The Digital Markets Act (DMA) will apply in the EU from May 2023. The overall goal of the new regulation is to ensure dominant tech companies behave fairly online and to monitor practices that might restrict the growth of new and alternate platforms.
What is the DMA?
The DMA sets out rules to address concerns relating to major online service providers. It introduces regulations in response to the perceived inability of competition laws to tackle specific types of behavior of big digital companies – the so-called ‘gatekeepers’ between smaller EU businesses and consumers.
Instead of replacing existing regulations, the DMA works in parallel with EU and national competition laws.
Who are the gatekeepers?
Gatekeepers are large online platforms that act as major gateways between businesses and consumers. Because of their size and their offerings, these providers of core platform services often have the power to create their own rules, which may lead to reduced innovation among smaller players and higher prices for consumers.
The EU recognized these gatekeepers are too important to be left unregulated.
Google, Amazon, Facebook, Apple and Microsoft are some of the platforms that fall into the gatekeeper category.
Other companies may fall into the gatekeeper category if they offer online intermediation services such as app stores, online search engines, social networking services, certain messaging services, video sharing platform services, virtual assistants, web browsers, cloud computing services, operating systems, online marketplaces and advertising services.
Additionally, to qualify as a gatekeeper a company will:
- Have a strong economic position, a significant impact on the internal market and be active in multiple EU countries
- Link a large consumer base to a large number of businesses
- Have a stable, long-standing position in the market.
What are the benefits of the DMA?
The goal of the DMA is to create a level playing field for businesses operating within the EU to grow and compete globally. To date, this has not always been the case.
For example, when a gatekeeper engages in practices such as favoring their own services or preventing business users of their services from reaching consumers, it can prevent competition.
This can lead to less innovation, lower quality and higher prices.
If a gatekeeper imposes unfair access conditions on using their app store, for example, or prevents installation of apps from other sources, consumers are likely to pay more or are effectively deprived of the benefits alternative services might have delivered.
Under the DMA, gatekeepers will still be able to innovate and offer new services. They will simply not be allowed to use unfair practices towards the businesses and customers that depend on them, to gain an undue advantage.
This will mean:
- Businesses that rely on gatekeepers in order to offer their services will be able to operate in a fairer business environment
- Tech start-ups will have enhanced opportunities to innovate and compete online
- There will be a greater number of better services for consumers to choose from
- There will be increased opportunities to switch providers and gain services at fairer prices.
How will the DMA impact gatekeepers?
The DMA sets out a list of dos and don’ts. Gatekeepers must comply with these in their daily operations.
Obligations
The DMA requires gatekeepers to:
- Allow communication between businesses and consumers
- Ensure price and fee transparency in ad intermediation services
- Allow consumers to easily change default settings and/or uninstall any software apps on an operating system (OS), unless it would compromise the OS
- Allow the installation and use of third-party apps or app stores, unless it would compromise the OS
- Provide businesses with real-time access to their data generated on the platform
- Provide other online search engines with fair, reasonable and non-discriminatory access to ranking, query, click and view data generated by consumers on their online search engines.
Prohibitions
The DMA prohibits gatekeepers from:
- Processing consumers’ personal data collected from third-party services for the purpose of providing online advertising services, without prior consent
- Reusing personal data collected during a service for the purposes of another service, without prior consent
- Preventing businesses from offering their products and services under different prices and conditions on their own sales sites, as well as on third-party platforms
- Requiring users to use certain platform services
- Using businesses’ non-public data to compete against them
- Ranking gatekeeper products or services higher than those of other businesses.
Gatekeepers that fail to comply with these obligations and prohibitions may be faced with fines of up to 20% of their global worldwide revenue, with the enforcing Data & Marketing Commission also holding the right to block acquisitions by repeat infringers.
What is the timeline for the Digital Markets Act?
The DMA will apply from May 2, 2023. Providers of core platform services that meet gatekeeper criteria and are operating in the EU then have two months (until July 2, 2023) to submit a notification to the Data & Marketing Commission.
Following this, the commission may designate a company as a gatekeeper. Alternatively, a market investigation may be required if the evidence submitted shows a company does not meet DMA gatekeeper criteria.
Digital Markets Act obligations and prohibitions will apply within six months of the gatekeeper designation, expected to be from March 2024.
