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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,” adn promote fairer competition in digital markets. It was adopted in December 2022 and entered into force on May 2, 2023, with obligations applying to gatekeepers starting September 6, 2023.
The DMA addresses concerns that dominant digital platforms can stifle innovation, reduce consumer choice, and exploit their position to disadvantage smaller businesses. It aims to ensure a more level playing field by imposing specific obligations and prohibitions on these gatekeepers. These obligations cover areas like interoperability of messaging services, data portability, and preventing self-preferencing of their own services.
Such as, the DMA prohibits gatekeepers from requiring users to sign into their services with their platform account, allowing users to easily switch between platforms. The European Commission details these obligations in a comprehensive overview of the Act.
Who are the Designated Gatekeepers?
gatekeepers are large digital platforms that control access to significant digital services.As of January 20, 2024, the European Commission has designated 19 companies as gatekeepers: Alphabet (Google), Amazon, Apple, ByteDance (TikTok), Meta (Facebook, Instagram, WhatsApp), Microsoft, and six others. These companies operate core platform services, such as search engines, social networks, messaging apps, and app stores.
The designation process involves assessing companies based on specific criteria, including their size, the number of users, and their ability to control access to digital markets. A company must meet certain thresholds in terms of revenue and market capitalization, as well as have a significant impact on the internal market. The European Commission announced the frist gatekeepers on September 6,2023.
As an example, google’s search engine and Android operating system, Apple’s iOS and App Store, Meta’s Facebook and Instagram, and Amazon’s marketplace are all considered core platform services subject to the DMA’s rules. The full list of designated gatekeepers and their core platform services is available on the European Commission’s website.
What Obligations Does the DMA Impose?
The DMA imposes a range of obligations on gatekeepers, categorized as “dos” and “don’ts.” These obligations aim to prevent anti-competitive practices and promote innovation. They cover areas such as interoperability, data access, and fair treatment of businesses using the gatekeeper’s platform.
Some key obligations include allowing users to uninstall pre-installed software,enabling interoperability of messaging apps,and providing businesses with access to data generated by their use of the platform. Gatekeepers are also prohibited from using data collected from business users to compete against them, or from favoring their own services over those of competitors. The European Commission provides a detailed Q&A on the DMA’s obligations.
As an example, the DMA requires Apple to allow developers to offer alternative app stores on iOS devices, breaking it’s control over the App Store and enabling greater competition. This change, mandated by the DMA, is detailed in Reuters reporting on Apple’s compliance with the new regulations.
What are the Potential Penalties for non-Compliance?
Non-compliance with the DMA can result in ample penalties. the European Commission has the power to impose fines of up to 10% of the gatekeeper’s total worldwide turnover in the preceding financial year. For repeated infringements, the fine can increase to up to 20% of worldwide turnover.
In cases of systematic infringements, the Commission can also impose behavioral or structural remedies, such as requiring the gatekeeper to divest parts of its business. The Commission has initiated investigations into several gatekeepers to assess their compliance with the DMA, and is prepared to take enforcement action where necesary. The European Commission announced the opening of investigations on December 18,2023.
As a notable example, the European Commission launched a formal inquiry into Google’s compliance with the DMA in December 2023, focusing on concerns related to self-preferencing in its advertising services. If found in violation, Google could face fines of up to 10% of its global revenue, which amounted to $282.8 billion in 2022,according to Statista data.
