The reform of digital markets
On July 5th, 2022, the European Parliament approved the Digital Markets Act (introduced with Reg. EU 2022/1925) (DMA), the first European regulation for digital markets which, together with the Digital Services Act (DSA), is part of a bigger project aimed at strengthening the regulation of big tech entities.
The DMA’s primary goal is to promote fair competition and limit monopolistic practices by big online platforms, as well as contain abusive practices and dominant positions, in order to strengthen competition on the market and give more space to the “smaller” operators.
The recipients of the legislation
a) The gatekeepers
After the DMA’s entry into force (on November 1st, 2022), and within the adjustment time limit imposed by the European legislation (by March 6th, 2023), the so-called “gatekeeper” recipients must follow precise directions to avoid incurring in heavy penalties.
Gatekeepers are defined as those corporations which control a certain market sector, and in the digital world such gatekeepers are the LOPs – Large Online Platforms.
Pertaining to DMA articles 2 and 3, the word “gatekeeper” refers to a provider whose core platform services are:
- Online search engines
- Intermediation services
- Social networking services
- Video-sharing platform services
- Operating systems
- Number-independent interpersonal communication services
- Cloud computing and advertisement services
b) The gatekeepers’ size limits
The new legislation specifies the requirements that such provider must satisfy in order to be classified as a gatekeeper according to the DMA Regulation.
Firstly, a Big Tech corporation will be considered a gatekeeper if it achieves an annual EU turnover equal to or above EUR 7,5 billion (in each of the last three financial years) or if its average market capitalisation or its equivalent fair market value amounted to at least EUR 75 billion (in the last financial year), and if it provides the same core platform service in at least three Member States (as per DMA, article 3, par. 2, point a).
Another requirement is that the undertaking provides a core platform service that in the last financial year has at least 45 million monthly active end users established or located in the EU and at least 10.000 yearly active business users established in the EU (in order to correctly identify and calculate the active business/end users, the Regulation has set out a specific methodology and indicators in its Annex), as stated in DMA article 3, par. 2, point b).
Lastly, the undertaking must enjoy an entrenched and durable position (as per DMA article 3, par. 1, point c), which will be presumed when the thresholds mentioned above (turnover/impact on the internal market and gateway control/active users on a monthly basis) were met in each of the last three financial years (as per DMA article 3, par. 2, point c).
Businesses can challenge the result of the calculation, reasoning on exceptional circumstances that might justify their exclusion from the aforementioned category.
c) “Emerging” businesses
The gatekeeper qualification might also apply, shall the European Commission see fit, to so-called “emerging” businesses, meaning those undertakings that have all the requirements to become gatekeepers. However, these undertakings will not have to comply with all the requirements imposed on “consolidated” gatekeepers.
The Commission’s job will be to periodically (or at least every three years) monitor the gatekeepers’ status, and it is therefore empowered to request, at any time, all the information it deems necessary from Big Tech corporations whenever a merger, or an acquisition of an “emerging” business by a domineering one occurs.
By going over the DMA legislation, it is clear that the EU’s goal is to reduce the power of big digital platforms and to promote a digital environment that is more open, innovative and competitive for businesses and European consumers.
Gatekeepers according to the EU Commission
The European Commission has already identified the first six gatekeepers (Meta, Amazon, Apple, Microsoft, Alphabet, ByteDance), and their related Core Platform Services (or CPS), as follows:
- 6 intermediary platforms (Amazon Marketplace, Google Maps, Google Play, Google Shopping, iOS App Store, Meta Marketplace)
- 4 social networks (Facebook, Instagram, LinkedIn, TikTok)
- 3 online advertisement services (Amazon, Google, and Meta)
- 3 widespread operating systems (Google Android, iOS, SO Windows PC)
- 2 web browsers (Chrome and Safari)
- 2 big interpersonal communication services (Facebook Messenger and WhatsApp, both owned by Meta)
- 1 video-sharing platform (YouTube)
- 1 search engine (Google)
New obligations and prohibitions for gatekeepers
According to the new legislation, gatekeepers must comply with several obligations and respect the related prohibitions.
One of the obligations the Regulation imposes is to allow end users to cancel their subscription to the platform’s main services as easily as they have subscribed.
Amongst the prohibitions, it is forbidden to track end users outside of the platform’s main service for targeted advertisement purposes, if consent to such tracking has not been obtained. Valid consent from the user will have to be obtained before their personal data is gathered or utilized through the gatekeepers’ platforms and services used by third parties.
In many cases, these businesses will be asked to express their consent to the gatekeepers in order to keep having access to their platforms, for example they may do so through Google’s consent process (Google Consent Mode, which will be the topic of an in-depth analysis in a separate, soon-to-be published article on our website).
Moreover, gatekeepers will be prohibited from using access to their platforms or services to show any preference or positioning towards other businesses. They will also have an obligation to make transferring a user’s data from their platform to other services as simple as possible.
Ultimately, the ambitious goal the European Union is aiming for with this reform is to grant more openness to digital platforms, allowing “smaller” businesses equal access to the crowd of web users and the respective data that platforms produce, while trying to limit the unfair competition practices that Big Tech corporations have carried out until today thanks to their controlling position.