A new era for online platform regulation: the Digital Markets Act took effect in May 2023
The European Union’s Regulation on contestable and fair markets in the digital sector, simply known as the Digital Markets Act (DMA), entered into force on 1 November 2022. It applies as of 2 May 2023, marking a new era in online platform regulation in the European Union. The purpose of the DMA is to ensure contestability and fairness for the markets in general and for businesses using core platform services in particular, and ultimately to contribute to the proper functioning of the internal market.
As promised in our article on the European Union’s Digital Decade Strategy (available here), we will provide a series of Roschier Insights Articles on the coming avalanche of EU legislation regulating digitalization and data. In this article, we will provide a brief overview of the scope and key provisions of the DMA, with an emphasis on the opportunities it offers to the competitors of gatekeepers.
Scope of application of the DMA
The DMA applies to what is known as ‘gatekeepers’, which are defined as undertakings that provide ‘core platform services’, such as web browsers, operating systems, or online search engines. To qualify as a gatekeeper, an undertaking must meet three criteria: (i) have a significant impact on the internal market; (ii) act as an important gateway for businesses to reach end users; and (iii) enjoy an entrenched and durable position.
The DMA includes quantitative thresholds for determining whether these requirements are met. Should the quantitative thresholds not be met, the DMA also provides alternative qualitative criteria, the fulfillment of which may nevertheless result in the undertaking being qualified as a gatekeeper.
In this respect, it is important to note that an undertaking is only considered a gatekeeper after being designated as such by the European Commission. The Commission’s first designation decisions are expected to be adopted in September 2023. After being designated as a gatekeeper, the undertaking concerned will have six months to comply with the DMA’s obligations.
New ex-ante rules applicable to gatekeepers
As is apparent from the definition of a gatekeeper used in the DMA, its main focus is on the largest tech companies, commonly referred to as the ‘GAFA’ companies (Google, Apple, Facebook, and Amazon). These companies have previously been accused of using their market power to stifle competition and harm smaller businesses.
Antitrust rules apply to conduct that has already happened. The DMA, much like merger control, allows authorities to anticipate and impose conditions beforehand. Gatekeepers are now required to adhere to a new list of provisions as specified in the DMA. The list includes (i) do’s, such as the obligation to allow end users to install third-party applications; and (ii) don’ts, such as the prohibition to combine personal data obtained from various platform services without the end user’s valid consent.
The implications for gatekeepers are clear: compliance with the new set of detailed rules is now mandatory. Thus, gatekeepers must adjust their operations to meet the new requirements.
Opportunities for competitors of gatekeepers
The DMA not only has significant implications for the largest tech companies operating in the EU, but it also creates advantages for the competitors of gatekeepers. We have identified three key opportunities that the DMA can provide in this respect:
- Access to data generated in the use of the gatekeeper’s platform. The DMA requires gatekeepers to provide companies, at their request and free of charge, with effective, high-quality, continuous, and real-time access to data. This creates several opportunities for competitors generating such data, for instance, to receive valuable information on customer behavior to improve their products or services and target new customers.
- Promote offers and conclude contracts with customers outside the gatekeeper’s platform. Under the DMA, gatekeepers must allow companies, free of charge, to communicate and promote offers, including under different conditions, to end users acquired via the core platform service, and to conclude contracts with those end users, regardless of whether they use the gatekeeper’s core platform service. This enables competitors to reach customers outside the gatekeeper’s platform, potentially leading to an increase in their visibility, the creation of new business opportunities, and a reduction in their dependence on gatekeepers.
- Inform competition authorities about the infringements of the DMA. Third parties, including competitors, may inform the national competition authorities or the Commission about any practice or behavior by gatekeepers that falls within the scope of the DMA. Informing authorities allows competitors to bring attention to gatekeepers’ DMA violations. This can lead to investigations and enforcement actions, potentially making the market more open for competitors. Non-compliance with the DMA can also result in the imposition of fines or ultimately in behavioral and structural remedies, which is likely to have a deterrent effect on gatekeepers.
Future outlook of the digital sector
The DMA has major implications for the digital sector. For gatekeepers, the regulation introduces new provisions aimed at ensuring fair behavior online. Gatekeepers must comply with the new rules; otherwise, they face the risk of fines and remedies, as well as reputational losses.
For the competitors of gatekeepers, the DMA offers a range of new opportunities. For example, the right to access data and promote offers outside the core platform makes it easier for the rivals of gatekeepers to compete in markets that have been dominated by this small number of large tech companies.
We continue to follow the development of the coming EU data legislation closely and advise our clients on compliance and related issues. Roschier’s experts are happy to help you with any questions you may have regarding the potential impact on your business or in general.
Article written by Senior Associate Lasse Nordström and Project Trainee Daniel Odabasi