The Digital Markets Act (DMA) comes into force, and large digital companies will have to comply with a series of measures against anti-competitive practices in order to better protect users. Here is what is changing… for the better!
While 10,000 online platforms now operate in the European digital market, only a tiny fraction of them capture the bulk of the value generated by their activities, according to figures from the European Commission. A situation that is problematic to say the least and which the European Union has decided to tackle. Also, the Digital Markets Act (DMA) officially applies since May 2, 2023 throughout Europe, while its counterpart is the Digital Services Act (DSA), which aims to regulate and secure the distribution and sale of online content and products, will come into force on August 25 (see our article). The purpose of the DMA is to better regulate digital companies, in particular the GAFAMs – for Google (Alphabet), Apple, Facebook (Meta), Amazon and Microsoft – and their activities in the European Union, in order to prevent abuse due to their dominant position. More specifically, it is a question of fighting against anti-competitive practices – and the resulting dependence –, of preventing these companies from favoring their own services to the detriment of other market players – as Google had done with Google Shopping for example – to foster innovation and better protect users and consumers. Companies have until March 2024 to become DMA compliant or face penalties – it’s kind of a transition period of sorts. And as much to say that this text will profoundly change our lives and our digital practices!
What are the objectives of the DMA?
The DMA aims to fight against the anti-competitive practices of digital giants and to correct the imbalances resulting from their domination of the European digital market. It is, as indicated the government websiteto fight against the economic models of large companies which are based “on the combination of masses of data on their users and powerful and opaque algorithms”. In effect, “thanks to the strong network effects and their ecosystems enclosing Internet users-consumers, these major players have acquired a quasi-monopoly position on the European market, leaving little room for competition”. The DMA must therefore restore fair competition between digital players, particularly vis-à-vis small and medium-sized enterprises, stimulate innovation, growth and competitiveness in the digital market, but also strengthen users’ freedom of choice. and European consumers. So big ambitions!
Which companies are affected by DMA?
The scope of intervention of the new European legislation concerns the vast majority of digital services, namely search engines, social networks, online video sharing platforms, operating systems – including connected televisions – , online storage (cloud), instant messengers, virtual assistants, web browsers, online advertising services, application stores and intermediation services – marketplaces, application stores, etc. The DMA targets what the Commission calls “gatekeepers”, because they are so large in some parts of the digital market that it is almost impossible to do anything without them.
Are considered as access controllers companies which, according to article 2 of chapter III of the official texthave a significant weight on the domestic market, provide “an essential platform service that provides a major entry point for enterprise users to reach their end users” and enjoy “of a solid and durable position, in its activities, or will, in all probability, enjoy such a position in the near future”. More specifically, these are companies that provide one or more essential platform services in at least three European countries, whose annual turnover exceeds 7.5 billion dollars, whose market capitalization exceeds 75 billion dollars and which have at least 45 million active users per month within the European Union. These are called VLOPs – for very large online platforms (very large online platforms) – and the VLOSE – for very large online search engines (very big search engines).
The same company may be designated as gatekeeper for several essential platform services. For example, Google is an access controller with its search engine, but also its virtual assistant, its mobile application store, etc. Of course, the companies concerned will be able to challenge their designation. Note that a number of them are already in the sights of the European Union and have been ordered to comply with the DSA by August 2023 (see our article). The list of digital players affected by the DMA will be published every three years.
What will DMA change for users?
With DMA, gatekeepers will be required, under pain of heavy penalties, to make unsubscribing to an essential platform service as easy as subscribing. They will also have to make it possible to easily uninstall pre-installed applications on their telephone, computer or tablet, and give users and consumers greater freedom of choice by not imposing the most important software on them. It should therefore be possible to select your web browser (Chrome, Edge, Firefox, Safari, Vivaldi…), your search engine (Chrome, Bing, Qwant, DuckDuckGo, etc.) or your personal voice assistant (Google Assistant , Alexa, Siri, etc). During the initial configuration of a device, a multi-choice screen must be offered to be able to opt for its preferred services instead of being imposed by default. Gatekeepers are now prohibited from favoring their services and products over those of sellers who use their platform or from using the data of these sellers to compete with them. They are also prohibited from reusing a user’s personal data to display targeted advertising without their explicit consent.
The digital giants will also have to make the basic functions of their instant messaging interoperable – and therefore compatible – with their more modest competitors. For example, WhatsApp users will need to be able to transfer their chat history and contact list to Telegram or Signal. Gatekeepers will also have to authorize sellers to promote their offers and conclude contracts with their customers outside the platforms, and give them access to their marketing or advertising performance data on their platform. Please note that user consent will be required for the cross-referencing of data from several services for the purpose of advertising profiling. Finally, they will have to inform the European Commission of the acquisitions and mergers they carry out.
What are the penalties provided by the DMA?
If they do not respect the prerogatives of the DMA, companies will expose themselves to heavy and dissuasive sanctions. Thus, they will be fined up to 10% of the worldwide annual turnover of the group concerned and up to 20% in the event of a repeat offence! The European Commission may also impose periodic penalty payments of up to 5% of its total worldwide daily turnover. This represents tens of billions of euros for GAFAM! If the firm commits at least three violations over eight years, the Commission may open a market investigation and, if necessary, “impose behavioral or structural remedies”. Thus, it may prohibit him from buying other companies over a given period or force him to sell an activity (sale of units, assets, intellectual property rights or trademarks). This time, for sure, we’re not kidding!