The EU Digital Markets Act – Changing Big Tech’s Grasp on Digital Services
Monday 28th November 2022
The EU’s Digital Markets Act (DMA) came into force on 1 November 2022. From May 2023, certain core online platforms will be designated as digital ‘gatekeepers’. The DMA aims to prevent gatekeepers from imposing unfair conditions on businesses and end users, preventing them from unilaterally dictating terms of service which, currently, users must accept.
A few years ago, Apple was investigated for abusing its dominant position in the market by operating a ‘closed ecosystem’ for app developers. This saw them charge 30% commission on all subscription fees which was mostly passed onto end users. The EU wants to end this type of practice.
Who are the gatekeepers?
Gatekeepers will include:
- Online intermediation services (e.g. Amazon and Google Play);
- Operating systems (e.g. Apple’s iOS);
- Online search engines (e.g. Google);
- Social networking services (e.g. Twitter);
- Cloud computing services (e.g. Salesforce);
The thresholds for being a gatekeeper are:
- an annual EU turnover above €7.5bn in each of the last three years; or
- a market value above €75bn in the last year; and
- operates in at least three EU countries; and
- has more than 45m end users and 10k business users based in the EU in each of the last three years.
There is a presumption that if a business meets the threshold criteria, they will be classed as a gatekeeper unless they can demonstrate otherwise.
How might this affect your business?
Obligations and restrictions imposed on gatekeepers include allowing businesses to offer the same product/service to end users at prices different to those offered through the gatekeeper. They will also be prevented from promoting or ranking their own products/services above those of a third party and must allow businesses to promote their own offers to end users through their platform for free. Gatekeepers’ obligations are expected to be enforced from March 2024 at the earliest.
The DMA won’t have jurisdiction in the UK, however businesses should keep abreast of future developments. The UK’s CMA ran a consultation last year on this topic but legislation is yet to be revealed. Drawing from the EU’s timescale of rolling-out the DMA, it’s likely any changes in the UK won’t be for a few years.
What happens if gatekeepers don’t comply?
Penalties and fines of up to 10% of a gatekeeper’s global annual turnover, and up to 20% for repeated infringements. Periodic penalty payments of up to 5% of daily turnover can also be imposed.