On 5 July 2022, the European Parliament approved—by an overwhelming majority—the final text of the Digital Markets Act (DMA), the new ex-ante regulation that will apply to so called “gatekeepers”, who act as an important gateway between business users and end customers.
The European Commission (Commission) proposed the DMA in December 2020, with the stated intention to ensure the fairness and contestability of digital markets. The Commission’s draft introduced a series of obligations and restrictions inspired by the Commission’s and national competition authorities’ antitrust enforcement agenda in the digital space.
After more than a year of intense negotiations, the European Parliament and Council reached a political agreement on the DMA on 25 March 2022. The DMA has now been adopted by the European Parliament and will go through the EU’s formal adoption procedure. We expect that the final legal text will be published in the EU’s Official Journal by October 2022. The obligations under the DMA will start applying six months after entry into force, in April 2023.
The Commission proposed the DMA together with the Digital Services Act (DSA), which aims to protect digital spaces against the spread of illegal content to ensure the protection of users’ fundamental rights. A political agreement was also reached on the DSA on 23 April and the European Parliament debated and approved the final text on the DSA together with that of the DMA. We discussed that development in our recent blog posts here and here.
Recap of the DMA’s application to so-called gatekeeper platforms
The DMA is designed to tackle some of the perceived weaknesses in EU antitrust enforcement, by imposing a broad range of obligations on “gatekeepers” by way of ex-ante regulation. We summarise below the main provisions of the DMA.
The DMA introduces a set of obligations and restrictions that will apply to companies designated by the Commission as “gatekeepers”. To be designated as a gatekeeper, a company must provide one or more of the “core platform services” (CPSs) listed in Article 2(2) DMA and meet three qualitative criteria set out in Article 3(1) DMA.
The final list of CPSs comprises online intermediation services, online search engines, online social networking services, video-sharing platform services, number-independent interpersonal communications services, operating systems, web browsers, virtual assistants, cloud computing services, and online advertising services.
Although the Article 3(1) criteria for gatekeeper designation are qualitative, the DMA also provides corresponding quantitative thresholds which – if met – give rise to a rebuttable presumption that the qualitative gatekeeper criteria are fulfilled.
Quantitative threshold giving rise to a rebuttable presumption
The company has a significant impact on the EU internal market
The company provides the same CPS in at least three EU countries and: (a) has had at least EUR 7.5bn in turnover in the EU in each of three most recent financial years; or (b) its market capitalisation or equivalent fair market value is at least EUR 75bn in the most recent financial year
The company’s CPS is an important gateway for business users to reach end users
In the last financial year, the CPS averaged in the EU at least: (a) 45 million monthly active end users; and (b) 10,000 yearly active business users
The company enjoys an entrenched and durable position, or it is foreseeable that it will enjoy such a position in the near future
The user-related criterion above has been met for the previous three financial years
Following a market investigation, the Commission may designate as “gatekeepers” companies that provide a CPS and meet the qualitative criteria, but not the quantitative thresholds.
Companies designated as “gatekeepers” must comply with a number of “do’s and don’ts” obligations in Articles 5–7. The wording of these obligations was hotly debated during the legislative process and the scope of some provisions changed materially (see our previous blogposts here and here). The obligations include, for example, certain restrictions on the combination and cross-use of personal data, an obligation to enable the portability of data provided by end users, an obligation to enable interoperability for third-party service and hardware providers, a prohibition on treating own services and products more favourably in ranking and related indexing and crawling than similar services and products of a third party, and transparency requirements in relation to advertisers and publishers.
Although the Articles 5–7 obligations appear to be quite detailed, they continue to give rise to a number of challenging questions which are further complicated by their required application to a wide range of “gatekeeper” business model. While Article 8 DMA enables designated gatekeepers to request that the Commission engages in a process to determine whether the measures the gatekeeper intends to implement (or has implemented) are effective in achieving adequate compliance, such a process does not capture the obligations contained within Article 5 and remains at the Commission’s discretion. The Commission will, however, be required to respect the principles of equal treatment, proportionality and good administration.
In addition, the DMA imposes on designated gatekeepers several ancillary obligations, including the requirement to inform the Commission of M&A deals involving a CPS, the collection of data, or which otherwise involves services in the digital sector (Article 14) and to set up a compliance function (Article 28). Although the DMA does not create a new merger control regime, the Commission can use the information on the M&A deals reported under Article 14 to encourage EU Member States to refer the deal for the Commission’s review under Article 22 EUMR, which may increase the number of smaller tech deals requiring merger clearance in Europe.
The DMA empowers the Commission to impose a fine of up to 10% of the designated gatekeeper’s worldwide turnover in case of non-compliance with its obligations, and up to 20% in case of repeated infringements. Systematic non-compliance may result in the Commission’s imposing behavioural or structural remedies on the designated gatekeeper.
Timing for compliance with the DMA’s obligations
After yesterday’s endorsement of the final text by the European Parliament, only the EU Council’s approval is required before the DMA can be published in the Official Journal of the EU — now expected by 1 October 2022 — and enter into force 20 days later. The DMA will apply six months later (in April 2023). Undertakings that meet the quantitative thresholds will have two months (until June 2023) to notify the Commission. Within 45 working days after such notification, the Commission will issue a designation decision, identifying the gatekeeper’s core platform services. Six months after the designation decision, gatekeepers will be expected to comply with most of the DMA obligations.
In the next few months, the Commission will be publishing further guidance envisaged by Article 46 DMA including, for example, notification templates, a methodology for compliance audits, market investigation procedures, and a framework for cooperation with national authorities. We understand that the work on these documents is already under way.
Within the Commission, the enforcement of the DMA is expected to involve collaboration between the European Commission’s Directorates General for Competition (DG COMP) and Communications Networks, Content and Technology (DG CNECT). Although a concrete number of “DMA unit” enforcement officials has not been officially communicated, in its original proposal, the European Commission estimated that this would require the redeployment of 80 officials between 2021 and 2027. As the legislative process developed, Commissioner Breton suggested it could be as many as 120 employees, while the European Parliament’s leading MEP Andreas Schwab has called for up to 220. Notably, within the scope of the ongoing negotiations of the EU Budget 2023, MEP Schwab has recently proposed the creation of 150 additional posts within the European Commission to allow for the effective implementation and enforcement of the DMA. It remains to be seen whether the EU Member States will be willing to provide the necessary funding; the negotiations on the EU Budget 2023 are expected to be concluded by the end of 2022.
National competition authorities of EU Member States have also been quite vocal about their role in enforcing the DMA. The DMA enables national authorities to carry out initial investigative actions (although all final decisions will fall within the Commission’s competence) and initiate market investigations, which may lead to additional gatekeeper designations or the introduction of new obligations. While the Commission is the sole enforcer of the DMA, national competition authorities are not prevented from continuing to take enforcement actions against big tech companies under antitrust laws or national platform regulations, subject to certain coordination obligations with the Commission. We expect to continue to see significant activity by national authorities in this area.
Finally, business users may seek to enforce the DMA obligations in national courts, including through damages claims and injunctions.
If you would like to discuss these developments in more detail please get in touch with our Antitrust, Competition and Trade team.
To read more about these and other antitrust developments, refer also to our Global antitrust in 2022: 10 key themes report.