The Digital Markets Act is Ready
Also — Ukraine, Energy, Food Safety, Roaming, Defence, Pensions
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War in Ukraine – A Week, Unpacked
EU and world leaders met in Brussels on 24-25 March to organise their international response against Russia’s attack on Ukraine. G7, NATO and EU Summits were held to show unanimous solidarity against Russia and agree further support to Ukraine. Disagreements however remain among Member States over a Russian oil ban – and no sanctions were approved on this front.
EUROPEAN COUNCIL • EU leaders met on Thursday to reaffirm their condemnation of the Russian aggression against Ukraine, including the violation of international law, the oppression of the civilian population and the targeting of civilian infrastructure. The European Council also reaffirmed the principles of the Versailles Declaration, which insists that the EU would support Ukraine and stand “ready to move quickly with further sanctions” – and approved the creation of a Ukraine Solidarity Trust Fund, encouraging all international partners to financially support the rebuilding of Ukraine once the war ends.
G7 • G7 Member countries, who also met in Brussels on Thursday upon invitation from Germany, agreed to strengthen international cooperation and financing in response to the war. They called on Russia to “immediately comply” with the International Court of Justice’s order to “suspend all military operations” and welcomed the International Criminal Court’s investigations of potential war crimes committed by the Russian army in Ukraine.
NATO • NATO members committed to stepping up their assistance and training capabilities to the Ukrainian army. Members’ foreign ministers are due to meet in April to further enhance NATO support to Ukraine. Since the beginning of the war, NATO deployed its 40,000-troop-strong Response Force on its eastern flank - while member countries, including Germany, committed to increasing their defence spending to at least 2% of GDP.
HUMANITARIAN CRISIS • According to the latest estimates, 10 million Ukrainians have been displaced, 3.5 of whom are estimated to have fled the country altogether. On 23 March, the EU Commission proposed a €3.4bn increase to the pre-financing from the Recovery Assistance for Cohesion and the Territories of Europe (REACR-EU) - thus providing financial support to Member States welcoming Ukrainian refugees. The proposal, which now requires approval by the European Parliament and the Council, complements the Commission’s Cohesion's Actions for Refugees in Europe (CARE) proposal, with over €10bn worth of emergency financial support to cover the basic needs of Ukrainian refugees in welcoming countries. An extraordinary Justice and Home Affairs Council, which took place yesterday, discussed possible additional financial support and called on the Commission to “seek an IT solution that would allow for a centralised Europe-wide approach to the registration of Ukrainian refugees”.
STATE AID • On Wednesday 23 March, the Commission adopted a Temporary Crisis Framework to give member states more flexibility over state aid rules. This will give countries extra leeway to support companies affected by the war, ensure they receive efficient liquidity, and help to offset the increased costs of gas and electricity.
SANCTIONS • Following the Council meeting of 24-25 March, the EU declared itself ready to move quickly with further coordinated robust sanctions. EU leaders continue to disagree on an oil embargo at this stage, however. According to the German Foreign Minister Annalena Baerbock, "the question of an oil embargo is not a question of whether we want or don't want [it], but a question of how much we depend on oil". In the same vein, German Chancellor Olaf Scholz expressed his concerns that a Russian energy ban would trigger a recession in the European Union.
EU Leaders Committed to Reducing Dependence on Russian Gas
On 24-25 March, EU leaders meeting in Brussels discussed a set of measures aimed at reducing dependence on Russian gas supply. Debates took place in a tense context marked by spiking energy prices, social unrest and provocative demands by the Russian president to pay gas in rubles.
GAS STORAGE • On 23 March, the Commission tabled a legislative proposal introducing a minimum 80% gas storage level obligation for next winter (planned to reach 90% in the following years). The aim is to strengthen the security of gas supply while building independence from Russian gas in the long run. Although it normally covers 25-30% of gas consumption during the winter season, EU gas storage has been significantly low for the past months. Deemed less controversial than other policy options, the measure found wide support during the EU Council Summit that took place late last week.
COMMON PURCHASES • The 27 EU head of states also agreed on joining forces to buy gas: “We will now use our collective bargaining power. Instead of outbidding each other and driving prices up, we will pull our demand”, Commission President Ursula von der Leyen commented. Moldavia, Ukraine and Georgia will be invited to take part in the common purchases platform.
NORTH-SOUTH DIVIDE • Other conversations were marked with disagreements among member states. While Spain, Italy, Greece, Portugal and Belgium support the decoupling of the prices of energy and electricity, the measure is still met with scepticism by Northern European countries. Market interventions also led to a polarised debate, with Northern European countries – especially Germany – remaining very critical of price caps and their potential effect on energy suppliers. EU leaders, who discussed the issue until late Friday evening, agreed to grant Spain and Portugal a temporary authorisation to set caps on their electricity prices – due to their “high load of renewables and [...] very few interconnections” with the European electricity market, Von der Leyen explained in a press conference. The Commission is due to present a list of policy options to decouple the price of gas from the overall electricity price in May, in line with Council recommendations.
TRANSATLANTIC DEAL • On Friday, Von der Leyen and US President Joe Biden also announced a plan to further reduce EU dependence on Russian gas by increasing US supply of liquefied natural gas (LNQ). Biden set the objective of reaching 15 billion cubic metres (bcm) of LNQ exports to the EU in 2022 and potentially 50 bcm annually by 2030. The announcement raised questions about the US ability to reach these targets.
Commission Launches Ambitious plan for Global Food Security
On 23 March, the European Commission announced a range of measures to enhance global food security and provide support to EU farmers and consumers, in light of rising food prices and input costs caused by the war in Ukraine. While food availability in the EU is not at risk, the Commission is already taking steps to make food supply chains more resilient to future crises.
STATS • Russia and Ukraine together represent 34% of the world’s wheat market and a quarter for barley. Ukraine also stands as the most important player in the sunflower oil market, with over 50% of world trade, up to 80% with Russia. Since the beginning of the war, trade has severely diminished and the Kremlin's offensives on Ukrainian ports virtually halted all exports out of the country. As a result, the price of wheat soared by 70% in the past month.
COMMISSION PLAN • The Commission launched actions on a far-reaching scale, as well as a plan to “boost agricultural production (…) by growing more food within the EU''. Among other things, it announced a €500 million support package, on top of the crisis reserve fund, to compensate for the increasing price of fertilisers. Ukraine is also due to benefit from a €330 million aid to support farmers and population, whilst the Commission will ramp up its work with relevant international bodies. Finally, it announced an “exceptional and temporary derogation” from the Farm to Fork objectives to “allow the production of any crops for food and feed purposes on fallow land”.
DEVELOPING COUNTRIES • While food security is not at threat in the EU today, the Commission’s plan acknowledges that the war will increase food supply vulnerabilities for many countries, especially for net-importer, non-EU developing countries such as Pakistan, Yemen or Bangladesh. In parallel, French President Emmanuel Macron, alongside UN Secretary General Antonio Guterres, announced the launch of an emergency food initiative, the so-called Food and Agriculture Resilience Mission (FARM), to secure supplies for the most at-risk countries.
DMA: Closing of the Political Debate
Member States and the European Parliament jointly agreed in principle a final version of the Digital Markets Act (DMA) on Friday 25 March, after 16 months’ worth of debates. The Act is now expected to be approved formally – a mere technicality – by both the European Parliament and the European Council.
TARGET • The DMA is a legal instrument that allows the European watchdog to apprehend predatory behaviours by gatekeepers when the sole application of current competition law is not sufficient. This regulation only applies to a certain number of large, powerful, and often-American companies, defined as gatekeepers.
According to Columbia Law School professor Anu Bradford, interviewed by the New York Times, the DMA heralds a similar advance in the US:
“It is possible that even the U.S. Congress will now conclude that they are done watching from the sidelines when the E.U. regulates U.S. tech companies and will move from talking about legislative reform to actually legislating.” - Anu Bradford
THRESHOLDS • The gatekeeper definition was the subject of intense debates between organisations, companies, lobbies, institutions and Member States. The political agreement reached on Friday, which slightly reduces the scope of the original framework provided by the Commission, sets the following (cumulative) thresholds for designating gatekeepers:
the company must have at least 1 of the 10 activities covered by the DMA (the "core platform services" including marketplaces, cloud, online messaging etc) in at least 3 Member States
€ 75 billion in capitalization
€ 7.5 billion annual turnover in the EU
45 million monthly end-users
10,000 business users based in the EU
When exceeding these thresholds, companies must report to the authorities and be subject to additional obligations.
CLOTHES DON’T MAKE THE MAN • We all have the GAFAMs (Google, Apple, Facebook, Amazon and Microsoft) and a few unicorns in mind when we look at this list, but other companies like Wikipedia or Booking.com could also be affected. These companies, if they do not agree with their gatekeeper status (e.g. they materially exceed the thresholds but do not have the market power of Big Tech), will be able to challenge it before the Commission.
OBLIGATIONS • Experts speak of new 'ex-ante' obligations for gatekeepers. These obligations may overlap with prohibitions under competition law (including national case law). For example, the regulation prohibits self-preferencing, a behaviour detailed by Pablo Ibáñez Colomo (Self-Preferencing: Yet Another Epithet in Need of Limiting Principles, July 17, 2020) whereby a vertically integrated company favours its own activities in a market, at the disadvantage of others. As a hypothetical case, a company such as Amazon, which operates a marketplace, will be prohibited from using mechanisms (if any) that allow it to favour its own retail arm.
PENALTIES • For scrupulous compliance with these new rules, the text provides for fines of up to 10% of the total worldwide turnover of the targeted company, and 20% in the event of a repeat offence. There is still some uncertainty as to how this text will fit in with existing competition rules, particularly as regards the accumulation of penalties.
EU Parliament Votes in favour of Amended Roaming Regulation
On 24 March, the EU Parliament adopted the amended EU Roaming Regulation. While aiming to extend the “Roam Like At Home” regime for 10 years, the new Regulation is also about to bring serious changes for the telecom market. The Regulation is due to enter into force on 1 July 2022, pending Council approval.
CONSUMER PROTECTION - The adopted legislation is a follow-up to the 2017 elimination of roaming surcharges, which allowed customers to use their mobile phones when travelling abroad in the EU with no extra fees on top of what they already pay at home (“Roam Like at Home”).
In addition to maintaining the consumer protection level provided by the current regulation, the new legislation includes new transparency measures that require roaming providers to inform consumers free of charge on the means of access to emergency services or about potential risks of increased charges due to the use of value-added services in the visited Member state. Consumers will also benefit from the same quality of the network connection abroad as they have at home, if the same generation of mobile communication networks, and technologies is available on the visited network.
ROAMING WHOLESALE CHARGES - The new legislation also brings about serious changes to the relationship between roaming providers (companies that allow their customers to use roaming services when visiting a country) and network operators (network expansion companies in the visited country that invest in expanding their own networks on which roaming takes place). These controversial wholesale changes were the crux of inter-institutional negotiations before resulting in an agreement. They include a significant reduction of maximum wholesale roaming charges, which can be understood as a maximum price cap that network operators are allowed to charge roaming providers for hosting their customers for roaming purposes.
INTRA-EU - During debates, some MEPs sought to go beyond the scope of the regulation by calling for the abolition of surcharges for so-called intra-EU calls. In contrast to classic roaming calls, which can only be made while visiting a member state different from the subscriber’s home member state, intra-EU calls are calls between EU member states that originate from the subscriber's home network. They are not regulated by the roaming regulation but are nevertheless subject to a legally determined price cap (currently 19 cents/min). Even though intra-EU calls will continue to remain outside the scope of the roaming regulation, the current price caps for intra-EU calls will be subject to an evaluation by the EU Commission at the request of the Parliament.
Member States Agree EU Defence Strategy
On 21 March, the Council of the European Union approved the EU’s future military strategy blueprint. This document, called the “Strategic Compass”, sets out the EU’s ambition to boost its security and defence policy by 2030.
WAR TIMES • While the Strategic Compass was officially submitted by the European Commission to EU foreign ministers in November 2021, the war in Ukraine gave new impetus to the adoption of this document outlining the EU security and defence policy for the years to come. The Russian invasion caused significant changes of perspective within EU member states in favour of enhancing defence and military capabilities. A few days after the war started, Germany decided to earmark 100 billion euros for military investments from its 2022 budget, from € 47 billion in 2021. In addition, the Ukrainian geopolitical crisis resonates with talks of EU’s “strategic autonomy”, a concept vigorously promoted by the current French Presidency and discussed at the Versailles Summit earlier in March.
FOUR PILLARS • In its latest version, the 47-page Strategic Compass outlines four pillars for the EU to “promote [its] vision and defend [its] interests”:
“Act”: Crisis Management – Strengthen European capacity to quickly tackle international crises. To this end, it foresees the creation of a 5,000-troop-strong EU Rapid Deployment Capacity.
“Secure”: Hybrid Threats – Develop a Hybrid Toolbox and set up an EU Cyber Defence Policy to better prepare for, and respond to, cyberattacks.
“Expand”: Enhance Capabilities – EU member states have “committed to substantially enhance their defence expenditures [and] strengthen [their] European Defence Technological and Industrial Base”.
“Partner”: International Cooperation – Reinforce work with key defence organisations, notably NATO.
PROS & CONS • This new strategy has been welcomed by parties from across the aisles of the European Parliament, including Renew Europe, S&D and the EPP. Critics have however pointed out that previous defence strategies – the 2003 “European Security Strategy” and the 2016 “European Union Global Strategy” – had failed to implement their intended policies, and the 2022 version would be no different. These critics highlight that defence and security policies are still mainly national competencies and thus require unanimity votes at EU levels - making any significant agreement arduous.
EU-Wide Pension Product Now Made Available
On 22 March, the Pan-European personal Pension Product (“PEPP”) Regulation started to apply. The PEPP is a new voluntary EU-wide pension scheme for people to save for their retirement - now made accessible by a broad range of financial institutions across the EU.
BACKGROUND • The June 2017 Commission proposal on PEPP is part of the Commission's Action Plan to strengthen the Capital Markets Union. Adopted on 25 July 2019, the PEPP regulation aims to build an internal market on personal pensions, foster competition between European providers and enable EU workers to access the product wherever they work in the EU (enhancing work mobility across the Union).
IN PRACTICE • The PEPP is now available as a complement to public and occupational pension systems, as well as private pension schemes. The Regulation ensures high levels of product transparency and flexibility, effective protection over invested capital and grants EU citizens the possibility to switch pension providers every five years. National regulatory authorities will supervise institutions offering PEPPs while the European Insurance and Occupational Pension Authority (EIOPA) has the prerogative to develop technical standards around supervisory reporting. EIOPA will also be charged with the management of a central database to aggregate PEPP data over time and monitor their evolution.
NOT SO OLD AGE • Whilst the PEPP's main public objective is to “fight against old age poverty”, it seems that its implementation will first and foremost serve financing purposes through fostered long-term and cross-border investments. To use the French system as an example, Pillar one pension schemes (state-based pensions) are likely to remain the sole source of retirement benefits for low wages – and these do not allow direct savings onto a Pillar III (PEPP-style) scheme.
What we’ve been reading this week
The urge to punish Russia cannot prevail over the imperative of finding a negotiated settlement, argues the International Crisis Group in a statement which highlights the tremendous risks and costs entailed by a drawn-out war.
Yet this is exactly where the conflict is heading, explains Frederick W. Kagan for the Institute for the Study of War. Russia’s failure to destroy the Ukrainian army means the war has reached a stalemate.
The EU’s newly-found awareness of geopolitics should not end on one side of the Black Sea and of the Mediterranean, contends Bernard Siman for Egmont. Europe must engage her neighbours from the Middle East and the Caucasus to guarantee her security.
Meanwhile, for the CEPS, Erwan Fouéré pushes the EU’s to pursue an ambitious strategy in the Western Balkans.
Regaining control of her geopolitical destiny also implies prioritising a forward-looking industrial strategy. For the Institut Montaigne, Mathieu Duchâtel has written two policy papers on technology transfers and semiconductors.
There are low-hanging fruits to pick; freedom of movement for intensive care specialists may be one of them, argues Danielle Brady for the European Policy Centre.
Now that the DMA is out, the Institute of International & European Affairs has a handy guide of the Commission’s extensive lineup of legislative proposals on digital coming this year.
Thanks to those who helped put this edition together — Cyril Tregub, Oskar Stoklosa, Augustin Bourleaud, Briac de Charry, Maxence de La Rochère, Viktoriia Omelianenko, Andreea Irina Florea, Ghislain Lunven, Nathan Munch, Pierre Pinhas, Théo Bourgery, Agnès de Fortanier. See you next Tuesday !
*Articles do not have individual authors, the views expressed in this publication do not reflect the personal views of those credited.