The Digital Markets Act
The Digital Markets Act (the DMA) addresses digital market imbalances in the EU, which the European Commission considers to arise from the gatekeeper role of large online platforms (so-called gatekeeper platforms).
The DMA aims to set out harmonised rules (ie applying in all EU Member States) defining and prohibiting certain unfair practices by gatekeeper platforms and providing an enforcement mechanism based on market investigations.
The DMA will apply only to providers of 'core platforms services': large, online platforms, such as search engines, social networking services, certain messaging services, operating systems and online intermediation services. The European Commission will designate a provider of core platform services as a gatekeeper if the platform provider meets the following cumulative criteria:
- It has a significant impact on the internal market and is active in multiple EU countries. The DMA indicates that companies with an annual turnover in EEA exceeding EUR 6.5 billion in the last three financial years or having an average market capitalisation of EUR 65 billion or higher, and providing a core platform service in at least three Member States are presumed to meet this criterion.
- It has a strong intermediation position, meaning that it links a large user base to a large number of businesses. A company is presumed to meet this criterion if it operates a core platform service with more than 45 million monthly active end users in the EU and more than 10 000 yearly active business users established in the EU in the last financial year.
- It has (or is about to have) a stable and durable market position. Companies that have met the other two criteria in each of the last three financial years will be presumed to comply with this criterion.
The notion of 'gatekeeper' under the DMA is different from what the DSA names as 'very large online platforms'. For instance, a platform with more than 45 million monthly active end users established or located in the EU will be considered a very large online platform under the DSA, but it will need to meet all three criteria mentioned above to be designated as the gatekeeper under the DMA.
Providers of core platform services meeting these three criteria must notify the European Commission, who will then decide whether that provider must be designated as a gatekeeper. Based on a market investigation, the European Commission can also designate platforms as gatekeepers even if the above-mentioned presumptions do not apply.
Gatekeeper platforms carry additional responsibilities to facilitate an open online environment that is fair for businesses and consumers. The DMA will attribute new powers to the European Commission to enforce non-compliance, including fines, periodic penalty payments and the power to impose additional tailored remedies on the gatekeepers.
The main points of the Digital Markets Act include:
- Gatekeeper platforms will have to comply with a defined set of prohibitions and obligations to avoid certain unfair practices. These include inter alia: prohibitions to discriminate in favour of own services, obligations to ensure interoperability with its platform, and obligations to share data that is provided or generated by business users and their customers in their use of the platform.
- Gatekeeper platforms must allow their business users to promote their offer and conclude contracts with their customers outside the platform. Gatekeeper platforms may no longer prevent consumers from linking up to businesses outside their platforms.
- The European Commission may conduct market investigations into new services and practices, to update the list of core platform services and to identify new practices that are unfair or may limit the contestability of core platform services. To this end, the European Commission will enjoy a broad array of investigative powers, among which the power to request information, to carry out interviews, and to conduct on-site inspections.
- The European Commission may impose fines of up to 10% of the company's worldwide annual turnover and periodic penalty payments of up to 5% of the company's worldwide annual turnover. In case of systematic infringements, the European Commission can impose additional remedies, including behavioural remedies and, when behavioural remedies do not suffice, structural remedies, eg the divestiture of (parts of) a business.
What's next?
The proposals will now be discussed by the European Parliament and the EU Member States via the Council of the European Union. The European Parliament and the Council will first agree on their own versions of the DSA and the DMA. The European Commission, the European Parliament and the Council of the EU will then need to reach an agreement on a final text before the regulations will be adopted. It may take a number of years before the rules are adopted, implemented and become enforceable. Given the importance of the proposed legal change, we advise companies that are likely to be affected by this legislation to follow closely the development of this package of regulations.
We are currently reviewing the legislative proposals and will share our thoughts on specific aspects of both draft acts in future publications. In the meantime, please reach out to us if you would like to discuss the impact new proposals might have on your business.