Technology | The Digital Markets Act will be applicable in the EU from 3 July 2023 and will prohibit certain business practices

The Digital Markets Act (“DMA”) entered into force in the European Union (EU) on 1 November 2022 and, following a 6-month grace period, will be applicable from 2 May 2023 and at the latest by 3 July 2023. The DMA will regulate and heavily effect companies that offer platform services and act as so-called gatekeepers in the online platform economy.

The main objective of the DMA

The main objective of the DMA is to target the largest operators of digital platforms in the EU – the so-called “gatekeepers”. The DMA defines “gatekeepers” as digital platforms that provide an important gateway between business users and consumers – whose position can grant them rulemaking authority. The EU believes gatekeepers can create bottlenecks in the digital economy in the form of unfair business practices and lack of competition. To address these issues, the DMA defines a series of obligations and prohibitions that gatekeepers must respect.

Who are defined as gatekeepers?

Companies operating one or more “core platform services” in the DMA qualify as a gatekeeper if they meet the three requirements described below. The core platform services are:

Online intermediation services such as app stores,
online search engines,
social networking services,
certain messaging services,
video sharing platform services,
virtual assistants,
web browsers,
cloud computing services,
operating systems,
online marketplaces,
and advertising services.

The three main criteria are:

The company is of a size that impacts the internal market: when the company achieves a certain annual turnover in the European Economic Area (EEA) and it provides a core platform service in at least three EU Member States;
The company controls an important gateway for business users towards final consumers: when the company provides a core platform service to more than 45 million monthly active end users established or located in the EU and to more than 10,000 yearly active business users established in the EU.
The company has an entrenched and durable position: This criterion is fulfilled if the company has met the second criterion during the last three years.

How will the DMA work in practice?

The DMA prohibits gatekeepers from:

treating services and products offered by the gatekeeper itself more favourably in ranking than similar services or products offered by third parties on the gatekeeper’s platform.
preventing consumers from linking up to businesses outside their platforms.
preventing users from un-installing any pre-installed software or app if they wish so.
track end users outside of the gatekeepers’ core platform service for the purpose of targeted advertising, without effective consent having been granted.

To ensure that gatekeepers stay compliant the Commission will carry out market investigations, qualify companies as gatekeepers, regularly update the obligations for gatekeepers when necessary and design remedies to tackle infringements of the DMA.

What will be the consequence of non-compliance and infringements?

Infringements of the DMA may result in fines up to 10% of the company’s total worldwide annual turnover, or up to 20% in the event of repeated infringements, periodic penalty payments of up to 5% of the average daily turnover, and further remedies in cases of systematic infringements. Such further remedies may for example include behavioural and structural remedies, e.g., the divestiture of (parts of) a business.

Timeline

The DMA entered into force in the EU on 1 November 2022 and will start applying as of 2 May 2023. Then, within two months, i.e., by 2 July 2023, companies will have to assess whether they are providers of core platform services that meet the quantitative thresholds in the DMA and will have to submit a notification to the Commission. Within 45 working days, the Commission will then designate them as “gatekeepers” and list the core platform services subject to the relevant obligations. The proposal is currently being assessed in Norway and in the EEA/EFTA countries.

BAHR’s view

The DMA will have a large impact on digital platforms that operate in the EU. The DMA will add several layers to the regulation of digital platforms and will arm enforcers with severe sanctions to ensure compliance. The remedies that include fines up to 20% of the company’s total worldwide annual turnover and business divestiture, should motivate companies to perform an assessment of compliance with the DMA before 2 May 2023.