Author

Debbie Heywood

Senior Counsel

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Author

Debbie Heywood

Senior Counsel

Read More

13 April 2022

Radar - April 2022 – 3 of 4 Insights

Political agreement reached on the EC Digital Markets Act

What's the issue?

The EC published its Digital Markets Act in December 2020.  It is intended to regulate digital markets, effectively to help 'level the playing field' and address concerns raised by the market power of large online players.  The bulk of the Act is aimed squarely at the tech giants although it will impact the wider market. It focuses on those platform service providers (including social media, search engines and operating systems) designated as "gatekeepers". 

What's the development?

The EU Parliament and Council have reached provisional political agreement on the Digital Markets Act (final text not yet published although due imminently). 

Who are the 'gatekeepers'?

A platform will be a gatekeeper if:

  • It has had an annual turnover of at least €7.5bn within the EU in the past three years, or it has a market valuation of at least €75bn, and
  • It has at least 45m monthly end users and at least 10,000 business users established in the EU, and
  • It controls one or more core platform services in at least three Member States.  Core platform services include marketplaces, app stores, search engines, social networking, cloud services, advertising services and web browsers.

If a gatekeeper does not agree with its designation as such, it can challenge the finding.  SMEs are specifically excluded from gatekeeper status although obligations may be placed on "emerging gatekeepers".

Gatekeeper requirements

Gatekeepers must:

  • Ensure users can unsubscribe from core platform services under similar conditions to which they signed up.
  • Not require use of pre-installed default important software (eg browsers) with operating systems so users will be able to select their browsers, search engines and personal assistants.
  • Ensure interoperability of instant messaging services, so the large messaging services will be required to be interoperable with smaller ones on request.
  • Allow app developers fair access to supplementary functionalities of smartphones, such as NFC chips.
  • Give sellers access to their marketing or advertising performance data on their platform.
  • Notify the European Commission of mergers and acquisition.

Gatekeeper restrictions

Gatekeepers cannot:

  • Rank their own products or services higher than those of others.
  • Reuse private data collected through one service for the purposes of another service.
  • Have unfair terms and conditions for business users.
  • Pre-install certain software applications.
  • Require app developers to use certain services (for example payment systems or ID providers) in order to be listed on app stores.

Enforcement

Compliance with the DMA will be overseen by the European Commission.  An advisory committee and high-level group will be set up to assist the Commission.  Member States will be able to empower their own competition authorities to start investigations into possible non-compliance and refer to the Commission.

Non-compliance can result in fines of up to 10% of annual global turnover, rising to up to 20% for repeat offences.  Systematic non-compliance (at least three times in eight years) can lead to a market investigation and the imposition of structural or behavioural remedies.

Interaction with the Digital Services Act

The DSA, which is going through the legislative process running shortly behind the DMA, is another core pillar of EU digital regulation.  As such, there are areas of overlap, including around digital advertising.  At the press conference to announce political agreement on the DMA, Competition Commissioner Vestaeger said the DSA is likely to include a ban on targeted advertising without consent, as well as rules on advertising to minors.  The Commission is hoping to pass the two Acts around the same time.

What does this mean for you?

The DMA text will now be finalised and then needs to be approved by the Council and the European Parliament.  It is expected to come into force in or around October 2022 and will come into effect six months later.

The businesses caught by the Act will almost certainly be multi-nationals.  As such, their UK entities will be indirectly impacted even though the DMA will not apply in the UK.  However, the UK is also pursuing similar aims to the EU's under its own proposals for a new pro-competition regime for digital markets.  This will be overseen by the recently created Digital Markets Unit with input from the Digital Market Taskforce comprising the CMA, Ofcom, the ICO, and the FCA . 

A consultation on the objectives and powers of the DMU closed in October 2021.  It ran alongside a wider consultation on other reforms to the competition and consumer protection frameworks. 

The DMU will oversee digital firms with "Strategic Market Status".  It will set and enforce a code of conduct and implement pro-competitive interventions including around access to data and interoperability.  The DMU is currently operating in 'shadow form' pending legislation which will place it on a statutory footing "when Parliamentary time allows".  It appears, however, that there are no plans for legislation equivalent to the DMA and the intention is to achieve similar aims through reform of the competition regime and non-legislative solutions.

Read more

For more analysis of the DMA, see here.

In this series

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Debbie Heywood looks at the recently announced draft Trans-Atlantic Data Privacy Framework to facilitate frictionless EU-US data flows – what does this mean for the UK?

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