EU agrees on new rules for ‘guardians’
The DMA seeks to prohibit “gatekeepers” – companies operating platforms seen as a gateway for small businesses to reach the end consumer – from giving preferential treatment to their own products and promotions over those of their competitors. The new rules would also give end-users of devices the ability to remove pre-installed apps and download alternative products offered by competitors.
During the legislative process, new obligations and prohibitions were included in the draft DMA. The text approved by the Commission, the Parliament and the European Council is currently being translated and is not yet publicly available. However, representatives of the three institutions have already summarized the results of the debate to the public.
The new obligations include an interoperability requirement that will apply to gatekeeper messaging services, meaning users will be able to send instant messages from one service provider to another.
The DMA will also prohibit gatekeepers from using personal data collected from users of one service for other services. Additionally, gatekeepers would no longer be allowed to predefine to app developers which services they must use to have their apps included in the App Store. Guardians should also grant app developers “equitable access” to smartphone functions.
The law also contains restrictions on targeted advertising: under the new rules, gatekeepers would have to obtain users’ consent before combining third-party data with their own data for the purpose of targeted advertising.
The thresholds for being classified as a gatekeeper have also been increased. A company will be considered a custodian if it has achieved an annual turnover of at least €7.5 billion in the EU in the last three years or if its activity has reached a market capitalization of at least minus 75 billion euros. It must also have 45 million monthly end users and at least 10,000 business users in the EU, and control one or more “core platform services” in at least three EU member states. Marketplaces, application stores, search engines, social networks, cloud services, advertising services, voice assistants and web browsers are considered core platform services.
EU Internal Market Commissioner Thierry Breton said the Commission “will work quickly to appoint guardians on the basis of objective criteria. Within 6 months of their appointment, they will have to comply with their new obligations”.
If the proposed new rules come into effect, custodians will face penalties for violating them, including fines of up to 10% of their overall annual turnover. In the event of a repeat offence, the penalty could be increased to 20% of annual turnover. If a gatekeeper breaks the new rules three times or even more, the Commission could impose a temporary ban on mergers for the company or impose divestment requirements.
The European Commission should be responsible for the application of the DMA and intends to increase its human resources to cope with the additional workload. Its personnel resources will be increased with at least 80 new employees, said Andreas Schwab, a representative of the parliamentary committee for the internal market and consumer protection. At the same time, the DMA has been revised to allow national authorities to be more strongly involved in enforcement, particularly in investigations.
“Although an agreement has been reached on the DMA, it will be a difficult time for all stakeholders once the gatekeeper rules come into force,” said Dr Laura Stammwitz, a competition law expert based in Frankfurt at Pinsent Masons. “It remains to be seen how the DMA will be interpreted and applied by the European Commission, how disputes will be handled by EU courts and how this will be aligned with current competition law rules applied by national competition authorities. competetion.”
The German Federal Cartel Office has recently been given new tools to combat the abuse of a dominant position by big digital players following the 10th amendment of the national antitrust rules in 2021. “The existing rules of the law of competition could already be used to combat some of the activities that may be prohibited by the DMA and so there could be potential overlap,” Stammwitz said.
Representatives of the Parliament, Council and Commission have made it clear that in addition to the sanctions the European Commission will be able to impose, companies affected by DMA breaches will have the option of taking legal action against the guardians. Class action lawsuits based on the violation of the DMA will also be possible.
Angelique Bret, competition law expert at London-based Pinsent Masons, said: “Large tech companies classified as ‘gatekeepers’ under the DMA will invariably also be active in the UK.” Therefore, they will also be subject to all the requirements of the Digital Markets Unit (DMU) – established last year – and the new UK legal framework within which the DMU will operate. “There will therefore be a significant additional compliance burden for these companies.”
“The DMU can benefit from greater flexibility to obtain satisfactory results, in collaboration with the companies concerned. For example, in relation to recent Google Sandbox confidentiality agreements, the terms of these were agreed between Google, the UK Competition and Markets Authority and the UK data protection body, the ICO,” she said.
Bret added: “In rapidly changing digital markets, there is a risk that prescriptive regulations quickly become outdated or irrelevant, and authorities may need to fall back on existing competition, consumer and privacy laws. .”
The Commission published its DMA proposal in December 2020, along with a proposed Digital Services Act (DSA). The DSA is still being negotiated between Parliament and EU Member States.
Despite the agreement reached on the law on digital markets, the new law has yet to be officially adopted by the European Parliament and by the Council of Ministers. The DMA is expected to be published in the Official Journal of the EU around October 2022. It will enter into force twenty days after this publication. Most of the provisions will be applicable six months after its entry into force, scheduled for around April 2023.