The European Commission isn’t a fan of the line, “I’m sorry, Dave, I’m afraid I can’t do that”, and the Digital Markets Act is their response. The Commission launched the Act in November 2022, with the full practical effects of it only coming into force now, in March 2024.
The Digital Markets Act aims to level the playing field across digital markets in the EU, by imposing certain rules on digital gatekeepers – essentially massive online platforms or search engines that have practical control over who gets to do business online, and how they do it. Through the Act, people in the EU can expect increased competition and fairness for businesses in the digital sector, greater choice for consumers in what service providers to use, and stricter limits on how gatekeepers can use their extensive access to personal information.
So, what is the Digital Markets Act, and why should you care?
What is the Digital Markets Act?
The Digital Markets Act is part of the EU Commission’s strategy for a safe and human-centred digital future, and works alongside the Digital Services Act. In a nutshell:
Where the Digital Services Act focuses on the people already inside the marketplace, the Digital Markets Act focuses on the people deciding whether or not to let you through the door.
The Act exists because the Commission noticed that there are a handful of companies that are so big and provide services that are so widely adopted – like Google, iOS or WhatsApp – that they’ve essentially become pseudo public spaces in their own right. This is a problem. As private services, the companies that own them can still dictate what can or can’t be done on them, which means that the common business response of “if you don’t like it, you can leave” will exclude other buyers and sellers from some of the largest marketplaces in the world. These “gatekeepers” have become so big that basic commercial law isn’t enough anymore, and the Commission has to step in to enforce fair business practices.
Who does the Act apply to?
The Digital Markets Act applies to any “gatekeepers” providing “core platform services” to business users in the EU. Even if the gatekeeper is based outside of the EU, the Act still applies.
The key definitions here are:
- “gatekeeper”, being any entity that provides the same core platform service in at least 3 EU states and has at least:
- EUR 7.5 billion turnover for 3 years OR EUR 75 billion market cap or value; and
- 45 million monthly active users AND 10,000 yearly active business users;
- “core platform service”, being any:
- online intermediation services (like Amazon);
- online search engines (like Google);
- online social networking services (like Facebook);
- video-sharing platform services (like Youtube);
- number-independent interpersonal communications services (like Whatsapp);
- operating systems (like iOS);
- web browsers (like Chrome);
- virtual assistants (none designated yet);
- cloud computing services (like Amazon Web Services);
- online advertising services (like Meta Ads).
Obviously, gatekeepers make up a fairly exclusive list, which the Commission updates regularly.
What does the Digital Markets Act change or require?
Under the Digital Markets Act, gatekeepers will be required to take and avoid a variety of actions, all designed to stoke fairness and competition in the digital marketplace.
Some of the actions that gatekeepers must take include:
- allowing third parties to interoperate with the gatekeeper’s own services;
- allow businesses to advertise services via the gatekeeper’s services, even if the sale doesn’t actually happen on the gatekeeper’s services;
- providing business users with access to data generated in their use of the gatekeeper’s platform; and
- ensuring that users can unsubscribe from the gatekeeper’s core platform services as easily as they can subscribe.
Some of the actions that gatekeepers must avoid include:
- combining users’ personal information across the gatekeeper’s own services without explicit consent;
- preventing businesses from offering the same services to users in different places and on different terms;
- favouring the gatekeeper’s own services over those of competitors on their platforms; and
- pre-installing certain apps or software and preventing users from uninstalling them.
The Act also explicitly confirms gatekeepers as being governed by EU merger control regulations.
What are the penalties for not complying with the Act?
Gatekeepers that fail to comply with the Digital Markets Act could face serious penalties, including:
- fines of up to 10% of global turnover, increasing to 20% for repeat infringements; and
- periodic penalties of up to 5% of average daily worldwide turnover, per day, to compel gatekeepers to comply with the Commission’s order.
Practically, what does the Digital Markets Act mean for me?
Unless you’re a member of the Big Tech country club, the Digital Markets Act doesn’t need you to do anything different. As a less massive company, though, it does open up a lot more opportunities for you in terms of how you interact in the digital marketplace. Whether its by seeing your services advertised on the same shelf as Apple’s own services, or being able to have a closer handle on how your advertising budget is being spent, you will see changes that contribute to a fairer online business landscape in the EU.