EU parliament prepares for vote on Digital Markets Act

Out-Law News | 26 Nov 2021 | 2:31 pm | 2 min. read

The European Union is a step closer to imposing fresh regulations on digital giants, after proposed rule changes were approved by a committee of MEPs.

The Digital Markets Act (DMA) sets out what restrictions ‘gatekeepers’ – companies with significant online influence like social media companies and search engines – can impose on other businesses and consumers.

The DMA, drafted by the European Commission in December 2020, faced lengthy delays while MEPs on the Committee on the Internal Market and Consumer Protection (IMCO) scrutinised its wording.

Commenting on the DMA’s passage through the committee stage, IMCO Rapporteur Andreas Schwab said current EU competition rules “cannot address all the problems we are facing with tech giants and their ability to set the rules by engaging in unfair business practices.”

“The Digital Markets Act will rule out these practices, sending a strong signal to all consumers and businesses in the Single Market: rules are set by the co-legislators, not private companies!” he said.

“The EU stands for competition on the merits, but we do not want bigger companies getting bigger and bigger without getting any better and at the expense of consumers and the European economy.”

Soon after the IMCO announced its decision, the DMA cleared another hurdle when ministers of the Council of the EU unanimously backed the Council’s general approach to the Act.

The decision provides the Council presidency with a mandate for further negotiations with the European parliament over the DMA next year.

The European Commission initially planned for the DMA to regulate so-called ‘core platform services’ that were most prone to unfair practices, including online intermediation services, social networks, search engines, operating systems, online advertising services, cloud computing, and video-sharing services.

At the committee stage, the IMCO broadened the definition of ‘core platform services’ to include web browsers, virtual assistants and connected TV.

MEPs on the IMCO also increased the quantitative thresholds for a company to fall under the scope of the DMA to €8 billion in annual turnover in the European Economic Area (EEA) and a market capitalisation of €80bn.

To qualify as a gatekeeper, companies would also need to provide a core platform service in at least three EU countries and have at least 45 million monthly end users - as well as more than 10,000 business users.

These thresholds, however, would not prevent the Commission itself from designating other companies as gatekeepers when they meet certain conditions.

Under the DMA, gatekeepers will be banned from imposing unfair conditions on businesses and consumers.

MEPs amended the legislation to include additional rules on the use of data for targeted or micro-targeted advertising.

The IMCO’s wording says that a gatekeeper shall, “for its own commercial purposes, and the placement of third-party advertising in its own services, refrain from combining personal data for the purpose of delivering targeted or micro-targeted advertising”, except if there is a “clear, explicit, renewed, informed consent”, in line with the General Data Protection Regulation.

It also stressed that the personal data of children should not be processed for commercial purposes.

MEPs agreed to empower the Commission to temporarily block the acquisition of any gatekeeper that engages in “systematic non-compliance” with the DMA.

Gatekeepers would also be obliged to inform the Commission of any intended concentration.

MEPs also proposed the creation of a “European High-Level Group of Digital Regulators” – a partnership between the Commission and EU member states to strengthen the DMA’s enforcement.

The IMCO increased the potential maximum fines faced by gatekeepers for refusing to comply with the DMA to 20% of its total annual worldwide turnover.

The DMA will now be put before MEPs for approval during the European parliament’s plenary session in December.

The approved text will then become parliament’s mandate for negotiations with EU governments, planned to start under the French presidency of the Council in early 2022.

The Council of the EU has also confirmed its negotiating position on the Digital Services Act (DSA), a parallel proposal to the DMA intended to regulate illegal content and algorithms online.

The IMCO said it will vote on amendments to the DSA at a future meeting.