The Digital Markets Act (DMA) will establish rules concerning the market power of "core platform services" who are "gatekeepers" (e.g. online search engines, social networking services, app stores, messaging services, etc. that meet certain thresholds) in the digital sector. The DMA aims to open up the digital market to new players by ensuring more competition and preventing gatekeepers from abusing the market power they hold (e.g. by imposing unfair conditions on end-users of online platforms) while ensuring the transparency of key services.
The DMA entered into force on the 1 November 2022 and the notification and review process by which the European Commission (EC) will designate companies as 'gatekeepers' starts six months later on 2 May 2023.
The DMA will govern the activities of online gatekeepers, regulate how businesses access gatekeeper platforms, provide internet users with new rights to uninstall pre-loaded apps, and place fresh restrictions on the use of users' personal data.
Once a platform is designated as a gatekeeper, it will have to comply with a number of obligations in relation to the use of data, interoperability and self-preferencing. The obligations prescribed by the DMA require gatekeepers to both proactively implement certain behaviours (the "do's") and to refrain from engaging in certain practices which the DMA classifies as unfair (the "don'ts"). (For more on this see previous WF analysis here).
A company will have gatekeeper status and fall under the scope of the DMA if it meets the following three criteria (notably, there are certain thresholds where the status of gatekeeper is presumed):
- The company is a size that impacts the internal market: There is a presumed status if the threshold for meeting this requirement is met. It is where the company has annual turnover of at least €7.5 billion within the EU in each of the past three financial years or an average market valuation of at least €75 billion in the past financial year, and it provides the same core platform service in at least three Member States;
- The company provides a core platform service which is an important gateway for business users to reach end users. There is a presumed status if the threshold is met where a core platform service in the last financial year has on average a minimum of 45 million monthly end users established or located in the EU and at least 10,000 yearly business users established in the EU. 'Core platform service' includes any of the following: online intermediation services, online search engines, online social networking services, video-sharing platform services, number-independent interpersonal communications services, operating systems, web browsers, virtual assistants, cloud computing services and online advertising services (including any advertising networks, advertising exchanges and any other advertising intermediation services); and
- The company has an (established or will in the future) entrenched and durable position. There is a presumed status if the threshold is met, where a core platform service has on average a minimum of 45 million monthly end users established or located in the EU and at least 10,000 yearly business users established in the EU in each of the previous three financial years.
An undertaking that is a core platform service and meets the additional presumed status thresholds set out above, needs to notify the EC without delay and in any event within 2 months after those thresholds are met.
The DMA also equips the EC with investigative powers and the EC has the power to conduct on-site inspections, having given prior notice to undertakings.
The EC is charged with enforcement of the DMA, but Member States can also empower their national competition authorities (in Ireland the Competition and Consumer Protection Commission) to investigate any alleged infringements and transmit their findings to the EC. Furthermore, third parties alleging harm by an infringement of the DMA may bring an action against a gatekeeper in their national courts for damages suffered as a result of the alleged infringement. If found to be in breach of its obligations, a gatekeeper will be exposed to fines of up to 10% of its total worldwide annual turnover and periodic penalty payments of up to 5% of the average daily turnover.
Impact on businesses
Relevant businesses will therefore to now start considering whether they meet criteria set out by the EC which would designate them as gatekeepers. If the entity considers that it falls within these criteria, it will need to inform the EC by 3 July 2023. The EC will have 45 working days to make an assessment and will, on the basis of the three criteria being satisfied, it will designate the relevant entity as gatekeeper. Within six months of such designation, the relevant entity will have to follow the sets of do's and don'ts prescribed by the DMA. This set out timeline should prompt the relevant entities to start reviewing their practices soon (if not now), given the potentially sizeable amount of preparation required to comply with the new detailed rulebook at the six-month deadline and avoid any enforcement actions. If you require assistance in this regard, do reach out to your usual William Fry contact.
The EC will soon launch a public consultation on the DMA's implementing regulation, which will include a draft form for designation as a market gatekeeper as well as other procedural rules.
Contributors: Cormac Little and Karolina Rozhnova
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.