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What is the Digital Markets Act (DMA)?
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The Digital Markets Act (DMA) is a European Union law designed to limit the market power of large online platforms, known as ”gatekeepers,” and promote fairer competition in digital markets.
Enacted in December 2022 and entering into force on May 2, 2023, with full submission expected in early 2024, the DMA aims to prevent these gatekeepers from abusing their dominant positions. It focuses on ensuring contestability and innovation in the digital sector. The law applies to companies providing core platform services, including social networks, search engines, operating systems, cloud services, and online marketplaces.
For example, on March 6, 2024, the European Commission designated six gatekeepers: Alphabet (Google), Apple, ByteDance (TikTok), Meta (Facebook, Instagram, WhatsApp), Microsoft, and Amazon. These companies face specific obligations and prohibitions under the DMA. European Commission Press Release
Who are the “Gatekeepers” Targeted by the DMA?
“Gatekeepers” are large digital platforms that control access to crucial digital services, acting as crucial intermediaries between businesses and consumers. To qualify as a gatekeeper, a company must meet specific quantitative thresholds related to market capitalization and user base, as well as qualitative criteria related to its entrenched position.
Specifically, a company is designated as a gatekeeper if it meets at least three of the following criteria: a market capitalization of at least €75 billion, an annual turnover of at least €7.5 billion within the European Economic Area (EEA), and at least 45 million monthly active users in the EEA. Qualitative criteria include having a core platform service that is,or is highly likely to become,an critically importent gateway for business users to reach end users.
As of March 6, 2024, the european Commission designated the following companies as gatekeepers: Alphabet, Apple, Meta, Amazon, Microsoft, and ByteDance. european Commission Press Release These companies are subject to a set of “dos and don’ts” designed to level the playing field.
What are the Key Obligations and Prohibitions under the DMA?
The DMA imposes a series of obligations and prohibitions on gatekeepers to ensure fairer competition. These rules are divided into “dos” and ”don’ts,” outlining what gatekeepers must allow and what they are prohibited from doing.
Some key obligations include allowing business users to access and interoperate with the gatekeeper’s platform,allowing users to uninstall pre-installed software,and providing access to data generated by users on the platform. Prohibitions include preventing gatekeepers from self-preferencing their own services, preventing them from using data collected from business users to compete with them, and preventing them from imposing unfair contract terms on business users.
For instance, the DMA prohibits Apple from preventing users from uninstalling pre-installed apps on iPhones and iPads. This was a specific concern raised by competitors and regulators. Reuters report on DMA and Apple. Non-compliance can result in fines of up to 10% of the company’s total worldwide turnover, potentially rising to 20% for repeated infringements.
What is the Enforcement Mechanism and Potential Penalties?
The European Commission is primarily responsible for enforcing the DMA, with the assistance of national competition authorities within the EU. The Commission has the power to investigate potential violations, impose fines, and order remedies to address anti-competitive behaviour.
the enforcement process begins with a market investigation, followed by a formal investigation if there are reasonable grounds to suspect a violation. The Commission can then issue a statement of objections, giving the gatekeeper an opportunity to respond. If the Commission finds a violation, it can impose fines, issue behavioral remedies, or even structural remedies, such as requiring a company to divest parts of its business.
The DMA provides for significant penalties for non-compliance. For a first infringement, the fine can be up to 10% of the gatekeeper’s total worldwide turnover in the preceding financial year. For repeated infringements, the fine can be increased to up to 20%.European Commission – Digital Markets Act. The first fines under the DMA are expected to be issued in 2024.
What is the Expected Impact of the DMA?
The DMA is expected to have a significant impact on the digital landscape, fostering greater competition, innovation, and choice for consumers and businesses. By limiting the power of gatekeepers, the DMA aims to create a more level playing field for smaller companies and startups.
Analysts predict that the DMA will lead to increased interoperability between platforms, allowing users to seamlessly switch between services. It is also expected to encourage the development of new and innovative digital services, as smaller companies will have a better opportunity to compete with established players.The DMA could also
