Out-Law News 3 min. read

EU Digital Markets Act ‘gatekeepers’ designated

Online platform services operated by six technology companies have been made subject to regulation under the EU’s Digital Markets Act (DMA).

In total, 22 ‘core platform services’, operated by Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft, respectively, have been brought within the scope of the DMA for the time being after the European Commission designated the six businesses as ‘gatekeepers’ under the legislation. The services – grouped into eight different markets by the Commission – include Google Search, Facebook, the Apple App Store, and Amazon Marketplace.

The Commission has opened five market investigations in respect of five other services to further consider whether those services should also be brought within the scope of the DMA. Those services are Microsoft Bing, Microsoft Edge, Microsoft Advertising, Apple iMessage, and Apple’s iPadOS. The Commission has a maximum of five months to conclude its investigations, save in the case of Apple’s iPadOS where it has up to 12 months to complete its investigation.

The Commission said: “Following their designation, gatekeepers now have six months to comply with the full list of do's and don'ts under the DMA, offering more choice and more freedom to end users and business users of the gatekeepers' services. However, some of the obligations will start applying as of designation, for example, the obligation to inform the Commission of any intended concentration. It is for the designated companies to ensure and demonstrate effective compliance. To this end, they have six months to submit a detailed compliance report in which they outline how they comply with each of the obligations of the DMA.”

The DMA applies to core platform services provided or offered by ‘gatekeepers’ to business users established in the EU or with end users established or located in the EU. Criteria is set by the legislation for determining which services fall subject to the DMA’s rules. The Commission has powers to designate businesses as gatekeepers should a company disagree that they fulfil the criteria for regulation.

Gatekeepers subject to the DMA are prohibited from undertaking certain practices prescribed by the legislation in respect of their core platform services. This includes dictating the price or conditions business users apply to the same products or services they offer via their platform. Gatekeepers cannot restrict end users’ use of business users’ software made available via their platform either.

Other prohibitions include provisions on using users’ personal data for the purpose of targeted advertising, or on aggregating the users’ data from across the different services they provide, without users’ consent, while further provisions encourage equality of access to data and promote interoperability. The Commission has powers to supplement the provisions of the DMA by introducing additional implementing legislation.

The Commission is responsible for enforcing compliance with the DMA. Gatekeepers face significant sanctions for breaching the DMA, including potential fines of up to 10% of their global annual turnover. For repeat offences, the penalty could increase to 20% of global annual turnover. If a gatekeeper breaches the new rules three times or even more, the Commission can impose a temporary ban on mergers for the business or impose divestment requirements.

In the UK, the Digital Markets, Competition and Consumers (DMCC) Bill introduced into the UK parliament in April makes provision for, among other things, the regulation of technology companies – both from a competition law and consumer protection law perspective. 

Similarly to the DMA, the DMCC, provides for the designation of businesses as having “strategic market status” (SMS) in respect of a digital activity, with knock-on implications for the way those activities are regulated.

The DMA is part of a wider package of legislation introduced by the EU in recent times that is relevant to businesses operating in the EU’s digital single market. The Digital Services Act (DSA) impacts online intermediaries. While most of its provisions will not begin to apply until February 2024, rules relevant to ‘very large’ online platforms and search engines (VLOPs and VLOSEs) took effect on 25 August 2023.

Like with ‘gatekeepers’ under the DMA, VLOPs and VLOSEs were designated by the European Commission. Amazon and Zalando are two businesses that have raised legal challenges against their designation as VLOPs. More detail about the grounds for Zalando’s appeal came to light recently when the EU’s General Court published the company’s pleadings and main arguments. Zalando considers, among other things, that its online fashion retail service does not constitute an intermediary service for the purposes of the DSA – and that therefore it falls outside the scope of the legislation.

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