In this article, we will dive into the understanding of the Digital Markets Act (DMA), clarify the meaning and role of gatekeepers and analyse the consequences of this legislation on the digital market landscape.
Digital Market Act: What is it?
The Digital Markets Act (DMA) is a regulation affecting companies operating online within theEuropean Union.From November 2022date of its entry into force, focuses on antitrust concerns related to Big Tech, referred to as 'gatekeepers', who control a vast amount of online activities and process huge volumes of user data.
The Digital Markets Act was proposed by the European Commission as part of the Digital Services Packagetogether with the Digital Services Act. Unlike the Digital Markets Act (DMA), the Digital Services Act (DSA) is the European digital services regulation, which aims to prevent and counteract illegal and harmful online activities, protect the fundamental rights of users and create a fair and open digital environment.
Who are the Gatekeepers?
The European Commission (EC) identifies the gatekeeper as the technology giantsor those companies that play a crucial role in the digital ecosystem acting as key intermediaries.
The designation of a platform as gatekeeper derives from well-defined criteria, including the management of afar-reaching user interfacethe provision of services that are indispensable for digital business, and the ability to steer market dynamics. In other words, these are companies that:
- They totalled in the previous three years a annual turnover of at least EUR 7.5 billion in the European Union, or have a market value of at least EUR 75 billion;
- They have at least 45 million monthly end users and at least 10,000 business users established in the Union;
- They control one or more basic platform services in at least three EU Member States;
- They have a strong economic position and a significant impact on the market interior;
- They provide a basic platform service which is an important access point for business users to reach customers;
- They have a established and lasting position in the markettoday or in the near future.
According to the European Commission, these platforms hold the power to modulate access to digital marketsexercising considerable influence on online trade and the distribution of information.
Among the companies identified as gatekeepers by the EC are:
- Alphabet (parent company of Google and Android)
- Amazon
- Apple
- ByteDance (parent company of TikTok)
- Meta (parent company of Facebook, Instagram, WhatsApp and others)
- Microsoft (parent company of LinkedIn)
The latter, through their services and platforms, define the way consumers and companies interact in the digital worldemphasising the importance of their role as gatekeeper within the DMA (Digital Markets Act).
What are basic platform services?
The basic platform services are online services which constitute an important access point for users. The regulation lists the following basic platform services:
- Services of online brokerage (including markets, application shops, accommodation and transport booking services);
- Search Engines online;
- Operating Systems;
- Services of cloud computing;
- Services of video sharing;
- Services of electronic communication;
- Services of social media;
- Advertising Servicesincluding advertising networks and any other advertising brokerage services related to one or more of the above services.
What are the objectives of the Digital Markets Act
The DMA law aims to affect competition, ensuring equity e transparency by gatekeepers. Because of their predominant influence on the market and consumers, the DMA applies restrictions to a variety of technological servicesincluding search engines, cloud services, social networks, video sharing platforms, online advertising networks and other products and services operated by large digital companies.
One of the main objectives of the DMA is "levelling the playing field" for the smaller enterprises in the digital space and provide more protections for users' rights and their data.
The objectives of the Digital Market Act are:
- Ensuring theabsence of entry barriers (contestability) of all online services;
- Fighting the market abuse of the major digital platforms;
- Stimulating theinnovation and the competition of digital markets;
- Closing the regulatory gap jeopardising users' data and privacy;
- Creating a fairer economic space for European companies;
- Favouring the division of values and profits between companies operating in the digital economy.
What does digital marketplace regulation entail?
To regulate gatekeepers, the DMA introduces a series of regulatory measures aimed at promoting justice and ethics in digital marketsthrough the adoption of lists of prohibitions (blacklist) e lists of obligations (whitelist) to prevent commercial misconduct and encourage fair practices among the leading digital operators.
Blacklist: gatekeeper bans
The DMA blacklist is thelist of abusive practices that gatekeepers are banned to perform, as they are considered detrimental to competition and the users' interests.
The backlist sanctions, inter alia, conduct such as theuse of dominant position to exclude competitors, the undue promotion of one's own products to the detriment of those of competitorsthe unjustified refusal to share data with third partiesand the creation of barriers to interoperability and data portability.
It also prohibits the acquisition or control of competing or complementary undertakings without the approval of the competent authoritiesthe imposition of restrictions limiting the freedom of business and end users to use third-party products or services, and the combination of personal data collected by its services with those of other sources without the users' explicit consent.
Whitelist: gatekeepers' obligations
The DMA whitelist is thelist of lawful practices that gatekeepers are required to respectas they are considered favourable to competition and users' interests.
The whitelist includes the uninstallation of pre-installed applications and access to basic platform services via third-party solutions, plus users will have the right to stop having their data collected. Companies, for their part, will be able to offer uniform conditions to customers both inside and outside gatekeeper platforms, access and use data generated on platforms, promote services and products outside of platforms, and use alternative payment and identification systems. They will also be able to conclude contracts directly with customers, access interoperability and data portability features, and interact with ad networks and exchanges. Finally, they will be able to verify the identity of customers for compliance purposes and offer contracts with independent electronic communication service providers.
Gatekeepers that respect the whitelist are recognised as responsible operators and can benefit from a increased trust and reputation by the users and the authority.
What will be the consequences of non-compliance?
In case of non-compliancethe DMA provides for heavy penalties, with fines of up to 10% of the company's annual global turnover and, in case of recurrence, up to 20%.
The size of the sanction will be determined according to the severity and the duration of the breach. In situations of systematic violation, the following may be imposed exceptional sanctionsincluding the sale of parts of the capital or business properties.
Download PDF on the Digital Market Act
Would you like to know more? For more information here the full text of the DMA.
