In recent years, the European Union has been striving to adapt its legislation to be as responsive as possible to technological advances and ongoing changes in the digital world and the digital economy.
To this end, the European Commission (hereafter the EC) has announced several initiatives outlining its priorities in the coming years. Among them is the European Commission Digital Strategy, announced in 2014, part of which is the EC's proposed Regulation on Contestable and Fair Markets in the Digital Sector (also known as the Digital Markets Act, hereafter "DMA") proposed in December 2020 . The regulation is aimed at ensuring a fair and competitive digital economy, one of the three main pillars of the policy directions and goals announced in the Communication "Shaping Europe's Digital Future." It also complements current EU and national competition rules.
The DMA is currently at one of the final stages in the legislative process - on July 5, 2022, the draft was formally adopted by the European Parliament, and is now only awaiting formal approval by the European Council, which is expected in September 2022. Once approved, the DMA will enter into force 20 days after its publication in the Official Journal of the EU, and the provisions will be directly applicable in Member States just six months later. The gatekeepers, on the other hand, will have up to six months to comply with the introduced regulations.
Scope of application
The subject of the regulation is unfair practices by "very large online platforms" (VLOPs), also known as the gatekeepers. Only companies with an annual turnover of €7.5 billion in the EU or with a global market value of €75 billion will therefore fall within the scope of the DMA. The gatekeepers must also have at least 45 million monthly individual end users and 100,000 business users. Moreover, these companies must control at least one "core platform service" such as marketplaces and app stores, search engines, social networks, cloud services, advertising services, voice assistants and web browsers. Previous EU rules did not apply to them or were ineffective in preventing monopolistic practices and effectively protecting smaller players in the market. The DMA is therefore intended to benefit smaller players. It aims to prevent large platforms from imposing unfair conditions on businesses and end users, and to ensure the openness of important digital services. The DMA will promote innovation, growth and competitiveness, and facilitate the scaling up of smaller platforms, SMEs and startups.
Major new obligations
According to the DMA, the gatekeepers will be required to:
- enable end users to easily uninstall pre-installed applications or change default settings on operating systems, virtual assistants or web browsers that direct to the gatekeeper's products and services and provide selection screens for key services;
- allow end users to install applications from other developers or app stores that use or work with the access gatekeeper's operating system;
- allow end users to opt out of the gatekeeper's core platform services as easily as they sign up for them;
- allow third parties to interact with the gatekeeper's own services;
- provide companies advertising on the platform with access to the gatekeeper's performance measurement tools and information necessary for advertisers and publishers to conduct their own independent operations.
At the same time, the following practices will be prohibited:
- using business user data when the gatekeepers compete with them on their own platform;
- classifying their own products or services more favorably compared to those of third parties;
- requiring app developers to use certain gatekeepers’ services (such as payment systems or identity verification) in order to appear in the gatekeeper's app stores;
- tracking end users outside of the gatekeeper's main platform service for the purposes of profiled advertising without giving effective consent.
In the event of the gatekeeper's non-compliance with the above-mentioned obligations, the EC may impose fines of up to 10% of its total worldwide turnover from the previous fiscal year, or, notwithstanding the penalty already awarded, may impose a further penalty of up to 20% of worldwide turnover in the event of a repeated violation of at least the same type.
Moreover, the EC may impose periodic fines of up to 5% of the average daily worldwide turnover achieved in the previous fiscal year for each day, calculated from the date specified in the decision, in case of non-compliance with prior recommendations. In addition, in case of systematic violations, the gatekeeper may be banned from carrying out mergers with other entities, at least for a specified period. These sanctions are accompanied by broad powers for the EC to check entities' compliance with DMA requirements through information requests, market studies and the possibility of inspections.