EU Digital Markets Act (DMA) explained incl. Summary

Technology giants, commonly referred to as “big tech,” have fundamentally changed our world and the (digital) economy. Their influence has become so great that they have changed the way we live, work and communicate. Their influence goes beyond technological advancements and reaches deep into social norms, commerce and the global economy. But with exponential growth and market dominance come concerns about unchecked power, monopolistic behavior, and threats to fair competition or the crowding out of innovatin.

The European Union (EU) has been trying to manage the tech giants for several years now. The challenges had to be recognized and now the Digital Markets Act (DMA) has been introduced as a decisive step towards a fairer digital market.

For the full Legal Text please referr to the official document of the DMA in the Official Journal of the European Union.

Definition of “Gatekeepers”

At the heart of the Digital Markets Act is the concept of a “Gatekeeper” offering “Central Platform Services.” This term needs more definition and it needs to be carefully delineated to ensure that the right companies are regulated and that enforcement actions are fair.

Therefore, the following criteria have been established that constitute a so-called gatekeeper:

1. Offering “Core Platform Services” (CPS)

Gatekeepers are companies that provide important digital services and often act as intermediaries between businesses and consumers. These services include search engines, social networks, cloud services, advertising services, and more. Typically, companies like Apple, Google, Facebook, Alibaba, and Amazon are good examples of core platform services provided by a gatekeeper.

In Article 2(2) of the DMA the list of services which are designated as “core platform services” include the following:

• online intermediation services;
• online search engines;
• social networks;
• video sharing platform services;
• messenger services (number-independent interpersonal communication services);
• operating systems;
• web browsers;
• virtual assistants;
• cloud computing services;
• advertising services (including any advertising networks, advertising exchanges and any other advertising intermediation services, provided by an undertaking that provides any of the core platform services listed above;)

2. DMA Criteria for identification of Gatekeepers

To prevent arbitrary designations, the DMA applies specific, measurable criteria:

Qualitative criteria – Article 3(1)

A CPS provider can qualify as a gatekeeper if it meets three qualitative criteria. Gatekeeper:

• The undertaking has a significant impact on the internal market
• The undertaking provides a core platform service which is an important gateway for business users to reach end users; and
• The undertaking enjoys an entrenched and durable position in its operations, or it is foreseeable that it will enjoy such a position in the near future.

Quantitative criteria – Article 3(2)

Further the DMA defines quantitative criteria:

• The undertaking achieves an annual Union turnover equal to or above EUR 7,5 billion in each of the last three financial years, or where its average market capitalization or its equivalent fair market value amounted to at least EUR 75 billion in the last financial year and it provides the same core platform service in at least three Member States.
• The undertaking provides a core platform service that in the last financial year has at least 45 million monthly active end users established or located in the Union and at least 10 000 yearly active business users established in the Union.
• Threshold (2) above relating to the CPS has been met in each of the last three financial years.

Core Objectives of the DMA.

The genesis of the Digital Markets Act has been developed over the years from extensive study, observation, and concern about modern digital ecosystems and platform economies. At its core, the DMA has several basic goals that are important to know so that you also have an understanding of what implications it could have for Big Tech:

• To promote fair and open digital markets: One of the DMA’s main goals is to ensure that digital markets remain competitive. It seeks to prevent gatekeepers from exploiting their dominant positions to suppress competition or to impede the entry of new, smaller companies or manipulate them.
• Curbing anti-competitive behavior: History has shown that unchecked market dominance can lead to practices that harm competitors, especially in sectors with high barriers to entry. The DMA is designed to detect and stop such behavior to ensure a level playing field, but this is also difficult to achieve.
• Consumer protection: by ensuring competition and transparency in digital markets, the DMA indirectly protects consumers. A competitive market often leads to better services, fairer prices, and more choice for consumers, and also has the effect of making lock-in more difficult to achieve.
• Encouraging innovation: by discouraging monopolistic behavior, the DMA fosters an environment in which startups and innovators can thrive, and ensures that the digital market remains dynamic and constantly evolving. Also, companies may be able to innovate more easily without being crowded out by Big Tech.
• Establish clear rules: Beyond prohibitions, the DMA provides clarity. Gatekeepers now have clear guidelines on what is acceptable and what is not, reducing ambiguity in the market. This can also be positive for big tech, as we
• Adaptability to future challenges: The digital world is constantly changing. Therefore, one of the goals of the DMA is to remain adaptable so that it can respond effectively to new challenges or market changes.

Key Prohibited Practices

Here are some of the main prohibited practices that are prohibited under the DMA:

1. Self-preference: Gatekeepers are prohibited from favoring their own services or products over those of competitors. For example, a search engine may not rank its own services higher than those of its competitors without good reason.
2. Unfair use of data: The DMA prohibits gatekeepers from using non-public data generated on their platform to compete with companies that rely on the platform. This ensures that smaller companies are not disadvantaged simply because the platform they use also competes with them in other areas.
3. Limit interoperability: gatekeepers cannot prevent users from accessing services or software from competitors. This promotes a more diverse ecosystem in which users are not locked into the products or services of a single provider.
4. Blocking external services: Gatekeepers cannot prevent users from connecting to or accessing third-party services. This ensures that smaller companies or new entrants can integrate with larger platforms, leading to more diversity and choice for users.
5. Restrict uninstallation of software: After the DMA, users should have the freedom to uninstall pre-installed software or apps. This ensures that users retain control over their own devices and are not forced to use certain applications.
6. Opaque advertising practices: Gatekeepers must not engage in practices that deny advertisers access to data about their own campaigns or prevent them from moving their campaigns to other platforms.

Obligations of gatekeepers

It is important to note that the Digital Markets Act is not only about restrictions, but also about obligations. Because of their influential position in the digital market, gatekeepers are expected to adhere to certain obligations to ensure a fair digital ecosystem. Here are some of the most important obligations:

• Ensuring data access and use: gatekeepers must provide third-party companies with access to the data they generate when using the platform. This ensures that companies can better understand their audience, improve their offerings, and make data-driven decisions.
• Interoperability and access: it is important that different software and services work together seamlessly. Gatekeepers need to ensure interoperability and real-time access to their software, especially for critical functions.
• Transparent advertising metrics: Gatekeepers offering advertising services must provide advertisers with transparent metrics and standards so that companies can accurately assess the efficiency and effectiveness of their campaigns.
• No unfair contract terms: Gatekeepers should not impose unfair terms on their commercial users. This includes not forcing companies into exclusive contracts or using their influence to impose unfavorable terms.
• Reporting mergers and acquisitions: To ensure transparency and prevent monopolistic consolidations, gatekeepers must report all mergers and acquisitions so regulators can assess potential anti-competitive effects.
• Facilitate software installation: users should have the freedom to install third-party software or applications of their choice. Gatekeepers have an obligation to enable this and ensure that proprietary software does not unjustifiably dominate users’ devices.
• Platform neutrality: Gatekeepers must ensure fair ranking and display of offers, especially when competing services are involved. Users should receive impartial results that are free from undue influence or manipulation.

Here are the different provisions and their content in the DMA itself, for the complete summarized list please refer to the official publication of the DMA regulation (Source CMS Law-Now):

Regulatory Oversight and Enforcement

To ensure compliance with the Digital Markets Act, the EU has put in place various oversight and enforcement mechanisms. Here are some of the most important tools and measures:

• The Role of EU Regulators: The DMA places primary responsibility for oversight and enforcement in the hands of the European Commission. This will allow the DMA to be enforced uniformly across Europe without relying on member states.
• Investigative Procedures: The European Commission has the authority to conduct investigations into suspected violations of the DMA. This includes gathering information, interviewing stakeholders, and evaluating company practices against the provisions of the DMA.
• Cooperation with Member States: While the European Commission leads enforcement of the DMA, member states play an important role. NCAs work with the Commission to provide on-the-ground insight and support. Thus, national competition measures can also be taken.
• Sanctioning mechanisms: One of the strongest aspects of the DMA is its sanctioning mechanisms. Gatekeepers that violate the DMA can be fined up to 10% of their annual global turnover up to 20% for repeated violations. In addition, recurring penalty payments of 5% may be waived. In total, however, these penalties should never exceed 20% of the annual sales of the preceding financial year.
• Systemic violations: Additional penalties are provided for gatekeepers that repeatedly violate the provisions of the DMA. These may include stricter behavioral measures or, in extreme cases, structural separation.
• Right to appeal: To ensure fairness in the enforcement process, companies that are penalized have the right to appeal decisions. This ensures that the enforcement process is transparent and fair.
• Regular reporting: To proactively monitor compliance, gatekeepers can be required to submit regular reports on specific aspects of their operations. This facilitates ongoing monitoring and allows for timely intervention when needed.

Conclusion: The way forward with DMA

The Digital Markets Act represents a global trend where governments try to regulate the “Too big to fail”-Tech Giants. The desire to strike a balance between harnessing the incredible potential of digital technologies, specifically platforms and digital ecosystems, and ensuring that this growth does not threaten competition, innovation, or consumer rights. In this, the EU is trying to lead the way in creating a new order in the digital world, it is setting a precedent that may eventually lead to similar regulations in other countries.

As with any significant regulatory measure, the true test of the DMA lies in its implementation. Over the next few years, we will be able to see how much the EU is able to enforce these directives and whether it has helped the growth and diversity of the digital ecosystem If the DMA encourages more innovation, promotes fairer competition, and protects end users, it will be a groundbreaking model for digital market regulation.

Despite major headwinds from tech lobbies and tech corporations, the EU has prevailed on the DMA here. While the generous definition of gatekeepers means that only a few companies fall into the category, we are seeing such “all-powerful” tech platforms and gatekeepers develop in more and more areas. The technologies and the head start of companies exploiting digital technologies and network effects will lead to more “winner takes it all” situations where gatekeepers will emerge and need to be encouraged to compete fairly. We also have to ask ourselves as a society how much power we want to give to companies, because some companies are already bigger and more powerful than some states of this world. And especially if we think a step further into the future and see concepts like the Metaverse emerging where we live, interact, work, love, communicate, and do everything in our lives on a platform that may be run by a single company – we really need to find a way to be responsible with such powerful platforms.

Benjamin Talin

Benjamin Talin, a serial entrepreneur since the age of 13, is the founder and CEO of MoreThanDigital, a global initiative providing access to topics of the future. As an influential keynote speaker, he shares insights on innovation, leadership, and entrepreneurship, and has advised governments, EU commissions, and ministries on education, innovation, economic development, and digitalization. With over 400 publications, 200 international keynotes, and numerous awards, Benjamin is dedicated to changing the status quo through technology and innovation. #bethechange Stay tuned for MoreThanDigital Insights - Coming soon!