The EU’s Digital Markets Act (DMA), which targets unfair practices by companies that act as gatekeepers in the online platform economy, went into force on November 1, the European Commission said in a press release.
“The DMA will change the digital landscape profoundly. With it, the EU is taking a pro-active approach to ensuring fair, transparent and contestable digital markets. A small number of large companies hold significant market power in their hands. Gatekeepers enjoying an entrenched position in digital markets will have to show that they are competing fairly.” — European Commission Executive Vice-President Margrethe Vestager
Why does this matter: The DMA has significant implications for big tech companies like Apple, Amazon, Google, Meta, and Microsoft. For example, Apple will have to allow third-party app stores and sideloading on iOS. Meta could request Apple to make its coveted iMessage interoperable with WhatsApp and the iPhone maker has to comply due to DMA, and so on. As it happened with the EU’s GDPR, other countries like India will likely model their online platform regulations after the DMA.
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Which companies are considered gatekeepers?
Companies that operate one or more “core platform services” listed in the DMA qualify as a gatekeeper if they meet certain requirements outlined below. Core platform services include:
- online intermediation services;
- online search engines;
- online social networking services;
- video-sharing platform services;
- number-independent interpersonal communication services;
- operating systems;
- cloud computing services;
- advertising services;
- web browsers;
- virtual assistants.
Three main cumulative criteria that determine gatekeeper status include:
- Turnover and presence: Any company that achieves an annual turnover above €7.5 billion in the European Economic Area (EEA) and provides a core platform service in at least three EU Member States;
- Number of users: Any company that provides a core platform service to more than 45 million monthly active end users established or located in the EU and to more than 10,000 yearly active business users established in the EU;
- An entrenched and durable position: The company has met the first and second criteria during the last three years.
Companies that satisfy the above criteria are presumed gatekeepers but they can submit substantiated arguments to the Commission seeking exemption. Conversely, companies that don’t meet the criteria can also be classified as gatekeepers based on a qualitative assessment carried out by the Commission.
What are the obligations of gatekeepers under DMA?
The DMA prescribes a list of do’s and don’ts for gatekeepers to proactively implement. “These obligations will help to open up possibilities for companies to contest markets and challenge gatekeepers based on the merits of their products and services, giving them more space to innovate,” the Commission claimed.
Examples of what gatekeepers must do:
- Allow users to uninstall pre-installed apps, change defaults, and provide choice screens for key services.
- Allow users to install third-party apps or app stores
- Allow end users to easily unsubscribe from the core platform services of the gatekeeper
- Allow third parties to inter-operate with the gatekeeper’s own services
- “Provide the companies advertising on their platform with access to the performance measuring tools of the gatekeeper and the information necessary 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 conclude 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”
Examples of what gatekeepers must not do:
- Use data of business users when gatekeepers compete with them on their own platform
- Rank the gatekeeper’s own products or services more favourably compared to those of third parties
- Requiring app developers to the gatekeeper’s services such as payment systems in order to appear on the app stores of the gatekeeper
- Tracking users outside of the gatekeepers’ core platform service for the purpose of targeted advertising, without obtaining consent.
“When a gatekeeper engages in practices, such as favoring their own services or preventing business users of their services from reaching consumers, this can prevent competition, leading to less innovation, lower quality and higher prices. When a gatekeeper engages in unfair practices, such as imposing unfair access conditions to their app store or preventing installation of applications from other sources, consumers are likely to pay more or are effectively deprived of the benefits that alternative services might have brought.” — European Commission
What next?
Source: European Commission Press Release
- December 2020: DMA was proposed by the Commission.
- March 2022: DMA was agreed upon by the European Parliament and the Council.
- November 2022 to 1 May 2023: Implementation phase.
- 2 May 2023 to 3 July 2023: DMA starts applying and Potential gatekeepers notify their core platform services to the Commission if they meet the thresholds established by the DMA.
- By 6 September 2023: The Commission designates companies as gatekeepers based on the information provided by them.
- By 6 March 2024: Gatekeepers must comply with the relevant obligations of the DMA.
Over the next few months, the Commission will engage with the industry and organise a number of technical workshops with interested stakeholders, the press release stated.
Penalty for non-compliance with DMA
- Fines: “If a gatekeeper does not comply with the rules, the Commission can impose fines of up to 10% of the company’s total worldwide annual turnover or 20% in the event of repeated infringements and periodic penalty payments of up to 5% of the company’s total worldwide daily turnover,” the Commission noted.
- Additional remedies: “In case of systematic infringements the Commission can impose additional remedies. Where necessary to achieve compliance, and where no alternative, equally effective measures are available, these can include structural remedies, such as obliging a gatekeeper to sell a business, or parts of it (i.e. selling units, assets, intellectual property rights or brands), or banning a gatekeeper from acquiring any company that provides services in the digital sector or services enabling the collection of data affected by the systematic non-compliance,” the Commission added.
- Court challenges: “The DMA is a Regulation, containing precise obligations and prohibitions for the gatekeepers in scope, which can be enforced directly in national courts. This will facilitate direct actions for damages by those harmed by the conduct of non-complying gatekeepers,” the Commission stated.
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