CPI Talks with Thomas Kramler

Thomas Kramler, Head of Unit, DMA Unit, European Commission

Brussels, November 2024

While answering questions regarding mobile ecosystems, Thomas Kramler delved into the nuanced regulatory approaches adopted by different regions and their implications on competition within the tech industry. His analysis highlights the distinctive paths taken by Japan, the US, and the EU in addressing the challenges posed by dominant mobile platforms like Apple and Google.

Diverging Regulatory Models

Kramler identifies three primary regulatory models:

1. Court-Driven Model (United States):
   In the US, the regulation of mobile ecosystems heavily relies on court rulings rather than legislation. Notable cases like Epic Games v. Apple and Epic Games v. Google underscore this approach. The absence of comprehensive legislative frameworks means courts play a decisive role in shaping market rules. While this model offers flexibility, its progress is slower, hinging on protracted legal battles.
2. Regulator-Driven Model (UK):
   The UK’s approach, as exemplified by its Digital Markets, Competition, and Consumer Act, places significant discretion in the hands of regulators like the Competition and Markets Authority (CMA). This model allows regulators to impose tailored conduct requirements on firms with “strategic market status,” fostering adaptability in addressing market-specific issues.
3. Legislator-Driven Model (EU and Japan):
   The EU and Japan adopt a legislator-centric approach, where laws like the EU’s Digital Markets Act (DMA) define explicit obligations and prohibitions for gatekeepers. This model aims for swift enforcement through regulatory clarity but is less flexible, limiting adaptability to evolving market conditions.

Competition and Impact on the Tech Industry

The dominance of Apple and Google in mobile ecosystems exerts profound effects on competition within the broader tech landscape. These platforms leverage network effects: the more apps they host, the more attractive they become to consumers, which in turn draws more developers. This creates a self-reinforcing “applications barrier to entry,” deterring new entrants and stifling competition.

Additionally, consumer lock-in exacerbates market concentration. Switching platforms is cumbersome, involving data loss and compatibility challenges. As a result, competition between Apple and Google remains limited, allowing them to dictate business models for developers.

Benefits and Drawbacks for Companies

For companies, the competitive dynamics of mobile ecosystems present both opportunities and challenges:

• Benefits:
  The dominant platforms provide a massive consumer base and streamlined distribution channels for apps. Developers can also tap into these ecosystems’ robust payment systems and security features.
• Drawbacks:
  The power imbalance allows platforms to impose restrictive policies, such as mandatory payment systems and steep commissions. Regulators are increasingly scrutinizing these practices, with the DMA mandating alternative payment systems and app store models to promote fairness.

Implications for Regulation and Enforcement

The choice of regulatory model influences enforcement speed and flexibility. While legislator-driven frameworks like the DMA ensure clear rules, they can struggle to adapt to rapidly evolving market dynamics. Conversely, regulator-driven approaches offer adaptability but require extensive dialogue, delaying outcomes. In the US, reliance on courts may lead to inconsistent rulings and slower progress.

As Kramler noted, the EU is actively addressing compliance challenges under the DMA, particularly in areas like alternative app stores and payment systems. Despite some progress, issues like fee structures and user experience frictions persist, requiring ongoing enforcement efforts.