The Digital Market Act: How will it impact businesses?

Marketplace
Marjory
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“The European Union has had to impose record fines over the past 10 years for certain harmful business practices by very large digital players. The DMA will directly ban these practices and create a fairer and more competitive economic space for new players and European businesses.” With these words, former Secretary of State for Digital, Cedric O, spoke about the provisional political agreement of the Council and the European Parliament, adopted on 24 March 2022, on digital markets legislation. After less than two years of discussions, this text marks a new stage in the supervision of large technology companies and in the opening up of “more competition, innovation and choice for users[1]”. The Digital Market Act therefore reshuffles the deck for the major digital platforms. From now on, big tech will no longer be able to monopolize their markets. For French Commissioner Thierry Breton, the Digital Market Act sounds the “end of the Wild West” by redefining the conditions for entry into digital markets. But what are the consequences for marketplaces? Here’s a look at what it means for marketplaces.

[1] According to Andreas Schwarb, reporter for the Internal Market and Consumer Protection Committee

Digital Market Act: the contours of a European decision

On 15 December 2020, the European Commission announced the publication of two texts aimed at better regulating activities in the European digital space: the Digital Service Act (DSA) and the Digital Market Act (DMA). While the former is aimed at companies of all sizes and concerns the regulation of the use of their services, the latter only concerns the large platforms dominating the digital markets.

It took only one year for the Member States to decide unanimously, on 25 November 2021, to adopt the Council’s position on the DMA. On the ASD side, the European Parliament adopted its version in January 2022.

On 23 March 2022, the Council and the European Parliament reached a provisional agreement on the AMD. This still needs to be finally approved by both bodies before an implementing regulation can be implemented, 6 months after its entry into force.

Which companies are targeted by the Digital Market Act?

Unlike the DSA, which makes no distinction in company size, the DMA focuses primarily on the “big fish”, online platforms that have at least 45 million monthly users and 10,000 business users. Focusing on companies established in the European Union (EU) that have (over the last 3 years) either had a turnover of at least 7.5 billion euros in the EU or have been valued on the stock exchange at at least 75 billion euros

To be covered by the DMA, platforms must also control one or more core platform services (such as Amazon), search engines (such as Google) or social networks (such as Facebook) in at least 3 EU Member States.

In concrete terms, the DMA thumbs its nose at the digital giants, because of their dominant position – known as gatekeepers – who control access to their services for users and competitors. The aim of the Digital Market Act is to re-establish a competitive balance with companies trying to break into digital markets, by lowering the barriers to entry.

Digital Market Act: what impact for businesses?

For smaller companies that want to position themselves on a range of products, this act is a godsend. In what way? Well, it imposes a number of obligations and prohibitions on “the gatekeepers”.

Gatekeepers will no longer be able to:

  • Prevent their users from accessing services outside of the platform
  • Use data from user companies to compete with them
  • Rank their own products or services more favorably than those of other market players (self-preference)
  • Require business users to subscribe to third party services 

Gatekeepers will be obliged to:

  • Provide companies that advertise on their platform with access to their performance measurement tools and the information necessary for advertisers and publishers to perform their own independent verification of ads hosted by the gatekeeper
  • Allow user companies to promote their offerings and enter into contracts with their customers outside the marketplace 
  • Inform the European Commission of acquisitions and mergers they carry out

You can find all the obligations and prohibitions of the Digital Market Act by following this link.

In case of non-compliance with these rules, companies affected by the DMA – and as a general rule large platforms – will risk a fine of up to 10% of their total worldwide turnover. This amount can be increased to 20% in the event of a repeat offense. Systematic non-compliance (at least 3 times in 8 years) with the obligations laid down by the DMA may even lead to a market investigation, commissioned by the European Commission, and the imposition of behavioral or structural corrective measures. And to go further, the European Commission will also have the right to claim up to 1% of its turnover if the platform does not cooperate during the investigation.

The DMA is intended to correct imbalances by giving more room to new players in the digital markets. The supremacy of GAFAM, NATU and BATX should be shaken by this act… at least on paper. It remains to be seen whether in a year’s time, when the DMA comes into force and its implementing regulation is issued, we will see real changes from these gatekeepers on the European “digital” floor.

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