Brief on Digital Markets Act - EU Digital Partners

About the Act

While general EU competition regulations apply to Big Tech platforms like Apple, Google, Microsoft, and Meta, there have been instances of these digital platforms engaging in unfair activities and abusing their market strength. For example, in June 2023, the EU antitrust commission ordered Google to change its advertising business and accused it of favoring its own advertising services and abusing its dominant position.

Regulation (EU) 2022/1925, often known as the Digital Markets Act (DMA), is an EU law aimed at making the digital economy fairer and more contestable. The regulation took effect on November 1, 2022, and became largely applicable on May 2, 2023.

The Digital Markets Act applies to significant digital platforms that serve as ‘gatekeepers‘ for core platform services such as search engines, cloud services, social networks, video-sharing platforms, online advertising networks, and so on. The legislation outlines certain do’s and don’ts for these ‘gatekeepers’ to provide a level playing field and fair and non-discriminatory contractual conditions for businesses and end users. Non-compliance may result in consequences, including fines of up to 10% of global turnover.

Purpose of the Act

The DMA recognizes the concentration of power in the hands of a few digital platforms and seeks to prevent these Gatekeepers from abusing their market dominance. The term “Gatekeeper” emphasizes the critical function of intermediary platforms as bottlenecks that impede access for many market players. The law tackles challenges related to economies of scale, network effects, data-driven advantages, rapid innovation rates, and the rise of conglomerates which shape complete ecosystems.

The DMA’s focus on eliminating unfair advantages, locking in dominating positions, and distorting competition strives to build a more competitive digital ecosystem while protecting consumers from any negative consequences such as higher prices or fewer alternatives.

The European Commission’s enforcement expertise in EU competition law underlines the DMA’s objective to control and constrain the perceived economic dominance of significant digital players.

Obligations under the Act

The legislation has a comprehensive list of requirements divided into three different parts. Articles 5, 6, and 7 establish obligations for gatekeepers, specific requirements, banned behaviour, and measures with a focus on fair competition, transparency, and user rights.

Article 5: Obligations for Gatekeepers

Prohibited Actions– Article 5(2)- Gatekeepers are restricted from various actions, including processing personal data for online advertising without consent, combining personal data across services without consent, and signing in end users for data combination without explicit consent.

Fair Competition for Business Users– Article 5(3) & (4)- Gatekeepers cannot prevent business users from offering products or services through third-party intermediation services at different prices. Business users are free to communicate, promote offers, and conclude contracts with end users through various channels.

End User Access and Use– Article 5(5)- Gatekeepers must allow end users access to content, subscriptions, and features via core platform services, using software applications from business users.

Non-Restriction of Complaints– Article 5(6)- Gatekeepers cannot prevent business users or end users from raising compliance issues with relevant public authorities, ensuring transparency and accountability.

Non-Imposition of Identification Services– Article 5(7)- Gatekeepers are prohibited from mandating end users or business users to use specific identification services, web browser engines, or payment services.

Subscription and Registration Freedom and Transparency in Advertising-Article 5(8-10) – Gatekeepers cannot require business users or end users to subscribe or register with additional core platform services as a condition for using listed services. Gatekeepers must provide advertisers and publishers with detailed information on pricing, fees, and metrics, ensuring transparency and fair conditions.

Article 6: Further Obligations for Gatekeepers

Ban on use of Business user’s data-Article 6(2)- Gatekeepers cannot use any non-public data generated or provided by business users while in competition with such business users.

Freedom to uninstall per installer applications– Article 6(3&4)- Gatekeepers allow end users to uninstall applications on the gatekeeper’s operating system that are required for the operating system to function. Furthermore, it must allow the installation and effective use of third-party software applications or software application stores that use, or interoperate with, its operating system, as well as access to those software applications or software application stores via means other than the gatekeeper’s relevant core platform services.

Detailed Measures for Interoperability and Access– Article 6(5-12)- Gatekeepers must ensure interoperability, user-friendly uninstallation of software applications, and fair access to data, performance measuring tools, and more.

Article 7: Interoperability of Number-Independent Interpersonal Communications Services

Mandatory Interoperability sand security preservation – Article 7(1&3)- Gatekeepers who supply designated number-independent interpersonal communication services must ensure interoperability with other providers across the Union. Technical interoperability interfaces must be made available free of charge upon request. Furthermore, the gatekeeper must ensure that all compatible services have the same degree of security, including end-to-end encryption.

User Freedom and Data Exchange– Article 7(8&9)- End users can decide whether to use interoperable functionalities. Gatekeepers can exchange only necessary end-user data with requesting providers, complying with privacy regulations.

Other obligations

Article 14- Notify the Commission of intended future mergers and acquisitions.

Article 15- Conduct an independent audit of profiling techniques and submit it to the Commission.

Ban on the use of data provided by business users to compete

In July 2019, the Commission opened an investigation into Amazon’s use of marketplace vendors’ non-public data. On November 10, 2020, a Statement of Objections stated Amazon’s dominance in the French and German online markets, charging unfair competition based on the exploitation of seller data. Amazon made commitments, pledging not to utilize non-public data in retail choices or sell branded and private label products.

To avoid such practices, Article 6(2) prohibits a gatekeeper from using any non-public data, in the context of their use of the relevant core platform services or of the services, generated or provided by business users or by customers of those business users while in competition with these business users.

The data covers all aggregated and non-aggregated data created by business users that may be inferred or gathered as a result of their or their customers’ commercial actions. These commercial operations include click, search, view, and voice data on the relevant core platform services, as well as services delivered alongside or in support of the gatekeeper’s relevant core platform services.

For example, business users can acquire online advertising services from a company that provides core platform services for the delivery of products and services to end users. In this situation, the data might not be generated on the core platform service itself, but rather by the business user or as a result of its activities through the core platform service in question. However, that basic platform service for advertising can serve a dual purpose as both an undertaking offering online advertising services and an undertaking providing services that compete with corporate users. As a result, the obligation restricting a dual-role gatekeeper from accessing business users’ data would also apply to data collected from business users to provide online advertising services relating to that core platform service.

Similarly, in terms of cloud computing services, the obligation not to use business users’ data extends to data provided or generated by gatekeeper business users in the context of their use of the gatekeeper’s cloud computing service, or through its software application store, which provides end users with access to software applications.

Both businesses and their end users supply significant data to gatekeepers’ key platform functions. To ensure that business users have access to this relevant data, gatekeepers must allow free and effective access when requested. Such access is granted to third parties engaged by the business user to function as data processors. Gatekeepers are barred from blocking access and must assist business users in getting end-user consent as per rules such as GDPR and ePrivacy Directive. Continuous and real-time data access is required, with appropriate technological measures such as strong application programming interfaces or integrated tools, particularly for small-volume business customers.

Conclusion

Finally, the Digital Markets Act (DMA) is a critical move taken by the European Union to limit the market dominance of major technology businesses. By setting particular obligations and bans on these digital platforms, the DMA hopes to promote a fair and competitive digital ecosystem that protects consumers while also advancing the interests of corporate users. The Act covers concerns such as self-preferencing, data abuse, and unfair contractual practices, and imposes substantial fines for noncompliance. The DMA seeks to promote a fair playing field by concentrating on transparency, data portability, and combating anti-competitive behaviour, ensuring that digital markets benefit both firms and end users while reducing the possible negative effects of concentrated power.

Author:

Harmanpreet Kaur, law student currently in her fourth year pursuing a law degree (BA LLB) at the Army Institute of Law in India & Legal Intern Data Privacy and Digital Law at EU Digital Partners.