The DMA has been published in the Official Journal of the European Union and will enter into force on 1 November 2022. The DMA aims to address concerns regarding "contestability" and "fairness" in the digital economy and introduces a number of per se prohibitions and obligations on "big tech". The rules are inspired by competition cases. Under the DMA, the European Commission will designate as "gatekeepers" certain providers of "core platform services" that fulfil a number of criteria. After the specific "gatekeepers" are designated, they will have six months to start complying with the DMA obligations. This is likely to be as of March 2024.
Introduction
The Digital Markets Act ("DMA") will enter into force on the twentieth day following that of its publication in the Official Journal of the European Union,1 i.e. on 1 November 2022, and will start applying six months after its entry into force, i.e. on 2 May 2023.2 The DMA has two general objectives: to "ensure contestability and fairness for the markets in the digital sector in general".3
The DMA is an ex ante regulatory system that is heavily inspired by competition law. It imposes a suite of regulatory obligations and prohibitions on "gatekeepers" that appears to be an inventory derived from past and current competition enforcement cases in the "digital" sector.
The DMA has as legal basis Article 114 of the Treaty on the Functioning of the European Union ("TFEU"), which empowers the legislator to adopt measures that are designed to approximate national rules and to prevent regulatory fragmentation in the internal market.
The DMA gives the European Commission ("Commission") broad investigative and enforcement powers.
Who can be designated as a “gatekeeper”?
In order to be designated as a "gatekeeper", an undertaking needs to provide one of the following core platform services (the "CPS") provided in the table below.
View full image: Definition of CPS (Article 2(2) of the DMA) (PDF)
The provider of a CPS will be designated as a "gatekeeper", if it meets a cumulative "three criteria test". The test relies on three qualitative criteria, which, however, are respectively presumed to be satisfied if three quantitative thresholds are met. In other words, the DMA establishes a rebuttable presumption that the qualitative criteria are satisfied when a provider of CPSs meets the quantitative thresholds.
View full image: Qualitative criteria (Article 3(1) DMA)/Quantitative thresholds (Article 3(2) DMA) (PDF)
The provider of a CPS has the possibility to rebut this presumption, "in exceptional circumstances", by presenting "sufficiently substantiated arguments" which "manifestly call [it] into question".4
What happens now?
As outlined above, the DMA will enter into force as of 1 November 2022 and will start applying as of 2 May 2023. Then, within two months, i.e. by 2 July 2023, the providers of CPSs that meet the quantitative thresholds will have to submit a notification to the Commission. Within 45 working days, the Commission will then designate them as "gatekeepers" and list the CPSs subject to the relevant obligations.5 If, however, an undertaking has presented "sufficiently substantiated arguments" and succeeded in manifestly calling into question the presumption derived from the quantitative thresholds, the Commission will have to analyze – through a "market investigation" – whether the evidence submitted shows that the CPS concerned does not satisfy the qualitative criteria.6
The Commission can also decide to designate as "gatekeeper" a provider of a CPS that does not meet the quantitative thresholds but satisfies the above qualitative criteria – to do so, it must first run a longer "market investigation".7
The obligations and prohibitions will apply six months after the designation of the provider of CPSs as a "gatekeeper".8 This is expected to be as of March 2024 at the earliest.
The Commission has the power to adopt delegated acts regarding the methodology for assessing the quantitative thresholds and other implementing provisions such as the form and the content of the notification for meeting the "three criteria test".9 We understand that the Commission is currently preparing the texts of these implementing measures.
View full image: The Digital Market Act Timeline (PDF)
What are the obligations and can they be “tailored” to a “gatekeeper's” business model?
The obligations and prohibitions are listed in Articles 5, 6, and 7 of the DMA. They are modelled around recent competition law cases. For example, Article 5(3) prohibits "gatekeepers" from preventing "business users from offering the same products or services to end users through third-party online intermediation services or through their own direct online sales channel at prices or conditions that are different from those offered through the online intermediation services of the gatekeeper". This echoes the on-going Apple App Store investigation.10 Article 6(5) similarly prevents "gatekeepers" from treating "more favourably, in ranking and related indexing and crawling, services and products offered by the gatekeeper itself than similar services or products of a third party. The gatekeeper shall apply transparent, fair and non-discriminatory conditions to such ranking." This clearly follows the theory of harm adopted by the Commission in the Google Shopping case.11
However, unlike in competition enforcement cases, the Commission will not have to define a "market" and prove that the "gatekeeper" holds a dominant position or that certain conduct causes anti-competitive effects. Likewise, no efficiencies defenses are allowed. In addition, the DMA rules are quite inflexible, in that there is no differentiation as to various business models. A designated "gatekeeper" "shall comply with all obligations"12 contained in Articles 5, 6 and 7, irrespective of which competition case inspired each particular obligation.
While all the obligations will be binding on designated "gatekeepers" as of March 2024, the obligations of Articles 6 and 7 are subject to "specification".13 This means that the Commission, either ex officio, or following a reasoned submission by the "gatekeeper", can open a procedure which will lead to the Commission to further specify some of the measures that the "gatekeeper" concerned should adopt in order to effectively comply with the Article 6 and 7 obligations.
The EU legislature also envisages the possibility to suspend or exempt a "gatekeeper" from one or more DMA obligations. The scope of the suspension or exemption, however, is extremely limited.14 Finally, the Commission can also update the obligations and prohibitions of Article 5 and 6 obligations through delegated acts. The aim of this provision is to render the DMA "future-proof".15
What are the Commission's powers vis-à-vis the “gatekeepers”?
The DMA grants the Commission very similar powers as in the antitrust area. Namely, the Commission can carry out inspections, send requests for information, interview employees of the relevant companies, impose interim measures, conduct market investigations, and, more significantly, impose fines and periodic penalty payments.
The DMA will allow the Commission to issue fines up to 10% of the global turnover of the "gatekeeper",16 provided that the fine is proportionate. However, if the "gatekeeper" commits a second violation of the DMA, with regard to the same CPS and in less than eight years following the first violation, the financial penalties may reach as high as 20% of the worldwide turnover.17 If the "gatekeeper" does not comply with the DMA for a third time within the same eight year timeframe, the Commission may carry out a market investigation into "systematic non-compliance".18 A finding of systematic non-compliance would allow the Commission to impose "on such gatekeeper any behavioral or structural remedies which are proportionate and necessary to ensure effective compliance". These could include a ban on M&A activity and, possibly even the break-up.
How will the DMA interact with competition enforcement?
The enforcement of the DMA comes without prejudice to the application of Articles 101 and 102 TFEU. This means that in the mind of the EU legislature the two tools are going to be used in a complementary way by the Commission.
On the merger control side, the DMA imposes on "gatekeepers" the obligation to inform the Commission of acquisitions "where the merging entities or the target of concentration provide core platform services or any other services in the digital sector or enable the collection of data". While the Commission will not be able to review these transactions under merger control rules, this provision is likely going to be applied alongside Article 22 of the EU Merger Regulation ("EUMR") to review a large number of transactions carried out by gatekeepers. The new Guidelines on Article 22,19 legitimately, according to a recent judgment of the General Court,20 allow the Commission to request Member States to refer a transaction to the Commission even if it does not meet the turnover thresholds of any of the Member States.
Private enforcement and class actions
The DMA is open to private enforcement. Indeed, it includes specific provisions on co-operation mechanisms between the Commission and the national courts and on the duty for national courts to pay respect to Commission DMA decisions.21 So, unlike, the national competition authorities ("NCAs"), which have been granted only some marginal and auxiliary competences,22 the national courts have full powers to apply the provisions of Articles 5, 6 and 7. This creates a risk of fragmentation.
The DMA also envisages class actions. Article 42 refers to Directive 2020/1828 on representative actions and provide that the Directive "shall apply to the representative actions brought against infringements by gatekeepers of provisions of this Regulation that harm or may harm the collective interests of consumers".
Does the DMA really tackle fragmentation within the internal market?
As noted above, the DMA is based on Article 114 TFEU, which aims to harmonize national rules. The Recitals of the DMA also refer on numerous occasions to avoiding fragmentation in the internal market. However, the DMA does not preclude Member States from imposing further obligations on providers of CPSs for matters falling outside the scope of the DMA.23 In addition, the DMA is without prejudice to the application of national competition rules, including "national competition rules prohibiting other forms of unilateral conduct insofar as they are applied to undertakings other than gatekeepers or amount to the imposition of further obligations on gatekeepers".24 Therefore, the efforts to prevent fragmentation within the internal market risk being stymied by initiatives of individual Member States. Germany, for example, has already imposed and applied DMA-like provisions in its Competition Act.25 It remains to be seen whether such national initiatives are consistent with the DMA.
1 Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on contestable and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828 (Digital Markets Act), OJ [2022] L 265/1.
2 Article 54.
3 Recital 7.
4 Article 3(5).
5 Article 3(4).
6 Articles 3(5) and 17(3).
7 Articles 3(8) and 17(1).
8 Article 3(10).
9 Articles 3(6) and 49.
10 Case AT.40437 - Apple - App Store Practices (music streaming).
11 Decision of the Commission of 27 June 2017 (AT.39740-Google Shopping).
12 Articles 5(1) and 6(1).
13 Article 8(2).
14 Articles 9 and 10.
15 Article 12.
16 Article 30(1).
17 Article 30(2).
18 Article 18(3).
19 European Commission, Communication from the Commission, Commission Guidance on the application of the referral mechanism set out in Article 22 of the Merger Regulation to certain categories of cases, 26 March 2021
20 Judgment of 13 July 2022, Illumina Inc. v. European Commission, Case T-227/21, EU:T:2022:447, currently on appeal.
21 Recital 92 and Article 39.
22 Article 38.
23 Article 1(5).
24 Article 1(6).
25 Section 19a on undertakings of paramount significance for competition across markets ("UPSCAM").
Giulio Preti (Associate, White & Case, Brussels) contributed to the development of this publication.
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