By Shannon Power, 23rd November 2022
On the 1st November 2022, the EU’s Digital Market Act (DMA) entered into force. The new regulation was proposed by the Commission in December 2020 and agreed upon by the European Parliament and the Council in March 2022. It aims to end unfair practices by companies that act as ‘gatekeepers’ in the online platform economy.
Over the past two decades, digital platforms have become an integral part of our lives. Whilst the benefits of digital transformation are highly evident, the dominant position achieved by some of these platforms gives them significant advantages over competitors. It also allows them to have an undue influence over democracy, fundamental rights, societies, and the economy. They often determine future innovations or consumer choices and serve as so-called gatekeepers between businesses and internet users.
Gatekeepers and the Digital Market Act
Gatekeepers are digital platforms that provide an important gateway between business users and consumers. This position grants them the power to act as a private rule maker, creating a bottleneck in the digital economy.
The Digital Market Act provides a defined set of criteria that determines whether a large online platform is a ‘gatekeeper’. This allows the DMA to remain well-targeted to the problem that it aims to tackle regarding large, systemic online platforms.
These are the three main criteria which will bring a company into the scope of the DMA:
- 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 3 EU Member States.
- The control of important gateways for business users to the final consumers – When the company provides a core platform service to over 45 million monthly active end users established or located in the EU. Plus, if they provide the service to more than 10,000 yearly active business users established in the EU.
- Has (or is about to have) a deep-rooted and durable position – The company is stable over time if it has met the first two criteria in each of the last 3 financial years.
The Dos and Don’ts of the DMA
The Digital Market Act establishes a list of dos & don’ts that gatekeepers must implement into their daily operations to ensure fair and open digital markets. These obligations will help open up possibilities for companies to contest markets and challenge gatekeepers based on the merits of their products and services, giving them more space to innovate.
Gatekeeper platforms will have to:
- Allow third parties to inter-operate with the gatekeeper’s own services in certain specific situations
- Allow their business users to access the data that they generate in their use of the gatekeeper’s platform
- Provide companies advertising on their platform with the tools and information necessary for advertisers and publishers to carry out their own independent verification of their advertisements hosted by the gatekeeper
- Allow their business users to promote their product/service and conclude contracts with their customers outside the gatekeeper’s platform
Gatekeeper platforms must no longer:
- Treat services and products offered by the gatekeeper itself more favourably in the ranking than similar services or products offered by third parties on the gatekeeper’s platform
- Prevent consumers from linking up to businesses outside their platforms
- Prevent users from un-installing any pre-installed software or app if they wish
- Track end users outside of the gatekeepers’ core platform service for the purpose of targeted advertising, without effective consent having been granted
There are many benefits to this new EU regulation for business users and consumers. For example, business users who depend on gatekeepers to offer their services in the single market will have a fairer business environment. Consumers will also have a more significant number of better-quality services to choose from, direct access to services, and fairer prices.
Innovators and technology start-ups will also benefit from new opportunities to compete and innovate in the online platform environment without having to comply with unfair terms and conditions limiting their development.
Important Dates and Compliance
With its entry into force, the Digital Market Act will move into its pivotal implementation phase and begin to apply in six months, as of 2nd May 2023. After this date, within 2 months and at the latest by 3rd July 2023, potential gatekeeps will have to notify their core platform services to the Commission if they meet the thresholds established by the Act.
Once the Commission has received the complete notification, it will have 45 working days to assess whether the undertaking in question meets the thresholds and designate them as gatekeepers. Following their designation, gatekeepers will have six months to comply with the Digital Market Act requirements, at the latest by 6th March 2024.
Failure to comply will result in periodic penalty payments of up to 5% of the average daily turnover. It may also result in fines of up to 10% of the company’s annual worldwide turnover, or up to 20% for repeated infringement.
For further information on the EU Digital Market Act and how it may affect your company, please get in contact with our team here at Euro Company Formations. We would be more than happy to be of assistance. Call us on + 353 (0) 1 6461627 or fill out our contact form!