Big Changes For Bigtech: Council And Commission Reach Agreement On Digital Markets Act

March 28, 2022
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The Council of the EU and the European Parliament have reached a provisional political agreement on the Digital Markets Act, and final technical work will make it possible to finalise the text in the coming days.

The Council of the EU and the European Parliament have reached a provisional political agreement on the Digital Markets Act (DMA), and final technical work will make it possible to finalise the text in the coming days.

The EU’s DMA, which was first proposed at the end of 2020, aims to rein in large online platforms.

The legislation, which has been a priority for France during its presidency of the EU, is subject to approval by the Council of the EU and the European Parliament, and must be implemented within six months after its entry into force.

The DMA is part of the EU’s ongoing pushback against Silicon Valley, as evidenced by investigations into Google and Meta, as well as Apple Pay, in recent years.

“The European Union has had to impose record fines over the past ten years for certain harmful business practices by very large digital players,” said Cédric O, French minister of state with responsibility for digital, commenting on the agreement.

He continued: “The DMA will directly ban these practices and create a fairer and more competitive economic space for new players and European businesses.”

These rules are key to stimulating and unlocking digital markets, enhancing consumer choice, enabling better value sharing in the digital economy and boosting innovation, O suggested. “The European Union is the first to take such decisive action in this regard and I hope that others will join us soon.”

Lawmakers in the US on the left and the right have long suggested that technology needs to face tougher regulation, while the UK is in the process of passing its Online Safety Bill and creating the Competition and Market Authority’s new Digital Markets Unit.

New gatekeepers

The proposed DMA regulation has gained notoriety for its coining of the new EU legal term: a gatekeeper.

Gatekeepers are classified as being a provider of a core platform service, with a significant impact on the market, serving as an important gateway, and enjoying an entrenched and durable position.

The proposed regulation specifically mentions payments among services provided by potential gatekeeper platforms, but not payments institutions themselves.

In addition, as part of the list of dos and don’ts that have been laid out for gatekeepers, bigtech firms will no longer be able to require app developers to use certain services, such as payment systems or identity providers, to be listed in app stores.

This will be music to the ears of certain regulators, namely the Dutch competition watchdog, which has repeatedly pushed for the DMA to act as a tool to rein in bigtech’s foray into payments.

The Dutch have been leaders in Europe in lobbying for tighter regulation for bigtech platforms.

In 2018, the Dutch government called for Apple to open up its near field communication (NFC) to Dutch authentication system DigiD.

And in the first-ever concession of its kind, Apple announced in January that it will allow third-party payment options for in-app purchases for dating apps in the Netherlands.

How to be a gatekeeper

The Council and the Parliament have agreed that for a platform to qualify as a gatekeeper, first it must either have had an annual turnover of at least €7.5bn within the EU in the past three years or have a market valuation of at least €75bn, and secondly, it must have at least 45m monthly end-users and at least 10,000 business users established in the EU.

In addition, the platform must control one or more core platform services in at least three member states. These core platform services include marketplaces and app stores, search engines, social networking, cloud services, advertising services, voice assistants and web browsers.

To ensure that the rules laid down in the regulation are proportionate, small and medium-sized enterprises are exempt from being identified as gatekeepers, apart from in exceptional cases.

The agreement also accommodates the notion of an "emerging gatekeeper", which will enable the European Commission to impose certain obligations on companies whose competitive position is proven but not yet sustainable.

If a gatekeeper violates the rules laid down in the legislation, it risks a fine of up to 10 percent of its total worldwide turnover.

Meanwhile, for a repeat offence, a fine of up to 20 percent of its worldwide turnover may be imposed.

If the gatekeeper systematically fails to comply with the DMA, violating the rules at least three times in eight years, then the European Commission can open a market investigation and, if necessary, impose behavioural or structural remedies.

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