Following a challenging legislative process lasting well over a year, on 24 March the European Council and the European Parliament reached a provisional political agreement on the Digital Markets Act (DMA) - the set of European Union rules which aim to govern the behaviour and limit the market power of large online platforms such as Google, Apple, Meta, Amazon and Microsoft.
After a last push, the co-legislators are now expected to finalise and publish the text soon. What is clear from the press conference following the agreement and the short publications made by the Council and the Parliament is that this landmark legislation will greatly impact digital markets in the EU. It may also set a precedent further afield.
Most of the regulatory framework appears to be in line with the key building blocks of the Commission’s proposal published in December 2020, albeit with some material changes. The framework now includes the principal features summarised in the table below:
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Thresholds |
For a platform to qualify as a gatekeeper, firstly it must either have had an annual turnover of at least €7.5bn in the past 3 years (up from €6.5bn in the Commission’s proposal) or a market valuation of at least €75bn (up from €65bn in the Commission’s proposal). Moreover, they must have at least 45m monthly end users and at least 10k business users established in the EU. |
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Core platforms |
In-scope platforms are marketplaces and app stores, search engines, social networks, cloud services, advertising services, messaging platforms, virtual assistants and web browsers (the last two have been added relative to the Commission’s proposal). Furthermore, a new category of “emerging gatekeeper” has been introduced, which will enable the Commission to impose “obligations on companies whose competitive position is proven but not yet sustainable”. |
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Dos |
Gatekeepers will need to: (1) ensure that users can unsubscribe from core platform services under similar conditions to subscription; (2) provide choice screens for the installation of certain software (e.g. web browsers, search engines or virtual assistants); (3) ensure the interoperability of their instant messaging services’ basic functionalities; (4) allow app developers fair access to the supplementary functionalities of smartphones (e.g. NFC chip); (5) give sellers access to their marketing or advertising performance data on the platform; and (6) inform the EC about planned M&A activity. |
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Don’ts |
Gatekeepers must not (1) show ‘self-preference’ for their own services; (2) reuse personal data collected from a core platform service for the purpose of another service; (3) establish ‘unfair’ conditions for business users; (4) pre-install certain software applications; or (5) require app developers to use certain services (e.g. payment systems or identification services) in order to be listed in app stores. |
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Penalties |
The Commission can impose fines of up to 10% of global turnover for non-compliance by gatekeepers, which increases to 20% for repeated offences. Systematic violations could trigger structural and behavioural remedies, including a ban on mergers. Furthermore, we understand that gatekeepers can now face collective actions from individuals and companies in national courts in cases of non-compliance with the DMA obligations. |
In the months ahead, the Commission and the potential gatekeepers will be turning their attention to implementation and compliance. Requirements as significant as those mandated in the DMA will undoubtedly raise a number of practical challenges, which both sides will need to work through. If the DMA is to be implemented in a way which maximises benefits to competition and consumers while minimising the implementation costs, careful thought needs to be given to how to carry out the required changes in a proportionate and sustainable way.
While we await the publication of the final text, we cast our minds back to our series on digital regulation last year. These articles set out our reflections on some of the most interesting aspects of the proposals in the EU (and UK) from an economic perspective, which we reconsider here in light of the current proposal.
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Authors
Ellie is a Manager at Frontier Economics with more than a decade’s experience, specialising in the telecommunications and digital sectors.
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Greg joined Frontier in 2015 after completing his Masters in Economics at the University of Nottingham.
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Tom has worked on a wide range of projects covering regulatory, competition and strategic issues.
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Federico is a Manager in Frontier's Competition and Public Policy practices in Brussels.
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