29/04/2022

Promoting fairness in the digital market: EU Parliament and Member States reach agreement on EU Digital Markets Act

On 24 March 2022, EU legislators reached political agreement on the long awaited Digital Markets Act (DMA) which seeks to regulate ‘gatekeeper’ technology giants and a promote fair and open digital market.

The DMA forms part of a package of legislation, including the Digital Services Act (DSA), introduced by the EU to facilitate its digital strategy, A Europe fit for the digital age, and to complement existing competition laws. Agreement on the DSA is also expected to follow in the coming months.

The European Commission (EC) welcomed the agreement on the DMA and in their press release published on 25 March 2022, commented that:

…This regulation, together with strong competition law enforcement, will bring fairer conditions to consumers and businesses for many digital services across the EU.

The DMA is expected to come into force by October 2022. Thereafter, it will be implemented into domestic legislation within six months.

The DMA and DSA have been described as the “two pillars of digital regulation” with a view to “defining a framework adapted to the economic and democratic footprint of digital giants”. These significant pieces of legislation have been the talking points of big tech companies in recent months, with the expectation that they will significantly impact the regulatory landscape in the digital space once they come into force. 

The DMA – key points

Gatekeepers

The DMA establishes a set of narrowly defined objective criteria to determine whether an online platform qualifies as a gatekeeper:

  • Has a strong economic position, significant impact on the internal market and is active in multiple EU countries.
  • Has a strong intermediation position, i.e. it links a large user base to a large number of businesses.
  • Has, or is about to have, an entrenched and durable position in the market, meaning that it is stable over time.

The EC and the European Parliament agreed that for a platform to qualify as a gatekeeper, it must either have had:

  • An annual turnover of at least €7.5 billion within the European Union (EU) in the past three years or have a market valuation of at least €75 billion.
  • At least 45 million monthly end users and at least 10,00 business users established in the EU.

The platform must also control one or more core platform services in at least three Member States, including marketplaces and app stores, search engines, social networking, cloud services, advertising services, voice assistants and web browsers.

SMEs are exempt from being identified as gatekeepers, except from in exceptional cases.

Do’s and don’ts

Gatekeepers must also comply with a list of ‘do’s and ‘don’ts’ in their day to day operations. 

Do’s - Gatekeepers are permitted to:

  • Allow third parties to inter-operate with the gatekeeper’s own services in certain specific situations.
  • Allow their business users to access the data that they generate in their use of the gatekeeper’s platform.
  • Provide companies advertising on their platform with the tools and information necessary for advertisers and publishers to carry out their own independent verification of their advertisements hosted by the gatekeeper.
  • Allow their business users to promote their offer and conclude contracts with their customers outside the gatekeeper’s platform.

Don’ts - They are not permitted to:

  • Treat services and products offered by the gatekeeper itself more favourably in ranking than similar services or products offered by third parties on the gatekeeper's platform.
  • Prevent consumers from linking up to businesses outside their platform.
  • Prevent users from un-installing any pre-installed software or app if they wish to do so.

Sanctions for non-compliance

The EC will be the sole enforcer of the DMA. It can engage in regulatory dialogue to ensure gatekeepers have a clear understanding of the rules and to specify their application, as necessary. The EC will also be supported by an advisory committee and high-level group. Member States will be able to empower national competition authorities to start investigations into possible infringements and transmit their findings to the Commission.

Non compliance can result in:

  • Fines of up to 10% of a company’s total worldwide annual turnover.
  • Periodic penalty payments of up to 5% of the average daily turnover.

Additional remedies may be imposed on gatekeepers in instances of systemic infringements, with such remedies to be proportionate to the offence committed. Such remedies may include non-financial remedies such as behavioural or structural remedies e.g. the divestiture of (or parts of) a business.