Interoperability a Key Concern for Competition Authorities Around the Globe
The US Federal Trade Commission wound down 2023 by emphasizing its focus on the potential competition and consumer protection effects of companies’ efforts to limit the interoperability of their products and services. In late December, the FTC’s Office of Technology and Bureau of Competition warned that that agency will particularly scrutinize instances “[w]here dominant market participants use privacy and security as a justification to disallow interoperability and foreclose competition[.]”
Just a few months earlier, the European Commission outlined its own approach to interoperability under the EU Digital Markets Act (“DMA”), and identified the “gatekeeper” companies in the digital platform space to which the DMA’s requirements will apply. A similar approach in the United Kingdom appears likely.
Technology companies—particularly those with a global reach—will need to keep all of these enforcement schemes in mind when navigating issues of product compatibility. In this Legal Update, we’ll lay out what those companies will need to know.
Interoperability in the United States
The FTC previously made clear that it sees a product’s interoperability—its ability to work with other companies’ products and services—as carrying both antitrust and consumer protection implications. In a 2021 report to Congress, the FTC looked at interoperability issues in aftermarket services, explaining that a manufacturer’s aftermarket restrictions may be subject to antitrust and unfair competition claims. In particular, the FTC focused on how manufacturers of mobile phones or cars can limit competition in markets that repair those goods.
In that report, the FTC also expressed skepticism about a wide array of manufacturer explanations for restrictions on repair services, noting “the record does not establish that repairs conducted by independent repair shops” would threaten intellectual property, safety, cybersecurity, liability or reputational harm, consumer demand, or quality of service. This skepticism continues as the FTC’s focus expands beyond aftermarkets.
FTC Sounds A Renewed Alarm On Interoperability
In December 2023, the FTC’s Office of Technology and Bureau of Competition published a blog post on Interoperability, Privacy, & Security. The post demonstrated the agency’s continued interest in interoperability, and its desire to scrutinize limitations on interoperability outside of repair markets. The FTC focused on the advantages of interoperability, stating “there are aspects of technology that people may take for granted while navigating their daily routines that turn on interoperability” such as webpages that open on multiple browsers, emails being sent between providers, and computer accessories working with multiple computer models.
The FTC also showed an increased skepticism toward defenses involving privacy and security. The post noted the FTC will focus on “[i]dentify[ing] anticompetitive behavior and closely scrutiniz[ing] claims that restrictions or bars on interoperability are the appropriate way to protect privacy or security.” Assertions that a limit on interoperability is necessary to protect privacy or security will be reviewed on a “case-by-case basis,” and “should be rejected if found to be a mere pretext for anticompetitive conduct.”
EC Focuses on Interoperability for Select “Gatekeepers”
The European Commission has also turned its sights to interoperability issues, while taking a different approach. The DMA, which took effect in 2023, introduced a new regulatory framework for the digital sector in the European Union. Under the DMA, the European Commission designates certain companies as “gatekeepers”—based on criteria involving company size and entrenched control of core digital platform services—and the DMA in turn imposes wide-ranging obligations on those companies. We previously discussed the objectives and implications of the DMA in November 2022 and June 2023.
As the European Commission explained this past fall when it designated the current set of gatekeepers, some of the DMA’s requirements focus on interoperability, including that the company “[a]llow end users to install third party apps or app stores that use or interoperate with the operating system of the gatekeeper” and “[a]llow third parties to inter-operate with the gatekeeper’s own services[.]”
Gatekeepers providing messenger services face additional requirements. Within six months of a gatekeeper designation, a messenger gatekeeper must make “some basic functionalities,” such as text messages between two users, available for interoperability. Within two years, a gatekeeper must make additional features—including group text messages—available for interoperability. And within four years, a gatekeeper must make more complex features—such as audio and video calls—available for interoperability.
It is anticipated that these newly introduced obligations will be subject to judicial review before the Court of Justice of the European Union. Indeed, several companies have already initiated actions challenging their designations as gatekeepers under the DMA, including in relation to the DMA’s interoperability requirements. Litigation could also arise at the national level, should third parties bring actions against gatekeepers.
UK Regulators Also Expected to Target Interoperability
While the exact content of the new rules in the United Kingdom are not expected to be finalized for another few months when the proposed UK Digital Markets, Competition and Consumer Bill becomes law, obligations relating to interoperability will certainly impact the largest digital players. The UK Competition and Markets Authority and its communications regulator, Ofcom, have already weighed in on interoperability issues in recent months. All of this will no doubt influence the interoperability conduct requirements imposed on the largest digital players going forward.
Key Takeaways
- Interoperability is a key priority for both US and European regulators.
- The FTC is expressing increased concern—from both a competitive and consumer protection perspective—about products and services that are not compatible with other available products and services. Companies that decline to develop their offerings to be interoperable due to privacy and security concerns should be prepared to substantiate those concerns in the face of FTC inquiry.
- The European Commission’s requirements regarding interoperability are more concretely—and stringently—defined, but apply only to those companies which that agency has designated as gatekeepers. Still, other digital platform operators aspiring to increase their size should be aware of the DMA interoperability requirements. These requirements become relevant if they attain “gatekeeper” status in the future, or if they seek to enhance their position by accessing services of established gatekeepers under the newly imposed interoperability obligations.
- Competition authorities around the globe have interoperability issues on their radar. For example, we expect to learn more about forthcoming requirements in the United Kingdom in the coming months. Companies operating in and around these markets will need to consider their approach in a global, holistic manner to ensure compliance, without overly restricting the wealth of opportunities these dynamic markets offer.
Mayer Brown’s Global Antitrust team offers in-depth experience and knowledge in the regulation of digital markets, including in particular, involvement in complex risk assessment, compliance audits and high-stakes litigation. We are well-placed to assist multinational corporations in navigating the field of ever-increasing tech regulation.
