The EU Digital Markets Act (DMA) came into force on 1 November 2022 and will begin to apply from 2 May 2023. The new Regulation (2022/1925) introduces rules for platforms that act as “gatekeepers” in the digital sector, to prevent them from imposing unfair conditions on businesses and end users and to ensure the openness of important digital services.
The DMA introduces a number of prohibitions and obligations on certain large online platforms (designated as “gatekeepers”) that serve as important gateways for business users to reach their end users. The DMA has been developed in close alignment with the Digital Services Act (DSA), together forming the “Digital Services Package”. This new set of rules aims to create a safer digital space in which the fundamental rights of all users of digital services are protected and to establish a level playing field to foster innovation.
What is a gatekeeper?
The DMA will only apply to companies designated as gatekeepers based on objective criteria set out in the Regulation.
In order to be designated as a gatekeeper, an undertaking needs to provide at least one “core platform service” (CPS) from among those listed in the DMA. This list includes online search engines, social networking services, app stores, certain messaging services, video sharing platform services, web browsers, virtual assistants, cloud computing services, operating systems, online marketplaces and advertising services. The same company can be designated as a gatekeeper for several CPSs.
In addition, the provider of a CPS needs to meet three cumulative criteria in order to fall within the scope of the DMA:
- Significant impact on the internal market: the provider achieves a certain annual turnover in the European Economic Area (above €7.5 billion in each of the last three financial years, or market capitalisation or equivalent fair market value above €75 billion in the last financial year) and provides a CPS in at least three EU Member States
- Important gateway for business users in respect of final consumers: the provider links a large user base (more than 45 million active end users per month) to a large number of businesses (more than 10,000 active business users per year)
- Entrenched and durable position: the provider has met the second criterion for the last three years.
An undertaking is presumed to satisfy these qualitative criteria if the quantitative thresholds are met. However, the undertaking can rebut this presumption by presenting sufficiently substantiated arguments to demonstrate that, exceptionally, due to the circumstances in which the CPS operates, the qualitative criteria are not met.
In practice, within two months of the date on which the DMA becomes applicable (i.e. 2 May 2023), potential gatekeepers will have to notify their CPS to the Commission if they meet the thresholds established by the DMA. The Commission will then have 45 working days in which to make an assessment as to whether the undertaking in question meets the thresholds and to designate it as a gatekeeper.
What obligations are imposed on gatekeepers?
The DMA provides a list of “dos” and “don’ts” that gatekeepers will need to implement in their daily operations in order to ensure fair and open digital markets.
By way of illustration, gatekeepers will have to:
• Allow end users to install third-party apps or app stores that use or interoperate with the gatekeeper’s operating system
• Allow end users to unsubscribe from the gatekeeper’s core platform services as easily as they subscribe to them
• Allow third parties to interoperate with the gatekeeper's own services
• Provide the companies advertising on their platform with access to the gatekeeper’s performance measuring tools and the information needed for advertisers and publishers to carry out their own independent verification of their advertisements hosted by the gatekeeper
• Allow business users to promote their offers and enter into contracts with their customers outside the gatekeeper's platform
• Provide business users with access to the data generated by their activities on the gatekeeper's platform.
Among the “don’ts”, gatekeepers are prohibited from:
• Using business users’ data when gatekeepers compete with them on their own platform
• Ranking the gatekeeper's own products or services in a more favourable manner than those of third parties
• Requiring app developers to use certain services provided by the gatekeeper (such as payment systems or identity providers) in order to appear in the gatekeeper’s app store
• Tracking end users outside the gatekeeper’s core platform service for the purpose of targeted advertising, without effective consent from such users.
These obligations and prohibitions will apply to the provider of a CPS six months after it has been designated as a gatekeeper.
If a gatekeeper does not comply with the rules, the DMA allows the Commission to impose fines of up to 10% of the company's total annual worldwide turnover. The fine may reach up to 20% in the event of repeated infringements. In addition, the Commission can impose periodic penalty payments of up to 5% of the company's total daily worldwide turnover.
In the event of systematic infringements, the Commission can impose additional remedies. These may include structural remedies, such as obliging a gatekeeper to sell a business, or parts of it, or banning a gatekeeper from acquiring any company that provides services in the digital sector.
How does the DMA interact with the competition rules?
The objective to ensure contestability and fairness on the digital markets is closely linked to the objective of competition law, namely undistorted competition.
In addition, the obligations and prohibitions provided for in the Regulation are inspired by past and current competition law cases in the digital sector.
However, the DMA will not replace but will instead complement the enforcement of competition rules at EU and national levels.
The ex-post enforcement of competition law may indeed be burdensome (requiring the definition of a relevant market, proof of the existence of a dominant position and a restrictive impact on competition), take years and therefore be ineffective when it comes to preventing harm to SMEs and innovators in the digital sector. The DMA’s ex-ante approach will therefore constitute a useful complementary tool to help curb undesirable practices by online platforms.
For further information about the DMA and/or for general legal advice relating to Belgian and EU Competition, please contact Pierre de Bandt or Jeroen Dewispelaere.