Digital Markets Act comes into force – what does it do?
27 October 2022
The Digital Markets Act (DMA) has been published in the Official Journal of the European Union and will enter into force on 1 November 2022 – but what does it do?
The DMA accompanies the Digital Services Act which together, form the eagerly-awaited EU Digital Services Act package which will radically reform the legal duties and responsibilities of digital service providers in the EU. The DMA will apply from May 2023.
What does it do?
The DMA will regulate the business conduct of so-called digital gatekeepers – the providers of the core platform services on which businesses depend to reach their customers. These include services such as online intermediation services, search engines, video-sharing platforms, web browsers, operating systems, online advertising services and digital assistants.
It establishes a set of narrowly defined objective criteria for qualifying a large online platform as a so-called “gatekeeper”. These criteria will be met if a company:
- has a strong economic position, significant impact on the internal market and is active in multiple EU countries;
- has a strong intermediation position, meaning that it links a large user base to a large number of businesses (45 million monthly active end users in the EU or 10,000 active business users); or
- has (or is about to have) an entrenched and durable position in the market, meaning that it is stable over time if the company met the two criteria above in each of the last three financial years.
The new rules will establish obligations for gatekeepers that they must comply with in their daily operations. Among other things, they will be required to:
- allow third parties to inter-operate with the gatekeeper’s own services in certain specific situations;
- allow their business users to access the data that they generate in their use of the gatekeeper’s platform;
- provide companies advertising on their platform with the tools and information necessary for advertisers and publishers to carry out their own independent verification of their advertisements hosted by the gatekeeper; and
- allow their business users to promote their offer and conclude contracts with their customers outside the gatekeeper’s platform.
Gatekeeper platforms may not:
- treat services and products offered by the gatekeeper itself more favourably in ranking than similar services or products offered by third parties on the gatekeeper's platform;
- prevent consumers from linking up to businesses outside their platforms;
- prevent users from un-installing any pre-installed software or app if they wish so; or
- track end users outside of the gatekeepers' core platform service for the purpose of targeted advertising, without the effective consent of such users.
The European Commission (EC) will carry out market investigations with the aim of ensuring that the new gatekeeper rules keep up with the fast pace of digital markets. These investigations will aim to allow the EC to:
- qualify companies as gatekeepers;
- update dynamically the obligations for gatekeepers when necessary; and
- design remedies to tackle systematic infringements of the rules in the DMA.
What are the consequences of non-compliance?
- Fines of up to 10% of the company’s total worldwide annual turnover, or up to 20% in the event of repeated infringements;
- Periodic penalty payments of up to 5% of the average daily turnover; and
- In case of systematic infringements of the DMA obligations by gatekeepers, additional remedies may be imposed on the gatekeepers after a market investigation. Such remedies should be proportionate to the offence committed. If necessary and as a last resort option, non-financial remedies can be imposed. These can include behavioural and structural remedies, e.g. the divestiture of (parts of) a business.
Private enforcement by consumers is also possible. The DMA also contains rules about co-operation mechanisms between the EC and the national courts and about the duty for national courts to take account of EC decisions under the DMA.
How does this affect the UK?
The regime in the UK will be similar but different. However, the Competition and Markets Authority has indicated that it intends to work closely with the EC and other regulators internationally as the digital world knows no national borders.
In the UK, a new Digital Markets Competition regime will apply to digital companies designated as having ‘strategic market status’ (SMS) and will be enforced by the Digital Markets Unit (DMU), within the CMA, which will be placed on a statutory footing when parliamentary time allows. The DMU will oversee the establishment of a new regime in the UK to regulate the most powerful digital platforms, promote greater competition and innovation in the sector and to protect consumers and businesses from unfair practices. The DMU is already operating in shadow form and will design and enforce a mandatory tailored Code of Conduct on designated companies with SMS. It will also have the power to implement pro-competitive interventions. There will also be mandatory merger control reporting requirements for SMS firms.
The CMA has already been carrying out investigations in this area, which give an indication of its likely approach in future, such as its investigations into acquisitions by big tech companies, its market study about the music streaming industry and its market study about UK mobile eco-systems.
Although the EU and the UK have taken slightly different approaches to the regulation of digital services, they share the same goal - establishing an effective framework for the regulation of existing and emerging digital markets.