The Digital Markets Act – what digital sector companies have to expect
The Digital Markets Act (DMA) and Digital Service Act (DSA) are intended to jointly create a secure digital space.
While the DAS mainly addresses users’ contents and their rights in digital services, the DMA primarily focuses on very large online platforms, so-called gatekeepers.
This article addresses the DMA and its ramifications. It is the second part of a DSA and DMA related series. The first part is available here.
I. What’s the DMA’s purpose?
The DMA’s purpose is to ensure a functioning single market with contestable and fair markets in the digital sector through uniform competitive conditions. Commercial users and consumers in particular are supposed to benefit from this. In addition, the frequently lamented “enforcement deficits” of the antitrust authorities’ existing control instruments is to be countered with regard to the rapidly developing digital economy.
II. Who is affected by the DMA?
The DMA’s addressees are central platform providers that hold a permanently established position with their digital services and are regarded as hardly avoidable gatekeepers for commercial users or end users in the European Union. Core platform services include online intermediary services, online search engines, social networks, operating systems, web browsers, and virtual assistants. The DMA targets in particular Alphabet (Google), Amazon, Apple and Meta (Facebook).
Whether or not an enterprise is actually deemed to have such gatekeeper status is determined by cumulative, objective criteria, which need to be established in a complex procedure. These include, on the one hand, a size-related criterion with EU-wide sales of EUR 7.5 billion during the last three financial years or a fair market valuation of EUR 75 billion plus the same central platform service’s offering in three EU member states, a gateway criterion with at least 45 million active end users per month and at least 10,000 active commercial users per year, as well as a permanent criterion according to which the gateway criterion must have been met during the last three fiscal years.
III. What obligations does the DMA entail?
Depending on the type of central platform service, the DMA provides for various obligations and prohibitions. Art. 5 DMA includes requirements which are applicable without any further specification; obligations pursuant to Art. 6 DMA, on the other hand, can be further specified by the European Commission. Art. 7 DMA includes far-reaching interoperability obligations for messenger services.
1. The obligations in detail
Articles 5, 6 and 7 DMA include various obligations and prohibitions. Prohibitions include, for example, the prohibition to combine data, prohibitions restricting users’ legal remedies, demanding registration with other central platform services, favoring oneself in ranking, indexing, and crawling, and a prohibition on data use in competition.
Obligations include, inter alia, the obligation to provide advertising customers and publishers with information on advertising prices, to allow the installation of apps, enable interoperability for certain hardware and software functions, to grant FRAND (fair, reasonable and non-discriminatory) conditions for app stores, online search engines and online social networks, and to implement specific interoperability obligations for messenger services. In addition, gatekeepers will in future always have to notify the European Commission about business combinations in the affected areas.
2. Consequences of violations
In order to verify whether gatekeepers comply with the DMA’s requirements, the European Commission can can resort to well-known investigation measures from antitrust law: from a request for information to witness interviews to searches (so-called “dawn raids”).
If the Commission identifies a violation, it may impose fines in the amount of up to 10 % of global group sales, in case of repeated violations even up to 20 %. An enforcement of the DMA’s requirements by national authorities and companies as plaintiffs (so-called private enforcement) has also been included in the DMA.
3. Effects on companies with no gatekeeper status
The DMA has no direct impact on non-gatekeeper companies. These are nevertheless confronted with DMA-related questions if they come into contact with a gatekeeper’s services, i.e., as users. In such case, they can examine whether a gatekeeper complies with certain obligations imposed on it and file a complaint with the European Commission or the competent national authorities (in Germany, probably the Federal Cartel Office) in case of violations. Furthermore, industry representatives can also participate in workshops and consultations on the DMA hosted by the European Commission and, if applicable, also resort to private enforcement before the civil courts which is to be facilitated, in particular, by the planned 11th amendment to the GWB (German Act against Restraints of Competition).
IV. When do the DMA’s legal obligations take effect?
01.11.2022 – DMA enters into force
02.05.2023 – Applicability of the DMA regulations
Six months after the DMA comes into force, most of the DMA takes effect. The process for designating gatekeepers begins.
03.07.2023 (at the latest) – Communication regarding the threshold data
Within two months, central platform service operators must evaluate whether they might qualify as gatekeeper. They must inform the European Commission if the exceed the quantity-related threshold.
06.09.2023 (at the latest) – Designation as gatekeeper
No later than 45 days after receipt of the information submitted by the central platform service operators, the European Commission must decide whether to designate a company as a gatekeeper. It may also conduct further investigations for this purpose.
March 2024 – Obligation to apply the DMA regulations
Six months after having been designated as gatekeeper, the companies must apply the DMA obligations.
From 2025 – Review of obligations for gatekeepers
After performance of a market investigation (18 months) at its own initiative or upon application by at least three member states, the European Commission must report on its findings and may propose to the Council and the Parliament supplementary regulations for gatekeepers if necessary.
03.05.2026 – Evaluation of DMA regulations
The European Commission must evaluate the regulation and report on such evaluation’s findings. This applies in particular also to the necessity to extent the interoperability obligations to social networks.
V. What is the relationship with existing regulations at national and EU level?
On a national level in Germany, the DMA correlates in particular with Art. 19a GWB, which addresses competition in the digital sector as anti-trust regulation. Due to partly different applicability thresholds and requirements, the DMA’s escape clause allows a complementary application of both regulations; thus, both regulations can jointly ensure fair competition in the digital sector.
The DMA contains various and far-reaching regulations for companies in the digital sector. Even if the precise effects remain to be seen, not only companies possibly qualifying as gatekeepers should familiarize themselves with the DMA in order to know their options when they get in contact with gatekeepers. In particular private enforcement, which is to be facilitated by the 11th GWB amendment, is supposed to play a role for companies with a connection to the digital sector and, for example, facilitate access to data.