Digital Markets Act
This is the second of two briefings about the Digital Services Act package introduced by the European Commission (EC). The package comprises the Digital Services Act (DSA) which we covered in our earlier briefing and the Digital Markets Act which we discuss in this second briefing.
While the proposals regulate large online platforms, small businesses that use these platforms should take note of the greater rights and freedoms they will enjoy when using these platforms.
The Digital Markets Act (DMA)
The DMA is aimed specifically at large technology platforms, known as “gatekeepers”, which act as gateways between businesses and their end users. Due to their size, these gatekeepers operate significant control over access to digital markets upon which numerous businesses rely.
The DMA will create rules that aim to prevent these gatekeepers from abusing their dominant position. The objective is to create a fair commercial environment for users that rely on the services provided by the gatekeepers when operating their business.
Who qualifies as a gatekeeper?
An online platform will qualify as a gatekeeper if it:
- has a significant impact on the internal market
This will apply if the online platform in question has an annual turnover equal to or above EUR 6.5 billion in the previous three financial years, or where the company in question has a market capitalisation of at least EUR 65 billion in the previous financial year and the company provides a core platform service in three or more member states.
- operates one or more important gateways to customers
This will apply if the online platform provides a core platform service to more than 45 million monthly active users located in the EU and more than 10,000 active business users in the EU during the previous financial year.
- enjoys or is expected to enjoy an entrenched and durable position in its operations
This will apply where the criteria outlined in point 2 above have been met in each of the past three financial years.
Those platforms that fulfil the above criteria are obliged to inform the EC who will then decide whether they are classified as a gatekeeper. It should be noted that the EC will have the discretion to designate a platform as a gatekeeper even if the criteria listed above are not fulfilled.
What is the law applicable to gatekeepers?
If the platform is classified as a gatekeeper, the DMA imposes several obligations and prohibitions which aim to create a fair business environment for users of the gatekeeper’s platform.
- Third parties must be allowed to interoperate with the gatekeeper’s own services (in specified circumstances)
- Gatekeepers must allow businesses using their platform to promote, offer and conclude contracts with customers outside their platform
- Companies advertising on the platform must be provided with the tools and information necessary to enable them to undertake independent verification of their advertisements hosted on the gatekeeper’s platform
- Gatekeepers must provide users of the platform with access to the data that they generate while using the platform
- Gatekeepers must not prevent business users of their platform from linking up with other businesses outside the platform
- Gatekeeper platforms must not treat products and services offered by the gatekeeper more favourably in ranking than similar products offered by third parties on the platform
- Gatekeepers must not prevent users of their platforms from uninstalling pre-installed apps or software.
Enforcement of the DMA will be undertaken by the EC at a supra-national level, and not by national regulators.
The fines and sanctions that can be applied under the DMA are larger than those available under the DSA. In the event of a breach of the DMA, the EC will be able to fine a company 10% of its annual worldwide turnover. The EC also makes provision for the imposition of periodic penalty payments of up to 5% of the gatekeeper’s average daily turnover. In a situation where a gatekeeper has systematically infringed the obligations imposed on it by the DMA, the EC will be able to impose structural and behavioural remedies that are proportionate and necessary to ensure compliance.
This briefing is for guidance purposes only. RadcliffesLeBrasseur LLP accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.