Digital Markets Act
Digital Markets Act Regulation 2022 (EU) 2022/1925 ("DMA"), is an EU regulation that aims to make the digital economy fairer and more contestable. The regulation entered into force on 1 November 2022 and became applicable, for the most part, on 2 May 2023.[1][2]
Title
Regulation on contestable and fair markets in the digital sector
Article 114 of the TFEU
5 July 2022
18 July 2022
14 September 2022
COM/nce again, 2020/842 final
Directive (EU) 2019/1937
Directive (EU) 2020/1828
The DMA aims at ensuring a higher degree of competition in European digital markets by preventing large companies from abusing their market power and by allowing new players to enter the market.[3] This regulation targets the largest digital platforms operating in the European Union. They are also known as "gatekeepers" due to the "durable" market position in some digital sectors and because they also meet certain criteria related to the number of users, their turnovers, or capitalisation.[4][5][6] Twenty-two services across six companies (deemed "gatekeepers") – Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft – were identified as "core platform services" by the EU in September 2023.[7]
These companies had until 6 March 2024 to comply with all of the Act's provisions.[8]
The list of obligations includes prohibitions on combining data collected from two different services belonging to the same company (e.g., in the case of Meta, its social network Facebook and its communication platform WhatsApp);[9] provisions for the protection of platforms' business users (including advertisers and publishers); legal instruments against the self-preferencing methods used by platforms for promoting their own products (e.g., preferential results for Google's products or services when using Google Search);[10] provisions concerning the pre-installation of some services (e.g., Android);[11] provisions related to bundling practices; and provisions for ensuring interoperability, portability, and access to data for businesses and end-users of platforms.[5] Non-compliance may lead to sanctions, including fines of up to 10% of the worldwide turnover.[5][6]
According to the European Commission, the main objective of this regulation is to regulate the behaviour of the so-called "Big Tech" firms within the European Single Market and beyond.[12] The Commission aims to guarantee a fair level of competition ("level playing field"[12]) on the highly concentrated digital European markets, which are often characterised by a "winner takes all" configuration.[6]
The DMA covers eight different sectors, which it refers to as Core Platforms Services (CPS). Due to the presence of gatekeepers who, to a certain degree, affect the market contestability, the CPS are considered problematic by the European Commission:
In April 2024, Reuters reported on data from six companies which showed that in the first month after the regulations were implemented, independent browsers had seen a spike in users. The Cyprus-based Aloha Browser said users in the EU jumped 250% in March. Norway-based Vivaldi, Germany-based Ecosia and United States-based Brave have also seen user numbers rise following the new regulation.[13]
Background[edit]
EU Competition policy rules[edit]
The present rules applied within the European Union with regard to digital markets are derived from European and national legislation. Under these circumstances, the basis for competition rules in the EU is established by Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU). Article 101 addresses anti-competitive agreements and concerted practices that may affect trade between members states or reduce competition in the common market. Article 102 aims to tackle the abuse of dominant positions.[14] All players operating in the common market are therefore subject to these provisions. European and national authorities have identified the need to strengthen the current legislation, given the structural problems that are not covered.[15]
Digital policy in the EU[edit]
The Digital Markets Act is in line with the legislative developments undertaken by the Juncker Commission between 2014 and 2019. One of the most important pieces of EU digital legislation is represented by the EU copyright rules. This has led to the protection, payment, and recognition of workers in thirty-three sectors and it aims to reward creativity, stimulate investment in the creative sector.[16] Another relevant achievement can be considered the implementation of the General Data Protection Regulation (GDPR) in 2016.[17] This regulation sets out the new European framework for the use and circulation of personal data and has a significant impact on the major digital players.[18] In addition, the regulation on platform-to-business trading practices (P2B) has been established to create a fair, transparent and predictable business environment for smaller businesses and traders on online platforms. This regulation has applied in July 2020 and prevents market distortion, encourages healthy competition and prohibits unfair practices.[19]
Legislative procedure[edit]
The Digital Markets Act proposal was submitted by the European Commission to the European Parliament and to the Council of the European Union on 15 December 2020. Along with the Digital Services Act (DSA),[20] the DMA is part of the Commission's European Digital Strategy entitled Shaping Europe's Digital Future.[12] The proposals were presented by the Executive Vice President of the European Commission for A Europe Fit for the Digital Age, Margrethe Vestager, and by the European Commissioner for Internal Market, Thierry Breton, as members of the Von der Leyen Commission.[12]
On 23 November 2021, the Parliament's Committee on the Internal Market and Consumer Protection (IMCO) adopted its position on the DMA proposal, and the text was adopted in plenary session of the European Parliament on 15 December 2021.[21] The approved text became the Parliament's mandate for negotiations with the Council, which started under the French presidency of the Council in the first half of 2022.[22] On 25 November 2021, the Council agreed its negotiating position, providing the Presidency with a mandate for the discussions.[23]
On 24 March 2022, the Parliament and the Council meeting in the trilogue format together with the Commission reached a political agreement on the DMA.[24][25][26] The negotiators reached a consensus on the interoperability provisions for large messaging platforms: the said obligations will make it possible for users to communicate between different platforms, giving them more choice against the increasing dominance of certain companies.[27] The choice is expanded also through provisions that guarantee users’ free choice as regards browsers, virtual assistants or search engines, while no interoperability obligation for social networks has been decided upon yet.[27] In the political agreement, platforms with a market capitalization of €75 billion or turnover in the European Economic Area equal to or above €7.5 billion have been included in the rules’ scope.[28] An agreement was reached for penalties, which will be amounting from 10% of annual worldwide turnover due to non-compliance for first infringements up to 20% in the case of repeated infringements.[28] The text of the DMA provisionally agreed in March 2022 was made publicly available by the European institutions only on 22 May 2022.[29]
The DMA was formally adopted by the Parliament on 5 July 2022[30] and by the Council on 19 July 2022,[31] and it was signed into law on 14 September 2022 by Presidents of the Parliament and the Council, which concluded the legislative procedure.[32] The adopted text was published in the Official Journal of the European Union on 12 October 2022, setting it to come into force twenty days after the publication, on 1 November 2022.[2]
The 2 May 2023, 6 months later, the regulation started applying and the potential gatekeepers had 2 months to report to the commission to be identified as gatekeepers. This process would take up to 45 days and after being identified as gatekeepers, they would have 6 months to come into compliance, at the latest the 6 March 2024.[8][33] From 7 March 2024, gatekeepers must comply with the DMA.[34]
The DMA rules[edit]
General framework[edit]
The Digital Markets Act sets up a list of conducts that should be outlawed, on the one hand, and obligations that platforms identified as gatekeepers should respect, on the other hand. The list is divided in two different parts, the general blacklisted actions (Article 5) and the case by case assessment that needs to be specified (Article 6).
Non-Gatekeeper firms[edit]
Airbnb and Booking.com[edit]
Due to their important positions on the short-term accommodation market, Airbnb and Booking.com became potential targets for the legislation. Indeed, above 50% of the homes designated for ‘short-terms stay’ are listed on AirBnB, and approximatively 1⁄3 on Booking.com.[104] Therefore, their possible labelling as gatekeepers has been long debated, leading the companies to defend themselves and explain why they should not be considered included in this category.[105][106][107] Moreover, Booking.com insisted on the fact that it is one of the only European companies that is a global success and that as they are not the most dominant actor in this sector, they should not be disincentivized while competing with bigger companies.[107]
Spotify[edit]
With approximately 1⁄3 of the market share in 2020[108] in the music subscription market, Spotify is by far the dominant actor in this sector as Apple Music comes in second position, with around 15% of market share.[108] However, Spotify does not seem to meet the criteria set by the European Commission, according to the analysis of Vox EU.[5] Dirk Auer, an economist of the American think tank ICLE, qualified this piece of legislation as a way to protect the European firms, and that the criteria are on purpose excluding major European tech firms, notably Spotify.[109] Even if it is true that SAP would probably be the only European firm targeted by the legal act,[5] there are also American big platforms like Twitter or Uber not targeted by the legislation, despite their important market position.[5]
Reaction within the European Union[edit]
France[edit]
The French Government expressed its ambition for imposing stricter enforcement on competition rules, so as to prevent giant tech firms favouring their own services, ousting rivals or maintaining their dominant positions.[111][112]
Nevertheless, France would like to rely on the possibility of adapting the rules, through the Digital Markets Act, in order to respond to the constant changes of the digital market.[113]
The French government is known to be publicly in favour of more regulation of the GAFAM[114] and unilaterally set up its "GAFA tax" in 2019.[115] This tax was the source of tensions with the Trump administration.[116]
Germany[edit]
The German federal government welcomed the proposal on the Digital Markets Act. They consider that the current European legal framework is not sufficiently strong and that the enforcement measures must also be strengthened with respect to digital platforms.[117][113] However, the main concern of Germany still remains the preservation of small and medium-sized companies, as it intends to keep them out of the scope of the new rules.[117]
The head of the German Federal Cartel Office, Andreas Mundt, has on several occasions criticised the European Commission's centralised approach to regulating gatekeepers.[118] He has called the European Commission's veto right over national competition authorities’ powers to impose decisions against Big Tech "unacceptable", and has asked for more powers to be given to national competition authorities.[119] This position was echoed by other Member States.[120][121]
Netherlands[edit]
In October 2020, the Dutch Government jointly with France and Belgium, expressed their willingness for a stricter enforcement of the competition rules, in order to avoid abuse of dominance and anti-competitive practices.[112]
On 17 February 2021, the Dutch Government published its official position on the Digital Markets Act[122] and welcomed the initiative, taking into account that the objectives it comprises are aligned with their national position.
Ireland[edit]
The Irish government published its position on 8 September 2020, during the public consultations held for the Digital Services Act Package.[123] According to their statements, Irish authorities are not willing to assess the definition of "gatekeepers", as they explained that the occupation of a dominant position is not illegal. Moreover, they have also stressed that this particular aspect does not imply a diminution of consumer welfare and does not prevent innovation or new entrances in the digital market.[123]
Many of the companies that are likely to be targeted by the DMA have their headquarters in Ireland.[124][125] The approach of the Irish Government towards Big Tech companies has often been the source of debates within the European Union.[126][124] In 2016, the European Commission accused Ireland of granting Apple "illegal tax benefits".[127] The General Court ruled in favour of Apple, but the Commission expressed its intention to appeal the ruling to the European Court of Justice.[128]