Digital Markets Act: Criticism of Market Definitions

Research

ZEW Study on the Server Outage of Social Media-Giant Meta Platforms

On 4 October 2021, there was a worldwide outage of all services of the tech company Meta, which also includes WahtsApp, Instagram and Facebook, for around six hours.

On 4 October 2021, all services of the tech giant Meta – including WhatsApp, Instagram and Facebook – experienced a global outage lasting around six hours. A recent study by ZEW Mannheim, using high-resolution tracking data from the USA and Spain, is the first to comprehensively analyse how digital consumer behaviour changed during and after the outage. The results of the study indicate potential for improvement in the implementation of the EU’s Digital Markets Act (DMA) and other similar regulatory initiatives.

“For the implementation of the DMA, the European Commission has grouped core platform services, i.e. services provided by large digital platforms, into categories according to their functionality. For example, Facebook and Instagram are categorised as social networking services, and YouTube as a video-sharing platform service. According to the EU Commission, competition between platform companies primarily takes place within a category. However, our study reveals that users substituted the unavailable Meta services with other services and providers across these category boundaries. Therefore, the boundaries defined do not necessarily align with the everyday reality of consumers’ lives. This approach to defining markets should be critically examined,” explains Dr. Dominik Rehse, head of the ZEW Junior Research Group “Design of Digital Markets” and study co-author.

“Our investigation is a case study that provides detailed insights into user behaviour. However, to make reliable statements about the long-term substitutability of digital services, we need further data and systematic analyses of comparable exogenous shocks. This calls for additional research,” adds Sebastian Valet, co-author and member of the same junior research group. 

Behavioural reactions vary

The study demonstrates that many users switched to other services during the Meta outage. These included not only other messaging services and social media platforms, but also streaming services, e-mail applications and even traditional phone calls. Clear differences were also observed between age groups: Younger users of the Meta services switched to alternative services at higher rates, and also opted for different services compared to older users.

In addition, many people used their devices less at the beginning of the outage: Especially in the USA, digital activity in the first hours was significantly lower than would have been expected. Only as the outage progressed did the use of alternative services increase. 

In Spain, the shift in usage was not only more pronounced, but also more diverse. While Meta users in the USA predominantly switched to other social media and messenger services, users in Spain also increased their usage of streaming services and more traditional communication channels such as e-mail or phone calls. 

“The different behavioural reactions indicate that standardised market definitions based on common service categories both within and across countries fall short of the mark. Future regulatory approaches should take greater account of the composition of a service's user groups,” Valet says.

About the DMA

The Digital Markets Act is an EU law that obliges large online platforms such as Google, Apple and Meta to enable fair competition and not abuse their market power. Large platforms are not allowed to favour their own services, for example. The market definitions made in this context are fundamental when considering which services are in competition with each other. The aim of the DMA is to regulate control over digital markets more strongly in the interests of innovation, consumer rights and fair competition.  Similar initiatives exist in other countries, for example in the United Kingdom with the “Digital Markets, Competition and Consumers Act” and in the United States with the “American Innovation and Choice Online Act” and the “Open App Markets Act”.

Additional Information