01 April 2021
Digital Markets Act: a new and fair business framework for large platforms
The European Commission has published the draft proposal for a new competition law framework for large online platforms, called the Digital Markets Act (the “DMA”). The reason the Commission proposed the DMA is that a small number of large online platforms capture the biggest share of overall value generated in Europe’s digital economy, and these platforms have emerged by benefitting from sector characteristics such as strong network effects, often embedded in their own platform ecosystems. These platforms represent the key structuring elements in today’s digital economy, intermediating the majority of transactions between end users and business users. A few large platforms increasingly act as gateways or gatekeepers between business users and end users, and enjoy a long-term, entrenched position, often as a result of the creation of conglomerate ecosystems around their core platform services, which reinforces existing entry barriers.The DMA deals with those large online platforms acting as gatekeepers in digital markets. The DMA aims to ensure that:these platforms behave fairly online;innovators and technology start-ups will have new opportunities to compete and innovate in the online platform environment without having to comply with unfair terms and conditions that limit their development;consumers will have more and better services to choose from, more opportunities to switch their provider if they so wish, direct access to services, and fairer prices.
Who are the gatekeepers?
Gatekeepers are core platform services which meet the qualitative and quantitative criteria set out in the DMA. Core platform services include online intermediation services, search engines, social networking services, video-sharing platform services, number-independent interpersonal communication services, operating systems, cloud computing services, advertising services including any advertising networks, advertising exchanges and any other advertising intermediation services, provided by a provider of any of the core platform services listed above.A core platform service qualifies as a gatekeeper, if:it has a significant impact on the internal market, which is presumed if it achieves an annual EEA turnover equal to or above EUR 6.5 billion in the three preceding financial years, or where the average market capitalisation or the equivalent fair market value of the undertaking to which it belongs amounted to at least EUR 65 billion in the preceding financial year, and it provides a core platform service in at least three Member States;it operates a core platform service which serves as an important gateway for business users to reach end users, which is presumed if it has more than 45 million monthly active end users established or located in the Union and more than 10,000 yearly active business users established in the EU in the preceding financial year;it enjoys a long-term, entrenched position in its operations or it is foreseeable that it will enjoy such position in the near future, which is presumed if the thresholds in point b) were met in each of the three preceding financial years. What are the gatekeepers’ main obligations? Do’s and Don’ts What kind of tools and powers do the Commission and other bodies have?
The DMA grants powers and different procedural rights to the European Commission and establishes the Digital Markets Advisory Committee for issuing opinions in issues related to the DMA.The DMA gives the Commission the following powers:to designate core platform services that meet the DMA criteria as gatekeepers;to review ad-hoc the status of gatekeepers on request or on its own;to review at two-year intervals the status of gatekeepers;to specify measures to be taken by gatekeeper to comply with the DMA;to suspend certain gatekeeper obligations under the DMA at a gatekeeper’s request, if the gatekeeper demonstrates that compliance with that specific obligation would endanger its economic viability;to exempt a gatekeeper from certain obligations under the DMA on the grounds of public morality, public health or public security;to initiate market investigations:lower-romanto examine whether a provider of core platform services should be designated as a gatekeeper;into systematic non-compliance by a gatekeeper;to examine whether certain services in the digital sector should be added to the list of core platform services and identify practices that might limit the contestability of core platform services or might be unfair.The DMA grants investigative, enforcement and monitoring powers to the Commission during its proceedings, based on which the Commission is entitled to:request information from any undertakings and from the governments and authorities of EU member states;access data bases and algorithms;interview any private person or legal entity to collect information relating to the subject-matter of an investigation;conduct on-site inspections at the premises of any undertakings, including together with auditors and experts;order interim measures against a gatekeeper on the basis of a prima facie finding of an infringement of obligations under the DMA;monitor the effective implementation and compliance with the obligations under the DMA. What will the sanctions for non-compliance be?
If the Commission adopts a non-compliance decision in which it finds that a gatekeeper does not comply with one or more obligations under the DMA, the Commission may fine a gatekeeper.The maximum amount of a fine is 10% of the total worldwide annual turnover of the gatekeeper in the case of a material breach of the obligations under the DMA, and a maximum 1% in the case of a less serious breach of obligations under the DMA.The Commission is also entitled to order periodic penalty payments of up to 5% of the average daily turnover in certain cases defined in the DMA.In the case of systematic breaches of the DMA obligations by gatekeepers, additional remedies may be imposed after a market investigation. Such remedies will need to be proportionate to the offence committed. If necessary and as a last resort, non-financial remedies can be imposed. These can include behavioural and structural remedies, e.g. the divestiture of (parts of) a business.
What are the next steps?
The European Parliament and Member States will discuss the Commission’s proposal according to the ordinary legislative procedure, which will take at least 18 months. Once adopted, the Act will directly apply across the EU and the core platform service providers will have six months to prepare for the new legal regime.We will continuously monitor the status of the legislative process and keep you updated on any changes to the draft text of the DMA.