The Regulation of Digital Markets by the European Commission

The Digital Markets Act or DMA as it is colloquially termed incorporates a novel set of guidelines issued by the European Commission with the primary aim of regulating and keeping gatekeepers in check and ensuring that there is a fair playing ground across the internet. The Act, which complements already existing EU Competition rules aims to make the markets in the digital sector fairer and more challengeable.  It lays down a set of obligations and stipulates a series of prohibitions which gatekeepers must observe and comply with.  The term ‘Gatekeepers’ refers mainly, to those large digital platforms which offer services known as ‘core platform services’ consisting of, but not limited to, online search engines, App stores such as Apple’s app store or Google’s Google play app store, or even messenger services like the one provided by META’s Messenger application. Thus, the main purpose of the DMA is “to contribute to the proper functioning of the internal market by laying down rules to ensure contestability and fairness for the markets in the digital sector in general, and for business users and end users of core platform services provided by gatekeepers in particular.”[1]

A review of – the Official Journal of the European Union reveals that the Act seeks to keep in particular operators in check.  The following is explained   – “A small number of large undertakings providing core platform services have emerged with considerable economic power that could qualify them to be designated as gatekeepers pursuant to this Regulation. Typically, they feature an ability to connect many business users with many end users through their services, which, in turn, enables them to leverage their advantages, such as their access to large amounts of data, from one area of activity to another. Some of those undertakings exercise control over whole platform ecosystems in the digital economy and are structurally extremely difficult to challenge or contest by existing or new market operators, irrespective of how innovative and efficient those market operators may be.”[2]

The DMA was first proposed in December of 2020 by the European Commission, after which the Regulation was adopted by the European Parliament nearly two years later on the 14^th of September 2022 and went on to be published within the official journal shortly after, on the 12^th of October 2022.

On the 1^st of November of 2022 the DMA entered into force becoming applicable as of 2^nd May 2023 giving companies that provide core platform services two months from said date to issue a notification to the Commission clarifying whether they meet the quantitative thresholds set out by the Regulation all the while providing all necessary and relevant information to back up their claims. Upon receipt of the said information, the Commission had a maximum of 45 working days within which to peruse the information provided and come to a decision so as to designate a specific gatekeeper. A designated gatekeeper is required to adhere to all obligations and prohibitions as stipulated under the DMA within six months.   The aforementioned time sequence applies only to those company services that already existed by the 2^nd of May 2023. Those companies which however meet the threshold at a later stage must notify the Commission within 2 months of meeting said threshold.

So as to ensure that the Regulation is effective and keeps up with the ever-evolving digital sector, the Commission will be keeping market investigations.  The said investigations will enable it to identify companies’ gatekeepers, revise obligations imposed upon the latter should the fast-moving market so require and draw up remedies addressed at tackling systemic infringements of the obligations included in the Act.

Gatekeepers  found to have lacked in their commitment to adhering with the rules  set out by for example, engaging “in any form of differentiated or preferential treatment in ranking on the core platform service, and related indexing and crawling, whether through legal, commercial or technical means, in favour of products or services it offers itself or through a business user which it controls”[3]  face potentially hefty detrimental penalties composed  of –

• Fines which, in normal circumstances, could reach 10% of a company’s total worldwide annual turnover. Where the company is found to be in breach of the Regulation repeatedly the said fine may rise up to a maximum of 20%;
• Periodic Penalty Payments that are levied at a maximum of 5% of the average daily turnover of the company;
• Where following an investigation it is ascertained that there are systemic infringements of the obligations set out in the Regulation, supplementary remedies which must be proportionate to the offence committed, may be imposed. To further impound on the effectiveness of the DMA, the Commission is entitled to impose  non-financial remedies, as a last resort, which may  include remedies of a behavioural or structural nature.

As previously stated the DMA seeks to prevent large core service providers from unfairly prejudicing third parties through the use of their strong grip on digital platforms. Therefore, core service providers would be guilty of unfair prejudice should they –

• Favour their own services and products ahead of those delivered by third parties when business is conducted on the gatekeeper’s platform;
• Prevent users from uninstalling pre-installed software from their devices should they wish to do so, thus prejudicing consumers and impinging on their right to freely use and enjoy their purchased goods;
• Prevent users and consumers from establishing communication with other businesses outside of the purview of their platform;
• End user tracking when outside of the core service provider’s platform and without the explicit consent of the consumer. This is usually done for the purposes of targeted advertising and has been an issue which large companies such as Meta have been accused of engaging in.

The last point is quite controversial, and the EU Commission has in fact recently opened proceedings against Meta, debating whether their new ‘pay or consent’ subscription model offered on their services designed to obtain user agreement to use their data for advertising purposes.  The Commission is unsure as to whether this payment design complies with the new DMA with the EU’s Commissioner for the Internal market, Thierry Breton, publicly stating that the Commission is “not convinced that the solutions by …. Meta respect their obligations for a fairer and more digital space for European citizens for businesses”[4]

Apart from the aforementioned prohibitions imposed on these large companies, they also have to abide with several obligations, namely –

• Allow business users to access any data generated whilst using the gatekeeper’s platform;
• Allow business users to utilise other means of promoting their offers not necessarily within the gatekeeper’s platform and conclude contracts of their own;
• Allow third parties to inter-operate with their own services if the circumstance warrants it;
• Provide advertisers and publishers with the necessary information required to independently verify their advertisements whilst they are being hosted by the gatekeeper.

Through the implementation of the new Regulation and consistent check-ups the EU is seeking to remain proactive in combatting digital market manipulation, ensuring a safe and fair marketplace for all users and companies.  As stated in the Official Journal itself in Article 28   “ Applying only those obligations that are necessary and proportionate to achieve the objectives of this Regulation should allow the Commission to intervene in time and effectively, while fully respecting the proportionality of the measures considered. It should also reassure actual or potential market participants about the contestability and fairness of the services concerned.”

This article is not intended to constitute legal advice and neither does it exhaust all relevant aspects of the topic.

Author: Matthew Borg Galea

[1] Official Journal of the European Union, REGULATION (EU) 2022/1925 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 14 September 2022 on contestable and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828 (Digital Markets Act),  Article 7

[2] Ibid Article 3

[3] Ibid Art 52

[4] EU probes Apple, Meta and Alphabet under landmark new law