In December 2020, the European Commission adopted a proposal for a Digital Markets Act (“Regulation of the European Parliament and of the Council on contestable and fair markets in the digital sector”). The proposal seeks to address the negative consequences arising from platforms acting as digital “gatekeepers” to the internal market of the European Union (EU). These are platforms that have the power to act as private rule-makers and that can function as bottlenecks between businesses and consumers.
Quoting from the EC webpage about the Digital Markets Act (DMA):
The Digital Markets Act builds on the horizontal Platform to Business Regulation, on the findings of the EU Observatory on the Online Platform Economy, and on the Commission’s extensive experience in dealing with online markets through competition law enforcement. In particular, the Digital Markets Act sets out harmonised rules defining and prohibiting unfair practices by gatekeepers and providing an enforcement mechanism based on market investigations. The same mechanism will ensure that the obligations set out in the regulation are kept up-to-date in the constantly evolving digital reality.
The DMA is part of a broad initiative by the EC that includes another proposed directive – the Digital Services Act (DSA) – which is intended to make the internal processes of online platforms more transparent, and allow more informed business decisions by users of such online platforms.
By the way, the EC is the same entity that in 2016 brought us the General Data Protection Regulation (GDPR EU 2016/679) which is a regulation in EU law on data protection and privacy in the EU and the European Economic Area (EEA).
As of 2020, 7 out of 10 of the world’s largest companies are heavily invested in digital market (online) platforms. Moreover, large online platforms intermediating between businesses and consumers are growing at an exponential pace. Some have several hundreds of millions of users (both businesses and consumers). According to a 2019 Eurostat report, over 40% of European SMEs that sell products online do it through such platforms. According to the outcome of the Open Public Consultation on a New Competition Tool, 88% of businesses and business users encountered unfair trading conditions on such platforms.
These businesses are dependent on gatekeeper platforms’ terms and conditions as to how their content is ranked and advertised, and how their communication channels through such platforms are moderated. Furthermore businesses don’t always have access to data related to their consumers and stemming from their activity on a gatekeeper platform. This is problematic for businesses in direct competition with a gatekeeper who can use such data to its own interest.
The obvious question revolves around the definition of the term gatekeeper and who are the apparent gatekeepers at this time. According to the DMA, gatekeepers are large, systemic online platforms that meet the following criteria:
- 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 a large number of businesses.
- Has (or is about to have) an entrenched and durable position in the market, meaning that it is stable over time.
- Has a market value of over 75 billion Euro.
Obvious candidates are Alphabet, Amazon, Apple, Microsoft and Meta.
What obligations will the DMA impose on gatekeepers?
- Must allow third parties to inter-operate with the gatekeeper’s own services in certain specific situations.
- Must allow their business users to access the data that they generate in their use of the gatekeeper’s platform.
- Must 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.
- Must allow their business users to promote their offer and conclude contracts with their customers outside the gatekeeper’s platform.
- Cannot treat services and products offered by the gatekeeper itself more favorably in ranking than similar services or products offered by third parties on the gatekeeper’s platform.
- Cannot prevent consumers from linking up to businesses outside of the gatekeeper’s platforms.
- Cannot prevent users from un-installing any pre-installed software or app if they wish to do so.
What should be the broad outcome of ratification and implementation of the DMA?
- Clearly-defined procedural rules will ensure quick decisions that will translate in speedy advantages for both business users and consumers.
- Businesses will know what to expect when dealing with gatekeepers.
- Gatekeepers will know the obligations applicable to them.
Hopefully, this proposed directive will be quickly ratified and implemented and the current unlimited power of the large digital platform gatekeepers such as Amazon and Google to complete unfairly against smaller businesses using their platforms is reduced.