On Thursday, March 25, 2022, the European Parliament and EU Member States reached agreement on the final text of the Digital Markets Act (DMA).  The DMA marks a paradigm shift in the regulation of digital markets, giving the European Commission unprecedented powers to regulate leading digital platforms and setting a global standard for other jurisdictions that are developing similar rules.  It is the most notable of a wave of new regulation in the US, UK, Europe, and Asia because of its geographic reach, the broad scope of its rules, and the severe consequences of non-compliance.

The DMA is targeted at gatekeepers’ core platform services.  The DMA targets platforms that operate as gatekeepers between businesses and users, and hold an “entrenched and durable position.”  To be a gatekeeper, a firm must operate a core platform service (CPS).  CPSs, in turn, are defined based on a broad list of services and include online marketplaces, app stores, operating systems, social networks, search engines, browsers, and voice assistants.  If a firm operates a CPS, it must meet three cumulative criteria of market impact, gateway status, and entrenched market position to be large enough to be classified as a “gatekeeper”.  Once a firm is designated as a gatekeeper, it must comply with the DMA’s behavioral rules for each of its CPSs that satisfy the usage thresholds.

The DMA sets out a list of rigid dos and don’ts with which gatekeepers must comply. The DMA sets out two sets of behavioral obligations with which gatekeepers must comply.  The first set of obligations are presented as being “specific” (Article 5), while the second are described as being open-ended and capable of further specification by the Commission (Article 6).  In practice, the difference between the Article 5 and 6 obligations is minimal: both sets of rules will apply directly and will be self-executing without further specification.

Many of the DMA’s obligations are inspired by recent antitrust cases.  For example: Article 6(1)(a) prohibits a gatekeeper platform from using businesses’ non-public data to compete against them (Amazon Marketplace case).  Article 6(1)(d) forbids gatekeepers from ranking their first-party products more favorably than competing third-party products (Google Shopping case).  Article 5(c) bans gatekeeper app store owners from restricting app developers from promoting offers to users through alternative sources and from contracting with users outside the app store (Apple App Store / Spotify case).  The table below provides a summary of the behavioral rules.

The DMA’s rules do not take account of competitive effects or harm; they do not explicitly allow for efficiency justifications; and they only provide for extremely narrow exemptions..

The DMA’s penalties are severe.  Non-compliance with the rules can lead to substantial fines of up to 10 percent of a gatekeeper’s annual global turnover and behavioral remedies, with the threat of breakup in the case of multiple infringements.

Next steps: enactment and compliance.  The final text’s adoption will likely take place in July and the text will then be published in the EU’s Official Journal in August.  The next step is for gatekeepers to notify their in-scope CPSs and for those CPSs to be designated (which will take place around mid-2023).  After designation, gatekeepers will have six months to be compliant with the behavioral rules.  Considering this timeline, gatekeepers may only be legally obliged to comply with the new rules by early-to-mid 2024.

 

Article Summary
5(a) User consent for combining personal data.  Prohibits gatekeepers from (i) processing personal data obtained from 3Ps using a CPS for the purpose of advertising, and from (ii) combining personal data obtained by a CPS with data obtained by any other 1P or 3P services, absent express user consent.
5(b) No MFNs.  Requires online intermediation services (like app stores, marketplaces) to allow businesses to offer the same products to end users at different prices or conditions both on other platforms and their own websites.  At this point it is not clear whether the provision will cover both narrow and wide MFNs.
5(c) & (ca) No anti-steering provisions. Gatekeepers cannot restrict app developers from promoting offers to users and contracting with users outside the gatekeeper’s app store.  Gatekeepers must allow users to access content, subscriptions, features and other items acquired without using the app store.
5(d) Cannot stop businesses from raising issues with public authorities.  Prohibits gatekeepers from restricting business users’ ability to raise issues of non-compliance with any relevant public authority.  Businesses and gatekeepers maintain the right to lay down in their agreements the terms of use of lawful complaint-handling mechanisms.
5(e) Use of identification and payment services.  Prohibits gatekeepers from requiring business users or end users to use a gatekeeper’s identification or payment service.  At the moment it is not clear whether gatekeepers will also be prohibited from exclusively requiring a single web browser rendering engine on their OS.
5(f) Bundling subscriptions or registrations.  Prohibits gatekeepers from conditioning business or end users’ access to one CPS on the users subscribing or registering with another CPS.
5(g) Disclosure of ads prices/rev shares.  Requires gatekeepers to disclose pricing information, revenue share information, and the measures on which prices and remuneration are calculated to advertisers and publishers upon their request free of charge and on a daily basis, if this information is also available to the gatekeeper.
6(1)(a) Use of business data to compete.  Prohibits gatekeepers from using non-publicly available data generated or provided by the business users on its CPS and the end users of those business users, to compete with the business users.
6(1)(b) Possibility to uninstall preloaded apps.  Requires gatekeepers to allow end users to fully uninstall any apps from the OS of the gatekeeper.  The provision includes a safeguard for apps that are considered to be essential to the functioning of the OS or the device. Gatekeepers will also be required to provide choice screens on their OSs to allow end users to easily change default settings for virtual assistants, web browsers and online search engines.
6(1)(c) Installing 3P apps and app stores.  Requires gatekeepers to allow 3P apps and app stores to be installed on their OSs. These 3P apps and app stores must be accessible via means other than the CPS of the gatekeeper.  The obligation also precludes gatekeepers from preventing these 3P apps or app stores from prompting users to decide whether they want to set that app or app store as their default.
6(1)(d) Non-discriminatory ranking.  Prohibits gatekeepers from treating its 1P services and products more favorably in ranking compared to similar 3P services.
6(1)(e) No restrictions on multi-homing or switching on an OS.  Prohibits gatekeepers from imposing any restrictions on end users’ ability to switch or multi-home across apps and services, including internet access services.
6(1)(f) Interoperability for OSs, virtual assistants, and messaging services.  Requires gatekeepers to give service providers and hardware providers, free of charge, interoperability with and access to  the same hardware and software features accessed or controlled via the OS or virtual assistant.  Gatekeepers may take strictly necessary and proportionate measures to ensure that interoperability does not compromise the integrity of the OS, virtual assistant, hardware or software.  Gatekeepers should also implement interoperability between messaging services.
(g) Ads performance measurement tools.  Requires a gatekeepers’ online advertising services to provide advertisers and publishers with free access to relevant information and performance measuring tools that the gatekeeper itself uses so that they can independently verify the performance of the advertisements.
(h) Data portability.  Requires gatekeepers to provide end users, free of charge, with the ability to port over their data to other platforms, as well as tools to facilitate data portability.
(i) Data access.  Requires gatekeepers to provide businesses, upon their request, with “continuous and real time access” to data on their use of their CPS and the users interacting with their products.
(j) Search data sharing.  Requires online search engines to share anonymized ranking, query, click, and view data with rival search engines, for both free and paid search results.
(k) Fair access to app stores, search engines and social networking services.  Requires gatekeepers to provide app developers with fair and non-discriminatory access to its app stores, search engines and social networking sites designated as CPSs.  The accompanying recital makes clear, however, that this article does not provide a right of access to these services.
(ka) Ease of termination.  Prohibits gatekeepers from imposing contractual or technical restrictions to termination (e.g., unsubscribing, or terminating a service contract more generally) on its business users and end users