European Commission’s New Designations and the Implications of the Digital Markets Act

The digital markets landscape of the European Union is undergoing a tremendous shift in power distribution. On 6 September 2023, the European Commission, in line with its approach towards a fair digital landscape, officially designated six major technology corporations as gatekeepers under the Digital Markets Act. These include Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft.  

Understanding the Digital Markets Act and its Impact

The Digital Markets Act (DMA), introduced in May 2023, focuses on regulating online platforms that have a “significant” impact, known as ‘gatekeepers’. These gatekeepers are platforms that: 

• Possess a dominant economy position across multiple EU countries and significantly influence the internal market  
• Serve as essential intermediaries connecting a vast number of users with various businesses  
• Have maintained, or are likely to retain, their market position for three consecutive fiscal years  

For business users
The DMA promises a balanced business environment, particularly for those who are particularly dependent on one of the gatekeepers 

For innovators and startups
The DMA creates opportunities by ensuring a competitive platform environment, free from unfair or monopolistic conditions  

For consumers
Expect a broader range of services, flexible provider-switching options, direct access to diverse services and fair pricing 

For gatekeepers

While innovation remains at the forefront, any unfair practices that may provide undue advantages are reduced in extent or quantity 

Recent Gatekeeper Designations and the DMA’s Role  

The recent designations by the European Commission were the result of a 45-day review, during which several companies, including Samsung, notified the Commission of their potential gatekeeper status. This resulted in 22 core platform services being marked, with the designated gatekeepers having six months to comply with DMA obligations. 

Some services, including Microsoft Bing, Microsoft Edge, Microsoft Advertising and Apple’s iMessage, are under scrutiny as they argue against their classification as gatekeepers. Investigation into these services are expected to conclude in five months. Apple’s iPadOS is also under investigation for gatekeeper status, with a review period of 12 months. 

However, certain services such as Gmail, Outlook.com and Samsung Internet won’t be designated as core platform services. As a result, Samsung will not be designated as a gatekeeper for any core service. 

Regulations and Consequences Under the DMA 

There are a number of obligations that gatekeepers must implement.  

Gatekeepers must:  

• Ensure interoperability with third-party services in certain cases  
• Give business users access to data generated on their platform   
• Provide independent advertisement verification tools and information 
• Allow business users to promote outside the gatekeeper’s ecosystem  

Gatekeepers cannot: 

• Rank their offerings higher than third-party businesses 
• Block consumers from external business links  
• Disallow uninstallation of pre-installed software or apps  
• Track users for targeted advertising without explicit consent

Breaching the DMA guidelines can lead to penalties such as: 

• Fines of up to 10% of global annual turnover, potentially rising to 20% for repeated violations 
• Daily charges up to 5% of their average daily turnover 
• Non-financial penalties including behavioural adjustments or divesting parts of the business  

Conclusion  

The DMA and the European Commission's recent designations signify the EU’s attempt to promote online fairness and competition. As countries beyond the EU observe these regulatory shifts, the enforcement of the DMA could inspire global changes.  

While the DMA brings clarity to the landscape, potential backlash from major tech corporations is anticipated. Its real-world execution and industry acceptance remains to be seen. 

In balance, the EU Digital Markets Act is a step towards a balanced digital market landscape. It combines principles of fairness, competition and innovation while trying to prioritise business and consumer interests. 

IoA Members: you can learn more about the Digital Markets Act in the October 2022 webinar recording available in your member portal

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