The European Digital Markets Act 2022 enters into forcePosted: 14 Dec 2022
The Digital Markets Act ("DMA") entered into force on 1 November 2022 and will start applying on 2 May 2023. The DMA has two general objectives: to "ensure contestability and fairness for the markets in the digital sector in general". After the specific "gatekeepers" are designated, they will have six months to start complying with the DMA obligations. This is likely to be as of March 2024.
The DMA is an ex ante regulatory system that is heavily inspired by competition law and case law. It imposes several per se of regulatory obligations and prohibitions on providers of “core platform services” designated as "gatekeepers" (Big Tech) that fulfill several qualitative and quantitative criteria.
The DMA set a number of obligations for these digital gatekeepers in the form of dos and don'ts concerning the core platform services.
The DMA has as legal basis Article 114 of the Treaty on the Functioning of the European Union ("TFEU"), which empowers the EU legislator to adopt measures that are designed to approximate national rules and to prevent regulatory fragmentation in the internal market.
The DMA gives the European Commission ("Commission") broad investigative and enforcement powers in respect of its digital strategy. The DMA should have an impact beyond the borders of the EU.
Who can be designated as a “gatekeeper”?
To be designated as a "gatekeeper", an undertaking needs to provide one of the following core platform services (the "CPS") provided in Article 2(2) of the DMA. This list is decisive as it defines the scope of the DMA. Only providers of CPS can be gatekeepers and the obligations of the DMA only apply to CPS. The CPS include online intermediation services; online search engines; social networks; video sharing platform services; messenger services (number-independent interpersonal communication services); operating systems; web browsers; virtual assistants; cloud computing services; online advertising services.
The provider of a CPS will be designated as a "gatekeeper", if it meets a cumulative "three criteria test" according to Articles 3(1) and 3 (2) of the DMA. The test relies on three qualitative criteria, which, however, are respectively presumed to be satisfied if three quantitative thresholds are met. In other words, the DMA establishes a rebuttable presumption that the qualitative criteria are satisfied when a provider of CPSs meets the quantitative thresholds.
- the undertaking has a significant impact on the Internal Market.
- which provides an important gateway for business users towards final consumers.
- and enjoy an entrenched and durable position.
- The undertaking has EU-wide turnover of EUR 7.5 billion in each of the last three financial years or fair market value valuation of EUR 75 billion and provides the same core platform service in three EU member states.
- Which has at least 45 million monthly active end users and at least 10,000 yearly active business users.
- These thresholds have been met in each of the last three financial years.
An Annex to the DMA explains how to identify active end users and active business users for each CPS.
Undertakings that meet the criteria are required to notify their gatekeeper position to the Commission within two (2) months and provide the Commission with the necessary information to verify the gatekeeper conditions. The Commission is working on an implementing regulation that will include a form for such notification. Undertakings that currently meet the gatekeeper criteria must submit their notification to the Commission by July 2023 (i.e. two months after the relevant rules in the DMA apply on 2 May 2023). The Commission then adopts decisions designating undertakings as gatekeepers within 45 working days.
The provider of a CPS has the possibility to rebut this presumption, "in exceptional circumstances", by presenting "sufficiently substantiated arguments" which "manifestly call [it] into question".
This period will be key and possible disputes may arise at this stage.
What are the obligations and prohibitions ? A list of Dos and Dont’s for gatekeepers
For each of their CPS identified in the relevant designation decision, gatekeepers must comply with the obligations and prohibitions under Art. 5, 6 and 7 of the DMA. They are modelled around recent competition law cases, like Apple App Store investigation and the Google shopping case.
The rules list business practices that the EU legislators found problematic (i.e. the don'ts) when used by gatekeepers with regard to their core platform services (CPS) or by which they wanted to require gatekeepers to behave in certain ways (i.e. the dos). Article 5 of the DMA contains requirements that are applicable without further specification, while the obligations under Art. 6 of the DMA are also directly applicable but can be further specified by the Commission for the individual gatekeeper.
The gatekeeper obligations of the DMA are in principle "self-executing". Gatekeepers are required to implement their dos and don'ts by themselves. To ensure compliance with the DMA they must establish a compliance function, and they are subject to audit and reporting obligations that place the burden of proof on them for compliance with the DMA.
However, unlike in competition enforcement cases, the Commission will not have to define a "market" and prove that the "gatekeeper" holds a dominant position or that certain conduct causes anti-competitive effects. Likewise, no efficiencies defenses are allowed. In addition, the DMA rules are quite inflexible, in that there is no differentiation as to various business models. A designated "gatekeeper" "shall comply with all obligations" contained in Articles 5, 6 and 7, irrespective of which competition case inspired each obligation.
What are the Commission's powers vis-à-vis the “gatekeepers”?
Monitoring compliance with the DMA is the responsibility of the Commission and the DMA grants the Commission very similar powers as in the antitrust area. Namely, the Commission can carry out inspections (dawn raids), send requests for information, interview employees of the relevant companies, impose interim measures, conduct market investigations, and, more significantly, impose fines and periodic penalty payments.
In the event of infringements, gatekeepers face fines of up to 10% of the group's worldwide turnover. In the event of repeated violations, the fines can amount to 20% of the group's worldwide turnover.
Within the Commission, implementation of the DMA is under the Directorates-General – DG COMP (Competition) and DG CNECT (Communications Networks, Content and Technologies). The allocation of tasks will be thematic, so that the more technical interoperability issues can be dealt with by DG CNECT while the self-preferencing issues stemming from competition law will be handled by DG COMP. Mixed teams could also a possibility.
Despite the Commission's responsibility for enforcing the DMA, member state authorities can also play an important role. In particular, the DMA allows them to initiate investigations into compliance with the DMA obligations and to report their findings to the Commission.
How will the DMA interact with competition enforcement?
The enforcement of the DMA comes without prejudice to the application of Articles 101 and 102 TFEU. This means that these two tools are going to be used in a complementary way by the Commission.
On the merger control side, the DMA imposes on "gatekeepers" the obligation to inform the Commission of acquisitions "where the merging entities or the target of concentration provide core platform services or any other services in the digital sector or enable the collection of data". While the Commission will not be able to review these transactions under merger control rules, this provision is likely going to be applied alongside Article 22 of the EU Merger Regulation ("EUMR") to review certain transactions carried out by gatekeepers. The new Guidelines on Article 22, according to a recent judgment of the General Court (Illumina/Grail), allow the Commission to request Member States to refer a transaction to the Commission even if it does not meet the turnover thresholds of any of the Member States.
Private enforcement and class actions
The DMA is open to private enforcement and includes specific provisions on co-operation mechanisms between the Commission and the national courts which should respect to Commission DMA decisions. These national courts have full powers to apply the provisions of Articles 5, 6 and 7.
The DMA also envisages class actions. Article 42 refers to Directive 2020/1828 on representative actions and provide that the Directive "shall apply to the representative actions brought against infringements by gatekeepers of provisions of this Regulation that harm or may harm the collective interests of consumers".
Article written by Marc Picat, 8 December 2022
Article written by:
Dhana Doobay is a Partner at Spencer West. She specialises in Telecoms, Media & Technology, Cloud and digital services, Network-sharing and infrastructure projects, International “best practice” regulatory strategy, Mobile ecosystems and Strategic partnerships
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