Regulation 2022/1925, also known as the Digital Markets Act (DMA), has been a hot topic for discussion the past few years to say the least. Ever since the first consultation, practitioners, academics and public officials have been in an extensive debate about the DMA and its implications. The DMA is part of the European Digital Strategy, that also includes the Digital Services Act (DSA). The DSA is another regulation which is primarily targeted towards online platforms and search engines and concerns illegal content, transparent advertising and disinformation. Together, the DMA and DSA contribute to the enforcement of long-term strategies in the European digital sector. A comparable regulation has also been initiated in the UK in the form of the Digital Markets, Competition and Consumers Bill (DMCC). Despite no longer being part of the EU, it is evident that the European Commission (Commission) is not the only authority which wishes to regulate digital platforms in this manner.
The DMA entered into force on 1 November 2022 and has been applicable since 2 March 2023. The Implementation Regulation was adopted on 14 April 2023 and lays down the procedural rules in relation to certain practical arrangements in the DMA. More importantly, as of 2 May 2023, gatekeepers that fulfill the quantitative thresholds are obligated to notify the Commission of this. They have until 3 July 2023 to do so. As a result, we frequently receive questions on the contents, status and implications of the DMA. This blog lists some of the key questions and their answers.
Question 1: What is the DMA?
Answer: The DMA is a regulation that introduces ex ante rules for digital platforms that act as so-called ‘gatekeepers’. These platforms qualify as gatekeepers because they have a significant impact on the internal market and serve as gateways between business users and end users (usually consumers). Their position is entrenched and durable within the market. As a result, they can act as a bottleneck by imposing unfair conditions on both businesses and/or end users, thereby limiting access to the market. The DMA ensures that such gatekeepers are identified, lays down rules which prevent such gatekeepers from abusing their entrenched market power, and ensures contestability, thereby allowing smaller and new players to enter the market.
Question 2: Is the DMA considered competition law?
Answer: It is important to emphasize that the DMA is not a competition law regulation as laid down in Article 103 TFEU. On the contrary, even though it is inspired by competition law (Article 101 and 102 TFEU) and recent case law,[1] it is seen as a complementary instrument. Where certain anti-competitive practices would usually be tackled via Article 101 or 102 TFEU, which is a long and sometimes ineffective ex-post instrument, the DMA creates ex-ante rules hoping to address concerning practices upfront. That being said, gatekeepers are naturally still able to initiate legal proceedings to appeal its gatekeeper qualification or the imposition of fines. The DMA is not exempt from litigation in that respect.
Question 3: What are the requirements for qualifying as a gatekeeper?
Answer: Gatekeepers must meet the following criteria laid down in Article 3 in order to qualify as a gatekeeper and fall within the scope of the DMA. Once an undertaking is designated the role of gatekeeper, it must comply with the obligations laid down the DMA. The quantitative thresholds for the three criteria below are laid down in Article 3(2).
An undertaking will be considered a gatekeeper if:
- It is large enough to impact the internal market: this is presumed to be the case if the company generates an annual turnover in the European Economic Area (EEA) equal to or above €7.5 billion in each of the last three financial years, or where its average market capitalization or equivalent fair market value amounted to at least €75 billion in the last financial year, and it provides a core platform service in at least three Member States;
- It controls an important gateway for business users towards final consumers: this is presumed to be the case if the company operates a core platform service with more than 45 million monthly active end users established or located in the EU and more than 10,000 yearly active business users established in the EU in the last financial year;
- It has an entrenched and durable market position: this is presumed to be the case if the company met the other two criteria in each of the last three financial years.
According to Article 3(3), if the undertaking meets these quantitative criteria, it must notify the Commission of this with relevant information of why it meets the thresholds. It must do so within two months of meeting the thresholds. Undertakings providing core platform services may present with its notification, sufficiently substantiated arguments demonstrating that even though they meet the quantitative thresholds in Article 3(2), that they do not meet the requirements under Article 3(1).
It is important to note that the Commission has expanded the reach of the DMA to ensure it is suitable for the dynamic nature of the (digital) market. According to Article 3(8), even if a digital platform does not meet the quantitative criteria mentioned above in Article 3(2), it may still be designated the status of a gatekeeper. The Commission would do this by launching an investigation into the given undertaking and examine whether the qualification of a gatekeeper is justified based on qualitative criteria, despite not meeting the quantitative criteria.
In addition, this is not the only way the Commission has made the DMA ‘future proof’. The Commission has the authority to also enhance the existing obligations imposed on gatekeepers. According to Article 19, the Commission may conduct a market investigation for the purpose of examining whether one or more services can be added to the list of core platform services or for the purpose of detecting other unfair practices which could be added to the scope of the DMA. The Commission would have a year and a half to publish a report with its respective findings and include (i) a legislative proposal to amend the DMA if it wishes to add additional services, and (ii) a draft delegated act supplementing the DMA in order to amend or supplement the unfair practices (obligations) laid down in the DMA.
By doing so, the DMA aims to address emerging fairness and contestability concerns that may arise as gatekeepers and digital markets evolve. Furthermore, the Commission will have the ability to designate “emerging” gatekeepers who are clearly trending towards leveraging services in their favor.
Question 4: Once you are assigned as a gatekeeper, do you remain that permanently?
Answer: If you are designated a gatekeeper, this does not mean a digital platform will have “gatekeeper” permanently branded on it. The Commission understands that the digital landscape is dynamic, meaning that platforms can come and go and potentially lose the qualification of gatekeeper with time. According to Article 4(1), the Commission carries out a review at least every three years to ensure that their designation is still up to date and in line with the DMA. In addition, Article 4(2) states that the Commission shall also examine at least every year whether new undertakings providing core platform services satisfy the requirements listed in Article 3.
Question 5: Which services and digital platforms fall within the DMA?
Answer: Digital platforms that are the target of the DMA include Meta (Facebook, Instagram, WhatsApp), Amazon, Apple, Alphabet (Google), and Microsoft. Article 2(2)(a-j) DMA covers ten core platform services.
- Online intermediation services; (Apple App Store, Google Play Store)
- Online search engines; (e.g. Google Search)
- Online social networking services; (e.g. Facebook & Instagram (Meta))
- Video-sharing platform services; (e.g. YouTube)
- Number-independent interpersonal communication services; (e.g. WhatsApp)
- Operating systems; (e.g. Google Android and iOS)
- Cloud computing services; (e.g. Google Cloud Platform)
- Advertising services; (e.g. Google Ads)
- Web browsers; (Google Chrome)
- Virtual assistant (e.g. Google Home)
As mentioned in the answer to question 3, the list of core platform services is exhaustive but can be expanded by the Commission based on a market investigation and subsequent legislative proposal.
This list must be considered in combination with the DSA. The DSA has drafted an exhaustive list of Very Large Online Platforms (VLOPs)[2] and Very Large Online Search Engines (VLOSEs).[3] These platforms will be required to comply with the DSA starting 25 Augustus 2023. It will be interesting to compare the digital platforms which will fall within the scope of the DMA in comparison to the companies currently being qualified as VLOPs and VLOSEs.
Question 6: When will the Commission assign the status of gatekeepers to digital platforms?
Answer: Starting from 2 May 2023, potential gatekeepers who fulfill the specified quantitative thresholds outlined in the DMA are obligated to inform the Commission about their core platform services by 3 July 2023. The Commission will then have 45 working days to evaluate whether the respective undertaking satisfies the thresholds and assign the status of gatekeeper, no later than September 6, 2023. Once designated, gatekeepers will be given a period of six months to adhere to the DMA requirements, with the deadline set for 6 March 2024, at the latest.
Question 7: What obligations must the gatekeeper adhere to?
Answer: Articles 5-7 and 14-15 state all of the (negative) obligations for gatekeepers. Amongst others, this includes rules regarding the processing and combining of personal data of end users from third party services and cross-using personal data from the core platform service to other services provided by the gatekeepers. In addition, gatekeepers may not prevent or restrict business users or end users from raising issues of non-compliance, as well as being obligated to allow end users to access and use other software applications. Gatekeepers are not allowed to obligate business users/end users to subscribe or register as a condition for access or use of the core platform services. Moreover, there must be transparency with regard to the price and fees paid by advertising, remuneration received by publishers using advertising services and the metrics on which prices, fees and remuneration is calculated. Finally, the DMA also includes provisions requiring transparency regarding (changes to) the terms and conditions on the use of the respective service as well as reporting obligations for providers of intermediary services.
Question 8: What are the consequences if a gatekeeper does not comply with the DMA?
Answer: If a gatekeeper does not abide by the DMA, the Commission shall adopt a non-compliance decision as stated in Article 29. Non-compliance could also lead to (hefty) fines from the Commission. According to Article 30, gatekeepers that fail to meet the new obligations face potential fines of up to 10% of their global revenue, or up to 20% of their global revenue for repeat offenses. If a gatekeeper consistently fails to comply with the DMA, the Commission has the authority to initiate a market investigation and, if necessary, impose corrective behavioral or structural measures. To ensure gatekeepers have a clear understanding of the obligations they must adhere to, the Commission can opt for regulatory discussions. An advisory committee and a high-level group will support and facilitate the work of the Commission.
Question 9: How is the DMA enforced?
Answer: The Commission is the sole enforcer of the DMA, thus aligning its centralized enforcement approach with the cross-border activities of gatekeepers. The objective is to create a unified framework across the EU which aims to guarantee legal certainty and consistency. Simultaneously, as part of the supervisory structure, the Commission will closely collaborate and coordinate with competition authorities and courts in EU Member States. For example, Article 27(1) entails that complaints about gatekeepers can be submitted to the national competition authorities. Moreover, the DMA allows national authorities, as per their respective national laws, to conduct investigations into gatekeepers’ compliance with the DMA and share their findings with the Commission. This strategy capitalizes on the strengths and expertise of relevant authorities throughout the EU, ensuring the highest possible compliance level. That being said, it is important to emphasizes that only the Commission can designate the status of a gatekeeper to a digital platform.
Question 10: What is the role of national competition authorities in the enforcement of the DMA?
Answer: According to Article 37 and mentioned above, the Commission and the Member States shall work closely together to ensure coherent and effective enforcement. The Commission may also consult national authorities where appropriate. This cooperation is also facilitated by the European Competition Network (ECN), a network consisting of the Commission and national competition authorities in EU Member States. Where the national authorities intend to launch an investigation on a gatekeeper based on national laws, it shall inform the Commission before starting the formal investigation. That being said, due to the Commission being the sole enforcer of the DMA, Article 38(7) states that even though national authorities may investigate non-compliance with the DMA (Articles 5-7), the national authorities may be relieved of their investigation if the Commission were to open its own proceedings.
It is interesting to compare the role of national competition authorities in enforcement of the DMA with enforcement of Article 101 and 102 TFEU. The latter fall under the scope of Regulation 1/2003, a regulation which lays down the obligations of national competition authorizes in the enforcement of Articles 101 and 102 TFEU. The DMA does not fall under the scope of this regulation. Therefore, a question that remains unanswered until now is what the role of national competition authorities will be when there is an overlap between a breach of Article 101 and/or 102 TFEU and a breach of the DMA.
By way of example, both the Netherlands and Germany are in the process of implementing rules on the enforcement of the DMA in their respective national systems. The Netherlands has drafted an implementation act where the ACM’s competences will be expanded, allowing it to launch an independent investigation into an alleged breach of the DMA. In Germany, the Germany Competition Act has been amended which broadens the (investigative) powers of the empowers the Federal Cartel Office (FCO) to investigate digital platforms.
Question 11: What is the role of national courts in determining a breach of the DMA?
Answer: Article 39 states that national courts and the Commission may share information with one another concerning application of the DMA. That being said, although not explicitly stated, the wording of certain provisions of the DMA seem to imply that national courts are not allowed to determine an infringement of the DMA, this seems to be under the sole jurisdiction of the Commission. In addition, Article 39(2) empowers national courts to send judgements where the DMA is being applied to the Commission. It is unclear whether this means that the national court is allowed to determine an infringement of the DMA. Having considered the cross-border nature of digital platforms and the importance of consistent and uniform application of the DMA, the DMA seems to imply that the national court can only apply the DMA if an infringement has already been established by the Commission. Finally, it is important to note that national courts are not allowed to issue judgements which conflict with Commission decisions.
The DMA is an EU regulation, which means that it has direct effect. This enables individuals to immediately invoke a European provision before a national or European court. We note that this principle of direct effect seems to be in some conflict with the Commission assigning itself as the sole enforcer of the DMA. The question that comes to mind is whether this role as sole enforcer imply that individuals (or undertakings) may not directly invoke the provisions of the DMA before national courts if an infringement has not yet been established by the Commission?
Any other questions? Just get in touch with us and we will be happy to answer them.
[1] See for example: Judgement of the General Court, 10 November 2021, Case T-612/17 – Google and Alphabet v Commission (Google Shopping) and Judgement of the General Court, 14 September 2022, Case T-604/18 – Google and Alphabet v Commission (Google Android).
[2] Alibaba AliExpress, Amazon Store, Apple AppStore, Booking.com, Facebook, Google Play, Google Maps, GoogleShopping, Instagram, LinkedIn, Pinterest, Snapchat, TikTok, Twitter, Wikipedia, YouTube, Zalando.
[3] Bing, Google Search.
