Fixing the Procedural Infirmities in the DMA’s Draft Implementing Regulation

Lazar Radic —  23 January 2023 — Leave a comment

Just before Christmas, the European Commission published a draft implementing regulation (DIR) of the Digital Markets Act (DMA), establishing procedural rules that, in the Commission’s own words, seek to bolster “legal certainty,” “due process,” and “effectiveness” under the DMA. The rights of defense laid down in the draft are, alas, anemic. In the long run, this will leave the Commission’s DMA-enforcement decisions open to challenge on procedural grounds before the Court of Justice of the European Union (CJEU).

This is a loss for due process, for third parties seeking to rely on the Commission’s decisions, and for the effectiveness of the DMA itself.

Detailed below are some of the significant problems with the DIR, as well as suggestions for how to address them. Many of these same issues have been highlighted in the comments submitted by likely gatekeepers, law firms, and academics during the open-consultation period. You can also read the brief explainer that Dirk Auer & I wrote on the DIR here.

Access to File

The DIR establishes that parties have the right to access files that the Commission used to issue preliminary findings. But if parties wish to access other documents in the Commission’s file, they will need to submit a “substantiated request.” Among the problems with this approach is that the documents cited in the Commission’s preliminary reference will be of  limited use to defendants, as they are likely to be those used to establish an infringement, and thus unlikely to be exculpatory.

Moreover, as the CJEU has stated, it should not be up to the Commission alone to decide whether to disclose documents in the file. The Commission can preclude documents unrelated to the statement of objections from the administrative procedure, but that isn’t the same as excluding documents that aren’t mentioned in the statement of objections. After all, evidence might be irrelevant for the prosecution but relevant for the defense.

Parties’ right to be heard is unnecessarily circumscribed by requiring that they must “duly substantiate why access to a specific document or part thereof is necessary to exercise its right to be heard.” A party might be hard-pressed to argue convincingly that it needs access to a document based solely on a terse and vague description in the Commission’s file. More generally, why would a document be in the Commission’s file if it is not relevant to the case? The right to be heard cannot be respected where access to information is prohibited.

Solution: The DIR should allow gatekeepers full access to the Commission’s file. This is the norm in antitrust and merger proceedings in the EU where:

undertakings or associations of undertakings that receive a Statement of Objections have the right to see all the evidence, whether it is incriminating or exonerating, in the Commission’s investigation file. [bold in original]

 There is little sense in deviating from this standard in DMA proceedings.

No Role for the Hearing Officer

The DIR does not spell out a role for the hearing officer, a particularly jarring omission given the Commission’s history of acting as “judge, jury and executioner” in competition-law proceedings (see here, here and here). Hearing officers are a staple in antitrust (here and here), as well as in trade proceedings more generally, where their role is to enhance impartiality and objectivity by, e.g., resolving disputes over access to certain documents. As Alfonso Lamadrid has noted, an obvious inference to reach is that DMA proceedings before the Commission are to be less impartial and objective.

Solution: Grant the hearing officer a role in, at the very least, resolving access-to-file and confidentiality disputes.

Cap on the Length of Responses

The DIR establishes a 50-page limit on parties’ responses to the Commission’s preliminary findings. Of course, no such cap is imposed on the Commission in issuing its preliminary findings, designation decisions, and other decisions under the DMA. This imbalance between the Commission’s and respondents’ duties plainly violates the principle of equality of arms—a fundamental element of the right to a fair trial under Article 47 of the EU Charter of Fundamental Rights.

An arbitrary page limit also means that the Commission may not take all relevant facts and evidence into account in its decisions, which will be based largely on the preliminary findings and the related response. This lays the groundwork for subsequent challenges before the courts.

Solution: Either remove the cap on responses to preliminary findings or impose a similar limit on the Commission in issuing those findings.

A ‘Succinct’ Right to Speak

The DIR does not contemplate granting parties oral hearings to explain their defense more fully. Oral hearings are particularly important in cases involving complex and technical arguments and evidence.

While the right to a fair trial does not require oral hearings to be held in every case, “refusing to hold an oral hearing may be justified only in rare cases.” Given that, under the DMA, companies can be fined as much as 20% of their worldwide turnover, these proceedings involve severe financial penalties of a criminal or quasi-criminal nature (here and here), and are thus unlikely to qualify (here).

Solution: Grant parties the ability to request an oral hearing following the preliminary findings.

Legal Uncertainty

As one commenter put it, “the document is striking for what it leaves out.”  As Dirk Auer and I point out, the DIR leaves unanswered such questions as the precise role of third parties in DMA processes; the role of the advisory committee in decision making; whether the college of commissioners or just one commissioner is the ultimate decision maker; whether national authorities will be able to access data gathered by the Commission; and whether there is a role for the European Competition Network in coordinating and allocating cases between the EU and the member states.

Granted, not all of these questions needed to be answered in the DIR (although some—like the role of third parties—arguably should have been). Still, the sooner they are resolved, the better for everyone. 

Solution: Clarify the above questions—either with the final version of the implementing regulation or soon thereafter—in a manual of procedures or best-practice guidelines, as appropriate.

Conclusion

Unless substantive changes are made, the DIR in its current form risks running afoul of a well-established line of jurisprudence highlighting the importance of fundamental rights in antitrust law, which is guaranteed to apply in DMA proceedings as well. One of these is the general principle that judicial and administrative promptness cannot be attained at the expense of parties’ right of defense (here). Ignoring this would not only result in a loss for the rights of defense in the EU, but would also drive a wedge in the effectiveness of the DMA—thereby staining the Commission’s credibility.

Lazar Radic

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Lazar is Senior Scholar for Competition Policy at the International Center for Law & Economics, and Adjunct Professor of Law at IE University. Lazar is a qualified lawyer and has worked in band one law firms in Spain and Serbia, both in the competition law department. He holds degrees in Law and Political Science from the University of Madrid, LL.Ms from the University of Amsterdam (EU and International Law, Cum Laude), and the European University Institute (Comparative and International Laws). Lazar’s PhD, also from the European University Institute, explored the intersection between political philosophy and competition law.

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