The EU Digital Markets Act is here!

The Digital Services Package:

The DMA does not come alone. It 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 where the fundamental rights of users are better protected and establishes a level playing field for businesses operating online.

The bigger picture: A Europe Fit For the Digital Age

The DMA is part of the European regulatory program known as ‘A Europe Fit For the Digital Age’. This program is meant to regulate the digital space and includes other legislative proposals like the Artificial Intelligence Act, the Data Governance Act and the Digital Operational Resilience Act (DORA). With more than 15 different Regulations and Directives on the way, the program will have a significant impact on the digital regulatory landscape in the coming years. As an organization, you should keep an eye on the progress and speed at which this is developing to prevent any surprises in the coming years.

Who does it apply to:

While the DMA is expected to be a very impactful and far-reaching piece of legislation, it will only be imposing obligations on a small number of very large online platforms that act as “Gatekeepers”. These Gatekeepers are core online platforms that offer gateway services between consumers and businesses that have become almost indispensable to thousands of businesses and millions of users. Core platform services can for example be online search engines, marketplaces and social networks.

The DMA uses quantitative thresholds to determine gatekeeper status. Platforms that meet the thresholds of a yearly EU annual turnover above €7.5 billion, a market capitalization over €75 billion, and 45 million active monthly end-users and 10.000 yearly business users in the EU will be subject to the provisions of the DMA. In that case, an organization is presumed to be a gatekeeper and should inform the European Commission. The Commission then designates the organization as a gatekeeper, unless the organization provides compelling evidence to the contrary. The Gatekeeper status is re-evaluated every 3 years.

Requirements for Gatekeepers

Following the designation process, Gatekeepers are subjected to several interesting and impactful requirements under the DMA:

• Side-loading:
  Gatekeepers must allow electronic devices using their operating systems to uninstall pre-installed software and allow for the installation of third-party equivalents. Gatekeepers are required to ensure effective interoperability of operating systems, hardware and software.
• Self-preferencing:
  When displaying goods and services to consumers, Gatekeepers need to apply transparent, fair and non-discriminatory ranking conditions. They are no longer allowed to treat their own goods and services more favourably than those of third parties that are using the gatekeeper platform to connect with consumers.
• Advertising transparency:
  Gatekeepers are required to provide transparency on pricing and performance of advertising services. They must provide business users using the Gatekeeper’s advertising services with information concerning the price, fees and performance of the advertisements paid for by the business user.
• New rules on data:
  Gatekeepers are prohibited from combining personal data from end-users collected through their core platform with data acquired from other services offered by them or third parties unless the user has given specific consent. They will also be required to facilitate effective data portability for data generated through its core platform.

Together, the DMA’s provisions aim to level the playing field in the online space by creating more transparency, trustworthiness and choice for both business and end-users.

What will the DMA mean for:

• Gatekeepers:
  For Gatekeepers, the Digital Markets Act means many new rules that sometimes require systemic, technical and procedural changes and in some cases will have serious consequences for business operations.
• Platform users (businesses):
  For businesses operating on gatekeeper platforms, the new rules will provide an improved position vis-à-vis these powerful gatekeepers. They will enjoy a higher level of equality and transparency and, in time, a fairer and contestable market.
• Platform users (consumers):
  The DMA will also improve the position of consumers using gatekeeper platforms. They will have more freedom of choice, see improved protection of their data and enjoy the benefits of interoperability and data portability.

Enforcement

The European Commission will carry out enforcement of the DMA, with national competition authorities having a supporting role. The Commission will have the sole authority to initiate proceedings, take infringement decisions and take other measures under the DMA. The DMA uses a similar fine structure to the GDPR, setting maximum fines based on a percentage of a company’s global annual turnover.

If a Gatekeeper fails to adhere to the requirements in the Act, the Commission can impose fines of up to 10% of the company’s total global annual turnover. If it concerns repeated infringements, the maximum fine can be raised to 20%. Additionally, the Commission can also impose periodic penalty payments of up to 5% of the Gatekeeper’s global daily turnover. If there are systematic infringements, the Commission also has the authority to impose additional remedies necessary to achieve compliance. These can include structural remedies such as the forced sale of parts of the gatekeeper’s business, or a prohibition on the acquisition of other companies in the digital sector.

Concluding remarks

After formal adoption by the European Parliament and Council, the DMA now awaits publication in the Official Journal of the European Union. Depending on the date of publication, it could enter into force as soon as October 2022, after which a six-month transition period will ensue before it becomes applicable. The first designation of a gatekeeper is expected around March 2023.

To place the Digital Markets Act and its effect into a broader context, it is important to emphasize that it has been presented and should be interpreted as part of the Digital Services Package, which provides new rules on consumer protection in the online environment. As important elements of the ambitious ‘A Europe Fit For the Digital Age’ regulatory program, the DSA and DMA fit into the broader framework guiding the European Union through an age of unprecedented technological advancement that brings both opportunities and challenges for businesses.

If you would like to stay up-to-date on the latest developments, please read our other blogs on the ‘EU Fit For the Digital Age’ programme.