The Digital Markets Act

The Digital Markets Act (DMA) is a Regulation, meaning that its contents are binding and have direct effect, without having to be transposed into national law. The Digital Markets Act was proposed by the European Commission in 2020, and adopted in 2022. The purpose of the DMA is to complement competition rules in important digital markets, as to help resolve asymmetries in power between large incumbent undertakings and smaller challengers in digital markets.

Competition in digital markets is characterised by the emergence of disruptive platforms, which connect different groups of users with one another (incl. buyers and sellers, audience and advertisers, or end-users and software developers). Platform markets often exhibit economic characteristics which drive concentration such as strong network effects and economies of scope. Moreover, activities in digital markets generate tons of data, which can be used to further increase the efficiency of providing certain services. As a result, the largest players often have a strong competitive advantage, which raises barriers to entry for (potential) new and innovative entrants. Moreover, as platforms are the technology to connect groups of professional users and groups of end-users, the platforms can be seen as an important distribution channel, or an important gateway for professional users to reach end-users (and vice versa). This allows the platform operator to impose certain conditions on users for the use of the platform which turns them away from potential competitors or which are exploitative.

In short, the DMA is based broadly on three problems identified by the Commission: 1) the existence of an unfair competitive advantage for large undertakings in certain types of platform markets; 2) the platform operator’s role as operating an important gateway for business users and end-users, where it can abuse this power to exploit its users or exclude competitors; and 3) that this competitive advantage is strengthened further by privileged access to data for the gatekeeper.

Here, it will be briefly explained how the identified problems have shaped the DMA and how it deals with these problems as to create a ‘levelled playing field’ between larger and smaller players in digital markets.

Who is regulated by the DMA?

It is the purpose of the DMA to mitigate asymmetries in power between large and small undertakings. Consequently, the DMA itself must also apply asymmetrically to undertakings. In order to distinguish between ‘large’ undertakings that must be regulated and ‘small’ undertakings that must benefit from the regulation, the DMA introduces the concept of being a ‘gatekeeper’. An undertaking is designated as a gatekeeper if it meets the quantitative thresholds set out in art.  3 DMA, or if it is designated by the Commission on the basis of a qualitative investigation under art. 3(8) & 17 DMA.

Article 3(1) DMA states that an undertaking shall be designated as a gatekeeper if it: 1) has a significant impact on the internal market; 2) operates a core platform service that serves as an important gateway between business- and end-users; and 3) if it is durably entrenched. How should we then understand these concepts?

Firstly, art. 3(3) provides us with a tool to determine whether an undertaking should be considered as having a significant impact on the internal market. The use of quantitative thresholds makes it easier to designate entities with gatekeeper status on the basis of objective criteria, without having to conduct an in-depth assessment into the actual facts and circumstances. Art. 3 DMA relies on the following thresholds:

FinancialAn annual turnover of > 7.5 bln. or market cap of > 75 bln in the EEA
Users45 million end-users and > 10.000 business users in the EEA
EntrenchmentFinancial & user thresholds have been exceeded for 3 consecutive years

Secondly, on determining what constitutes a core platform service, article 2(2) DMA provides a list of 12 selected platform services: (a) online intermediation services; (b) online search engines; (c) online social networking services; (d) video-sharing platform services; (e) number-independent interpersonal communications services; (f) operating systems; (g) web browsers; (h) virtual assistants; (i) cloud computing services; (j) online advertising services, including any advertising networks, advertising exchanges and any other advertising intermediation services, provided by an undertaking that provides any of the core platform services listed in points (a) to (i). If the operator meets the quantitative thresholds and operates one of these services, they are considered a gatekeeper of a core platform service. However, they are only regulated if they are also durably entrenched in this position. In accordance with art. 3(3) DMA, gatekeepers are considered entrenched if they hold their position for 3 years consecutively. While the list provides a clear delineation of what is or is not a core platform service, the Commission can still add new core platform services following an investigation in accordance with art. 20 DMA.

Aside from the use of quantitative thresholds, the Commission can also find that an undertaking should be considered a gatekeeper on the basis of qualitative thresholds. This provides the Commission with some flexibility as to whom is to be designated. For instance, an undertaking that does not meet the quantitative thresholds or has not held its position for three years may still be designated through this way.  Art. 3(8) DMA sets out the criteria which the Commission can take into account.

Now that it is clear which criteria and procedures are followed, you may wonder who is already designated. This is shown in the visualization hereunder as provided by the European Commission:

What are the objectives of the DMA?

The previous section has briefly discussed the motivation to introduce the DMA and its purpose (to create a levelled playing field), yet the DMA also pursues distinct objectives: fairness and contestability. The recitals of the DMA shed light on what fairness and contestability are supposed to be and how the DMA promotes them. Recital 33 argues that for the purpose of the DMA, unfairness should relate to  imbalance between the rights and obligations of business users where the gatekeeper obtains a disproportionate advantage. It is not important whether the gatekeeper derives this advantage from anti-competitive behaviour or if it is related to the characteristics of the market. The existence of an undue competitive advantage justifies the implementation of the rules set out in the DMA.

Contestability is a distinct objective. On contestability, recital 32 states that it should relate to the ability of undertakings to effectively overcome barriers to entry and expansion and challenge the gatekeeper on the merits of their products and services. It is argued that the economic characteristics of platform markets weaken contestability, which in turn reduces incentives to innovate or improve quality and leaves users of the platform services more vulnerable.

Fairness and contestability are thus considered intertwined (recital 34), as the lack of, or weak, contestability for a certain service can enable a gatekeeper to engage in unfair practices. Similarly, unfair practices by a gatekeeper can reduce the possibility of business users or others to contest the gatekeeper’s position. A particular obligation in this Regulation may, therefore, address both elements.

While much can be  – and has been –  said about the objectives of fairness and contestability and their exact meaning and relationship, this will not be explored in-depth here. However, what is important to note is that with the pursuit of fairness and contestability, the DMA distinguishes itself from broader competition law. Unlike articles 101, 102, 107 TFUE and the Merger Control Regulation, the DMA is not concerned with distortions of competition, protecting the competitive process or enhancing consumer welfare. It also does not require anti-competitive behaviour to trigger interventions. As such, the DMA is truly a complement to competition law, and not part of the competition law toolbox.

What are the substantive rules laid down in the DMA?

After an entity has been designated, they are subjected to specific and targeted rules laid down in articles 5, 6, 7, 14 and 15 DMA. Article 5 DMA contains ‘self-executing’ rules. These rules are phrased sufficiently precise that they need no elaboration by the Commission, but that gatekeepers should be able to implement them independently. The rules laid down in article 6 DMA require further specification.. However, once clarified these rules are also self-executing. The difference between the nature of rules laid down in article 5 and 6 DMA may then be marginal, where the Commission provides more leeway to rules implemented under art. 6 DMA. The obligations laid down in these articles are briefly summarised hereunder:

Article 5 – self-executing obligations

5(2)Consent requirement for combining personal data
5(3)Allow professional users to use third-party distribution channels
5(4)Allow business users to offer promotions through third-party or own channels free of charge
5(5)Allow end-users to access services and subscriptions through the CPS, even if acquired without using the CPS
5(6)Do not prevent users from raising issues of non-compliance before public authorities including courts
5(7)Do not impose requirements on business users to use an additional service offered by gatekeeper to use the CPS
5(8)Do not require end-users to subscribe to additional services to use CPS
5(9)Provide additional data to advertisers on costs & success metrics advertising
5(10)Provide additional data to publishers on costs & success metrics advertising

Article 6 – Obligations that require further elaboration

6(2)Do not use privileged access to non-public data to compete with professional users that depend on the CPS
6(3)Allow uninstallation of proprietary apps of gatekeeper
6(4)Allow technical interoperability for third party apps, software & services
6(5)No self-preferencing
6(6)Do not restrict users’ ability to switch to competing services
6(7)Requirement to provide interoperability for OS and voice assistants
6(8)Provide additional data to advertisers and publishers to allow them to conduct independent verification of inventory
6(9)Provide more effective data portability rights (when compared to art. 20 GDPR)
6(10)Provide continuous, real-time access to data free of charge generated for the use of the CPS
6(11)Provide FRAND access to important search engine data (if operated)
6(12)Provide FRAND access to app stores, search engine, and social networks

Article 7 DMA was the latest substantive addition to the DMA in the legislative process, and regulates number-independent communications services such as WhatsApp or Facebook Messenger. According to art. 7(1) DMA, gatekeepers will have to provide interoperability between messaging services upon request (if designated). Art. 7(2) DMA sets out the timeline for implementing interoperability functionalities. Article 14 DMA expands the notification obligations for gatekeepers related to mergers, and art. 15 DMA imposes the obligation to submit to an audit.

There are other relevant provisions to the substantive obligations. For instance, art. 13 DMA contains an anti-circumvention provision which aims to ensure that gatekeepers cannot use technical tricks to avoid compliance. Art. 9 DMA provides possibilities for suspension of the obligations and art. 10 DMA provides exemptions on the basis public interests. Art. 11 contains reporting requirements for gatekeepers and art. 12 DMA allows the Commission to update the list of obligations that the gatekeepers have to meet. While these provisions are relevant, they are not discussed in-depth in this introduction. It can do so on the basis of a market investigation, the rules and procedures for which are laid down in art. 16-19 DMA.

To conclude this chapter, the substantive obligations can be divided roughly into four categories: data-related, anti-steering provisions, interoperability, and procedural. See the visualization hereunder for a categorization:

The enforcement of the DMA

The DMA is enforced by the European Commission, and national competition authorities only have a supporting role. In order to enforce the DMA, the Commission has received a number of powers and rights.

In chapter 5 DMA (art. 20 to 43), the Commission is granted its enforcement powers. This chapter also explains the division of tasks between the Commission and NCAs. The Commission is granted the powers to open proceedings (art. 20), request information (art. 21), carry out interviews and take statements (art. 22), to conduct (on-site) inspections (art. 23), to impose interim measures (art. 24), negotiate commitments from gatekeepers (art. 25), monitor obligations and compliance (art. 26), request information from third-parties (art. 27) and determine whether there is non-compliance (art. 29).

When there is a finding of non-compliance by the Commission, they are equipped with a toolbox consisting of fines (art. 30 DMA), periodic penalty payments (art. 31), and the ability to impose remedies to ensure compliance (art. 29 DMA). Fines may be up to 10% of global annual turnover of the gatekeeper for the first infringement, and up to 20% for the second. With the third infringement, the Commission retains the right to impose structural measures. Besides remedies imposed on the basis of non-compliance, the Commission may introduce a fine of 1% of the total annual turnover for procedural shortcomings of the gatekeeper, such as failing to meet their reporting or notification requirements (art. 30(3) DMA).

In enforcing the DMA, the Commission can cooperate with national competition authorities. However, the role of NCA’s is limited to aiding the Commission, they cannot independently impose fines or remedies. The rules and procedures for cooperation between the Commission and NCAs are laid down in articles 37, 38, 39 and 41 DMA. Member States can be requested to aid the Commission in conducting the investigation, or request the Commission to open a market investigation on the basis of art. 41 io art. 16 – 19 DMA. However, Member States can still remain active in digital markets within their jurisdiction. Following art. 1(5) and 1(6) DMA, Member States can still make rules or competition law reforms aimed at regulating digital markets, as long as they do not intrude on the prerogatives of the DMA. This provides ample space for Member States to introduce rules that complement the DMA, see on this also our overview on section 19a GWB.

To be continued

This page has provided a brief overview of the main provisions of the DMA as to provide some background information. However, the implementation and enforcement of the DMA will surely raise more questions and issues over time. In the SCiDA project, we will continue to monitor the implementation of the DMA, as well as the DMCCA and section 19a GWB, we invite you to look at our blog to keep up with the latest developments and current affairs!

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