ENABLING COMPETITION THROUGH STANDARDIZATION: INSIGHTS ON ADVERSARIAL STANDARD SETTING FROM THE EU’S INTEROPERABILITY REGULATION

ABSTRACT In an effort to increase competition in digital markets, both the Digital Markets Act (DMA) and the Data Act (DA)—two landmark EU digital regulations—empower the European Commission to impose standards for the interoperability of digital services. In the case of the DMA, the Commission can, for instance, impose standards with respect to interoperability between messaging apps, and in the DA, standardization relates, for example, to interoperability between cloud services. In both cases, the European Commission can decide whether to delegate the standard setting to European Standardization Organizations (ESOs) or create its own standards. We note that standardization in that context differs from the contexts that ESOs have previously managed, because the adoption of the standard is not voluntary and firms have conflicting interests. Although an incumbent has a strong incentive to resist the emergence of a common standard, a rival firm would benefit from standardization—a scenario that we call ‘adversarial standard setting’. In that new context, we analyze the feasibility of the Commission’s possible approaches to standardization and compare their effectiveness in promoting competition and contestability in digital markets.