Why the proposed DMA might be illegal under Article 114 TFEU, And how to fix it

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The European Commission’s Digital Markets Act (“DMA”) Proposal relies on the legal basis provided by Article 114 TFEU. The choice of this legal basis enables the EU legislature to avoid the unanimity requirement and to involve the European Parliament as co-legislator, but it also determines the limitations on the scope for EU action. An analysis of the DMA Proposal in light of the relevant EU case law regarding Article 114 TFEU suggests that the current text is likely to be incompatible with EU law. This paper submits that, to ensure that the DMA Proposal is compatible with EU law, the EU legislature needs to ensure (i) that the DMA is effectively designed to harmonize national rules and prevent regulatory fragmentation; and (ii) that the DMA’s scope and list of obligations comply with the principle of proportionality and do not interfere with the fundamental rights of the companies affected beyond what is necessary to ensure the proper functioning of the internal market. Absent these changes, the DMA would, in our view, be vulnerable to an eventual legal challenge before the EU Courts.