The Digital Markets Act (DMA) aims to regulate the conduct of large digital platforms acting as “gatekeepers” by prohibiting certain practices and enabling the European Commission to carry out market investigations and sanction non-compliant behaviour.
15.12.2020: Proposal of Regulation from EU Commission
15.12.2021: Amendments by the European Parliament
25.3.2022: Political Agreement reached between the European Commission, European Parliament and Council of Ministers – Agreement on final text
11.5.2022: Council Delegation
The Regulation of the European Parliament and of the Council on contestable and fair markets in the digital sector (Digital Markets Act) (“Regulation”) is an EU Regulation proposal that is currently under consideration. It is subject to formal approval, which is estimated to take place in late 2022 / early 2023. It is estimated to come into effect in 2023 / early 2024.
Aims of the proposed Regulation
The Regulation aims to create a fairer and more competitive digital market. This in turn, will lead to the stimulation and unlocking of digital markets and therefore enhance consumer choice, enable better value sharing and boost innovation. The above aspirations will be achieved by regulating the behaviour of large online platforms, which are classified by the Regulation as Gatekeepers. More specifically, the Regulation imposes certain obligations on Gatekeepers, which will ensure that new competitors can enter the market and prevent abuse of market power.
Which platforms can be classified as a Gatekeeper
A Gatekeeper is an online platform that acts as a gateway for smaller businesses to reach the end consumer. The legislation sets the criteria under which platforms can be classified as Gatekeepers.
Online platforms that fulfill either of the following criteria are classified as Gatekeepers:
- They have achieved an annual turnover of at least €7.5 billion within the European Union (EU) in the past three years, or
- They have a market valuation of at least €75 billion, at least 45 million monthly end users, and at least 10 000 business users established in the EU.
An additional condition is that online platforms must also control one or more core platform services in at least three EU member states. These core platform services include marketplaces and app stores, search engines, social networking, cloud services, advertising services, voice assistants and web browsers.
Considering the above, it is expected that GAFAM (Google, Amazon, Facebook, Apple, Microsoft) are deemed to meet the criteria mentioned. It should be noted that SMEs are generally exempt from being classified as Gatekeepers, except under exceptional circumstances.
In the case where an online platform disagrees with its classification as a Gatekeeper, it can challenge the designation and present its arguments to the European Commission.
Examples of main obligations of Gatekeepers
The main obligations imposed on Gatekeepers by the Regulation are the following:
- Ensure that users have the right to unsubscribe from core platform services similarly as to how they had initially subscribed.
- Not require the default installation of certain software, such as web browsers, as a result of the installation of an operating system.
- Ensure interoperability of instant messaging services’ basic functionalities.
- Allow fair access to supplementary functionalities / hardware of smartphones to app developers (e.g., NFC chip).
- Give sellers access to marketing data.
- Inform the European Commission of their mergers and acquisitions.
Gatekeepers must refrain from:
- Ranking their own products higher than those of competitors (Self-preferencing).
- Reusing private data collected through the provision of a service for the purpose of providing another service.
- Pre-installing software applications.
- Establishing unfair conditions for business users.
- Requiring app developers to use certain services in order to be listed in app stores.
Penalties for infringement
The Regulation provides that infringing Gatekeepers are subject to fines up to 10% of their global annual turnover. For repeat infringement, they are subject to fines up to 20% of global turnover.
In addition to the imposition of strict fines, the European Commission has the discretion to launch a market investigation and impose behavioural or structural penalties, such as the imposition of divestment requirements or the temporary ban on mergers, to Gatekeepers who infringe the Digital Markets Act at least three times in an eight-year time span.
Enforcer of the Regulation
The European Commission will be responsible for enforcing the Regulation.