EU Digital Markets Act

The DMA accompanies the Digital Services Act which together aim to radically reform the legal duties and responsibilities of digital service providers in the EU. 

What does it do?

The DMA regulates the business conduct of so-called digital gatekeepers – the providers of the core platform services on which businesses depend to reach their customers.  These include services such as online intermediation services, search engines, video-sharing platforms, web browsers, operating systems, online advertising services and digital assistants.

It establishes a set of narrowly defined objective criteria for qualifying a large online platform as a so-called “gatekeeper”. These criteria will be met if a company:

• has a strong economic position, significant impact on the internal market and is active in multiple EU countries;
• has a strong intermediation position, meaning that it links a large user base to many businesses (45 million monthly active end users in the EU or 10,000 active business users); or
• has (or is about to have) an entrenched and durable position in the market, meaning that it is stable over time if the company met the two criteria above in each of the last three financial years.

The rules establish obligations for gatekeepers that they must comply with in their daily operations. Among other things, they are required to:

• allow third parties to inter-operate with the gatekeeper’s own services in certain specific situtions;
• allow their business users to access the data that they generate in their use of the gatekeeper’s platform;
• provide companies advertising on their platform with the tools and information necessary for advertisers and publishers to carry out their own independent verification of their advertisements hosted by the gatekeeper; and
• allow their business users to promote their offer and conclude contracts with their customers outside the gatekeeper’s platform.

Gatekeeper platforms may not:

• treat services and products offered by the gatekeeper itself more favourably in ranking than similar services or products offered by third parties on the gatekeeper's platform;
• prevent consumers from linking up to businesses outside their platforms;
• prevent users from un-installing any pre-installed software or app if they wish so; or
• track end users outside of the gatekeepers' core platform service for the purpose of targeted advertising, without the effective consent of such users.

The European Commission will carry out market investigations with the aim of ensuring that the new gatekeeper rules keep up with the fast pace of digital markets. These investigations will aim to allow the Commission to:

• qualify companies as gatekeepers;
• update dynamically the obligations for gatekeepers when necessary; and
• design remedies to tackle systematic infringements of the rules in the DMA.

The first tranche of designated gatekeepers were required to comply with the DMA by 6 March 2024 at the latest. These include Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft.  In late March, the Commission began investigating Alphabet's rules on steering in Google Play and self-preferencing on Google Search, Apple's rules on steering in the App Store and the choice screen for Safari and Meta's “pay or consent model”. The European Commission has since indicated that it believes that Meta’s “pay or consent” model breaches the DMA.  

It also designated booking.com as a gatekeeper in May 2024 and Apple's iPadOS, its operating system for tablets, as a gatekeeper in April 2024.

What are the consequences of non-compliance?

• Fines of up to 10% of the company’s total worldwide annual turnover, or up to 20% in the event of repeated infringements;
• Periodic penalty payments of up to 5% of the average daily turnover; and
• In case of systematic infringements of the DMA obligations by gatekeepers, additional may be imposed on the gatekeepers after a market investigation. Such remedies should be proportionate to the offence committed. If necessary and as a last resort option, non-financial remedies can be imposed. These can include behavioural and structural remedies, e.g. the divestiture of (parts of) a business.

Private enforcement by consumers is also possible.  The DMA also contains rules about co-operation mechanisms between the Commission and the national courts and about the duty for national courts to take account of Commission decisions under the DMA.

How does this affect the UK?

The regime in the UK (set out in the Digital Markets, Competition and Consumers Act is similar but different.  However, the Competition and Markets Authority (CMA) has indicated that it intends to work closely with the European Commission and other regulators internationally as the digital world knows no national borders.  

It gives the CMA the power to designate undertakings as having strategic market status (SMS) in respect of a digital activity and to impose conduct requirements on designated undertakings. The CMA will also, following investigation, be able to intervene to promote competition where it considers that activities of a designated undertaking are having an adverse effect on competition through pro-competition interventions. The Act also introduces a duty for designated undertakings to report certain mergers and to produce compliance reports. It also gives the CMA investigatory and enforcement powers. The CMA has already been carrying out investigations in this area, such as its investigation into the acquisition of Giphy by Meta, its market study about the music streaming industry and its market study in UK mobile eco-systems. Interestingly, it has closed its existing Competition Act cases into Google’s Play Store and Apple’s App Store as it plans for the roll out of the new digital markets competition regime.

The CMA has also issued draft guidance on how it intends to fulfil its regulatory obligations with regards to the digital markets aspects of the Act.

Although the EU and the UK have taken slightly different approaches to the regulation of digital services, they share the same goal - establishing an effective framework for the regulation of existing and emerging digital markets.