What does Digital Markets Act mean?
Digital services in general and online platforms in particular play an increasingly important role in the business and economy. Such services enable businesses to reach users in a large area by facilitating cross-border trade within the EU and by opening new business opportunities for companies. However, among those digital services, core platform services feature characteristics that can be exploited by the companies providing them. This can hamper proper functioning of competition.
The Digital Markets Act contains rules for platforms that act as “gatekeepers” in the digital sector. In practice, the DMA is a new competition law tool designed to level out the business conditions between companies on digital platforms in the EU’s internal market. The aim of the DMA is to increase competition between platforms and make it easier for smaller companies to operate on online platforms and improve their rights. The DMA also increases the range of means to address and intervene perceived grievances in the digital services in a more comprehensive manner and at an earlier stage.
Companies for which the DMA applies to
The Digital Markets Act specifically regulates the core platform services provided by so-called gatekeeper companies. According to the DMA, core platform services are defined among other things as online intermediation services, online search engines, online social networking services, video-sharing platform services, number-independent interpersonal communication services, operating systems and cloud computing services.
A company is presumed as a gatekeeper when three cumulative criteria are met:
- EU-wide annual turnover of EUR 7,5 billion in each of the last three financial years, or average market capitalisation or fair market value of EUR 75 billion in the last financial year, and
- the company provides the same core platform service in at least three Member States
2. users: company provides a core platform service that in the last financial year has at least 45 million monthly active end users in the EU and at least 10 000 yearly active business users in the EU;
3. durability: the number of users criteria has been met in each of the last three financial years.
Companies that meet the above criteria must notify their gatekeeper position to the European Commission which, after assessment, designates companies as gatekeepers. In practice the obligations of DMA concern only a handful of companies but it is noteworthy that the same company can be designated as a gatekeeper for different services.
New rules for gatekeeper companies – do’s and don’ts
The DMA sets new obligations to the gatekeeper companies in form of strict do’s and don’ts. Among other things, they must offer users the possibility to disable recommendations based on profiling and facilitate access to their data and algorithms by authorities and approved researchers. Companies may not use customers’ personal data without consent for advertising, impose unfair conditions on business users, and may not prevent end users from removing pre-installed software applications in their core platform service and thereby favoring their own software applications.
The gatekeepers must also inform the Commission about their intended business transactions irrespective of whether the EU’s or national merger control thresholds are met. This can decrease deal certainty when a gatekeeper is party to a transaction in digital sector.
Compliance with the DMA
The gatekeepers are required to implement do’s and don’ts by themselves but they have reporting and audit obligations. The Commission monitors compliance with the DMA and it has a wide range of investigation measures at its disposal. Third party businesses or consumers can also complain to the Commission or the national competent authorities of the infringements of DMA.
In the event of non-compliance of the DMA, the Commission issues a non-compliance decision. If the Commission finds that the gatekeeper has intentionally or negligently failed to comply with its obligations, it may impose a fine maximum of 10 % of the gatekeeper’s total worldwide turnover in the preceding financial year. With continuous violations of the obligations, the fines can rise up to 20 % of the gatekeeper’s worldwide turnover.
When will the DMA apply?
The DMA entered into force on 1st November 2022, and it will apply six months after its entry into force. Thus, most of the articles of the DMA will be applied from May 2023. The gatekeepers shall comply with the new obligations no later than six months after their designation which is expected to be in spring 2024.