The EU’s new Digital Markets Act (DMA) was published in the EU’s Official Journal on 12 October 2022 and will come into force on 1 November 2022.1 The DMA creates an entirely new legal regime that expands the existing regulatory powers of the European Commission (EC) under antitrust and merger control rules in the digital sector. It will require gatekeepers to alter existing business practices (and models) to increase the contestability of EU digital markets.
The new regime affects established digital platforms offering core platform services, as well as smaller digital market players, including tech start-ups, other business users and/or end users of platforms that will launch complaints to the EC and national authorities against gatekeepers under the new DMA and existing antitrust rules or initiate litigation before national courts. Given its wide scope of application, the DMA is likely to result in a large number of investigations at the EU and member state level in the EU, and private action against gatekeepers before national courts.
This alert highlights the key features of the new DMA regime (i.e., what it takes to be designated as a gatekeeper and the do’s and don’ts obligations applicable to gatekeepers), the EC’s enforcement powers, the timeline to ensure compliance, and the DMA’s implications for regulatory, antitrust and merger control enforcement in EU digital markets (and potentially beyond).
The DMA imposes a detailed set of obligations and restrictions on companies designated as “gatekeepers”. To qualify as a gatekeeper, a business must meet the following criteria:
- The business must provide at least one so-called core platform service – the types of core platform services are enumerated in the DMA and include (a) online intermediation services; (b) online search engines; (c) online social network services; (d) video-sharing platform services; (e) number-independent interpersonal communication services; (f) operating systems; (g) web browsers; (h) virtual assistants; (i) cloud computing services; and (j) online advertising services, including advertising networks, exchanges and intermediation services, provided by an undertaking that provides any of the core platform services listed in (a) to (i).
Two of these services (web browsers and virtual assistants) were added to the list only at the end of the legislative process, reflecting recent findings in the EC’s sector inquiry into the consumer Internet of Things. Notably, the same company can be identified as the gatekeeper for several core platform services.
- Services are offered by a platform company that has a significant impact on the EU internal market – this is presumed where the platform company (a) has EU-wide group turnover of at least €7.5 billion in each of the last three financial years, or an average market capitalisation or equivalent fair market value of at least €75 billion in the last financial year; and (b) provides the same core platform service in at least three member states.
- The core platform service is an important gateway for business users to reach final consumers – this is presumed where the company operates a core platform service that, in the last financial year, had at least 45 million monthly active end users established or located in the EU, and at least 10,000 yearly active business users established in the EU. The DMA’s annex provides guidelines on how to identify and calculate end users and business users for each type of core platform service.
- The platform provider enjoys an entrenched and durable position in its operations or it is foreseeable that it will enjoy such position in the near future – this is presumed where the company met the thresholds under paragraph 3 above in each of the last three financial years. Where a platform provider does not yet enjoy such a position today, but will foreseeably enjoy such a position in the near future, the EC may apply a sub-set of the general obligations (see below) to the gatekeeper to ensure that the business concerned does not achieve an entrenched and durable position in its operations by unfair means.
Even if these thresholds are met, a business can present “sufficiently substantiated arguments” to demonstrate that – due to the circumstances in which the relevant core platform operates and based on qualitative criteria – it is, exceptionally, not to be qualified as a gatekeeper. This poses a significant burden of proof on platform providers, and it is likely to be a highly disputed issue in many gatekeeper designation processes before the EC. Conversely, if these thresholds are not exceeded, the EC can still assign gatekeeper status to platform providers based on an overall qualitative assessment following a market investigation.
Relevant qualitative criteria include (i) the size of the provider of core platforms services (in terms of turnover, market capitalisation, operations and position); (ii) the number of business users using the service to reach end users and the number of end users; (iii) network effects and data driven advantages, in particular in relation to the provider’s access to and collection of personal and non-personal data or analytics capabilities; (iv) scale and scope effects the provider benefits from (including with respect to data and, where relevant, its activities outside the EU); (v) business user or end user lock-in (including switching costs and behavioural bias that reduce the ability of business users and end users to switch or multi-home); (vi) a conglomerate corporate structure or vertical integration of a provider that, for instance, enables it to cross-subsidise, combine data from different sources or leverage its position; or (vii) other structural business or service characteristics.