The EU Digital Markets Act aims to improve the internal market and increase competition on digital platforms
In recent years the European Commission has striven to be a pioneer among competition authorities when it comes to scrutinising companies that maintain digital platforms and provide digital services and products. The Commission has already actively applied existing competition law to US tech giants, and it has several ongoing competition law proceedings concerning the Big Five, or GAFAM (Google, Apple, Facebook (Meta), Amazon and Microsoft).
Soon the Commission will have a completely new tool at its disposal when the Digital Markets Act (DMA), one of the centrepieces of the Commission’s data legislation project, enters into force on 1 November. The DMA aims to level the playing field for companies active on digital platforms and facilitate addressing any harmful practices in platform markets. The majority of the DMA’s articles will become applicable from May 2023 onwards.
The DMA regulates core platform services and gatekeepers
The DMA aims to improve the functioning of the EU’s internal market. In practice, this is striven for by regulating gatekeepers and the core platform services they provide, such as online intermediation services and search engines, online social networking services, video-sharing platform services, interpersonal communication services, operating systems and cloud computing services. For example, Google’s search engine, Apple’s App Store, Microsoft’s operating system and Amazon’s cloud computing platform AWS could be considered core platform services.
The Commission designates gatekeepers pursuant to the DMA. By ‘gatekeeper’ the DMA refers to an established provider of platform services that has a significant impact on the internal market and reaches a wide audience. Pursuant to the DMA, gatekeepers include at least those companies that provide core platform services in at least three Member States, have a core platform service with a number of end users exceeding the DMA’s thresholds (more than 45 million monthly active end users established in the Union and more than 10,000 yearly active business users established in the Union in the last three years) and have a turnover or market value exceeding certain thresholds. According to current estimates, fewer than 15 companies meet the gatekeeper criteria.
Designated gatekeepers must comply with the obligations laid down in the DMA. For example, gatekeepers may not:
- favour their own services and products over competing services and products in ratings and rankings;
- limit payment methods to the platform’s own method of payment;
- use the customers’ personal data for the purposes of advertising without consent;
- set unfair terms for business users; or
- pre-install software or applications the users cannot easily uninstall.
In addition, gatekeepers must secure easy subscription to or cancellation of a service, provide business users with information concerning their marketing and advertising results, and ensure that the basic functions of instant messaging services are interoperable. Gatekeepers are also obligated to inform the Commission of any mergers and acquisitions that concern digital services and enable data collection regardless of whether such concentration is notifiable under merger control rules based on revenues of the parties.
If a gatekeeper fails to comply with its obligations under the DMA, the Commission may impose on the gatekeeper fines of up to 10% of its total worldwide turnover in the preceding financial year. In the event of repeated infringements, the Commission may impose fines of up to 20% of the gatekeeper’s turnover.
A level playing field in digital markets
The DMA may have a significant impact on Finnish companies. It is evident that the majority of companies are not subject to obligations under the DMA but rather they hold rights clarified by the new Act.
With the DMA, the Commission aims to not only increase competition between platforms (that have to compete for business users) but also provide SMEs with better mechanisms to develop their operations and business environments, for example when it comes to switching providers or combining services. Furthermore, the DMA clarifies the rights of business users when using platforms provided by gatekeepers.
It is likely that the DMA will have the biggest impact on data sharing. The underlying objective is the ability to regulate situations in which a gatekeeper holds a dual role, offering on its platform the same products as its business users. In such a situation the gatekeeper has the opportunity to receive more data on consumer behaviour, terms of sale and other information than the other merchants. A similar situation was in the spotlight when the Commission addressed the practices of Amazon’s marketplace. Going forward, in addition to clients’ sales data, gatekeepers are obligated to disclose data on product success to their clients in a more transparent manner under the DMA.
The DMA will also restrict how gatekeepers can favour their own products and services in their platforms’ search rankings and ratings.
Continued regulation of the digital markets
As described above, the DMA aims to level the playing field between large platform service providers and their users and, subsequently, increase competition and innovation in the EU. The DMA is a part of the European strategy for data that aims at strengthening the EU’s competitiveness by creating a single European market for data where data can be widely utilised under common standards and rules. In addition to the DMA and other previously issued regulations, for example, the Data Act is being prepared in the EU institutions and the Digital Services Act was published only last week.
These regulations will have a significant impact on the business opportunities of companies as well. However, as is the case with the DMA, legislators, authorities and companies will have to harmonise all regulations related to the strategy for data with previous binding legislation, such as competition legislation.