What will change with the application of the DMA, the European text to regulate digital giants?

Europe DMA DSA

As of Tuesday, May 2, large digital companies must comply with new measures on European territory. This day marks the official implementation of the Digital Markets Act (DMA), also known as the Regulation on Digital Markets in the European Union. The law is now in a “transition” period, during which different actors must work together to successfully implement this new legislation.

The DMA aims to regulate large digital companies and their economic activities in the European Union. Specifically, it aims to limit the dominant economic position of most digital platforms in the European territory, curb their anti-competitive practices – and the resulting dependence – and better protect users and consumers. It was voted by the European Parliament on July 5, 2022, and finalized in November of the same year.

The DMA goes hand in hand with the Digital Services Act (DSA), which aims to regulate the relationship between platforms and their users and should come into effect by the end of August 2023.

From May 2 until March 2024, companies must work to comply with all DMA requirements. Sanctions will be applied if they fail to do so.

The companies affected are logically the GAFAM (Google, Apple, Facebook, Amazon, and Microsoft), as well as a handful of others operating in at least three EU Member States. Among others, these include Chinese companies Alibaba and AliExpress, German seller Zalando, travel service Booking, and social networks TikTok, Snapchat, and Twitter.

The European Commission also announced on May 2 that it would publish the exhaustive list of all affected companies on September 6 at the latest, according to AFP.

The official text lists the services affected: intermediation services (such as marketplaces and app stores), search engines, social networks, video sharing platforms, online messaging, operating systems (including connected TVs), online data storage services, advertising services (such as networks or advertising exchanges), web browsers, and virtual assistants.

To target them, legislators now impose the label of “gatekeeper.” Companies that can be classified as such meet several criteria, defined as such in Article 2 of Chapter III of the official text:

“[If] it has a significant impact on the internal market, [if] it provides an essential platform service that constitutes a major access point for user companies to reach their end-users, and [if] it enjoys a strong and durable position in its activities or is likely to do so in the near future.”

Revenue and user number criteria further refine the scope of this law. Thus, a company is a “gatekeeper” “[if] it has generated annual revenues in the Union of at least €7.5 billion in each of the last three financial years or if its average market capitalization or equivalent fair market value has reached at least €75 billion in the last financial year.”

In addition, it is concerned “if it provides an essential platform service that, during the last financial year, had at least 45 million active end-users per month established or located in the Union.”

A platform designated as a “gatekeeper” must now comply with a number of prohibitions and obligations. For consumers, three key points stand out:

  • User consent will now be mandatory for the combination of data (from multiple services) for public profiling purposes.
  • The user’s freedom of choice regarding the pre-installation of applications on connected devices will be strengthened, thus allowing for fairer competition between applications.
  • Users will also have more transparent access to evaluations and reviews of products and services offered by platforms.

For the targeted companies, the DMA imposes the following obligations:

  • Prohibition of anti-competitive practices, such as platform preference for its own products and services at the expense of competitors, or restricting access to user data for competitors.
  • Transparency regarding platform decisions on the ranking of products and services offered.
  • Implementation of an interoperability process to allow users to easily switch platforms while retaining their data and information.

The companies concerned must also designate a single point of contact within the European Union to facilitate exchanges with the competent authorities and the implementation of corrective measures in case of non-compliance.

In the event of non-compliance with the obligations imposed by the DMA, companies may face sanctions of up to 10% of their global turnover, or even the possibility of being forced to split their activities.

In summary, the Digital Markets Act represents an important step towards fairer and more equitable regulation of major digital companies operating in the territory of the European Union. By imposing clear and specific obligations, as well as deterrent sanctions in case of non-compliance, the DMA aims to ensure fair competition and better protect users and consumers.

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