Initially announced for 9 December, the Commission finally presented its proposals on 15 December 2020 for regulations on digital services – the Digital services Act (DSA) and on digital markets, the Digital Market Act (DMA). The regulations, which respond to the ongoing discussion process initiated by the Commission and the Member States to understand the implications of the digital revolution on our societies and economies, in particular on fundamental rights and competition, have yet to be submitted to the European Parliament and the Council. The draft DSA imposes binding obligations on all digital services that connect consumers with suppliers of goods, services or content, notably transparency rules regarding online advertising or the algorithms used to promote content to internet users. Above all, the text provides for procedures that allow the rapid removal of illegal content and the effective protection of the fundamental rights of online users. The draft DMA – which we will focus on as it relates to competition law – applies to gatekeepers in the digital sector, i.e. platforms that are in an entrenched and sustainable position to act as bottlenecks between businesses and consumers. The text aims to ensure the opening of digital markets by preventing gatekeepers from imposing unfair terms on businesses and consumers.
Scope of application of DMA
The DMA applies to digital services provided or offered by gatekeepers to undertakings or end-users domiciled in the European Union, irrespective of their place of establishment and the law otherwise applicable to the provision of the service, with the exclusion of markets relating to electronic communication networks and services respectively defined in Article 2(1) and (4) of the Directive establishing the European Electronic Communications Code (Art. 1). It covers online intermediation services, services provided by online search engines, social networks, video-sharing platforms or operating systems, interpersonal communication services, cloud computing services or advertising intermediation, provided by gatekeepers ( Art. 2). According to Article 3 of the DMA, a digital platform is presumed, in the absence of proof to the contrary, to be a gatekeeper if it meets three cumulative conditions:
- it has a significant impact on the internal market: the DMA presumes this to be the case where the platform achieves an annual EEA turnover equal to or above EUR 6.5 billion in the last three financial years, or where the average market capitalization or the equivalent fair market value of the undertaking to which it belongs amounted to at least EUR 65 billion in the last financial year, and it provides a core platform service in at least three Member States;
- it operates a core platform service which serves as an important gateway for business users to reach end users: this is presumed satisfied where the undertaking has more than 45 million monthly active end users established or located in the Union and more than 10 000 yearly active business users established in the Union in the last financial year;
- it enjoys an entrenched and durable position in its operations or it is foreseeable that it will enjoy such a position in the near future: The DMA assumes that this is the case if the platform has satisfied the other two conditions in each of the last three financial years. If all the thresholds are not met, the Commission will be able to evaluate by means of a market investigation, the status of a provider and nonetheless designate it as a gatekeeper on the basis of a qualitative assessment.
- Obligations and prohibitions for gatekeeper platforms
Articles 5 and 6 of the DMA set out a series of ex ante obligations and prohibitions that platforms designated as gatekeepers must comply with within six months.
Under those obligations, the gatekeeper must, inter alia:
- allow business users to promote their offers and conclude contracts with their customers outside of its platform;
- allow end users to un-install any pre-installed software applications on its core platform service, and also allow the installation and use of third-party software applications;
- provide advertisers and publishers, upon their request, with free of charge access to the performance measuring tools of the gatekeeper and the information necessary to carry out their own independent verification of the ads hosted on its platform;
- guarantee to business users the effective interoperability of its services;
- provide to any third-party providers of online search engines, upon their request, with access on fair, reasonable and non-discriminatory terms to ranking, query, click and view data in relation to free and paid search generated by end users on online search engines of the gatekeeper;
- apply fair and non-discriminatory general conditions of access for business users to its software application store;
- ensure effective portability of data generated through the activity of a business user or end user and, in particular, provide tools for end users to facilitate the exercise of data portability.
With regard to the prohibitions, the gatekeeper must refrain from:
- combining personal data sourced from these core platform services with personal data from any other services offered by the gatekeeper or with personal data from third-party services unless the end user has consent thereto beforehand;
- requiring business users or end users to subscribe to or register with any other core platform services;
- treating more favorably in ranking services and products offered by the gatekeeper itself or applying discriminatory conditions to said ranking;
- preventing users from accessing services acquired outside of its platform.
Within six months of its designation as gatekeeper, the platform must submit to audit of its services (Art. 13). Lastly, Article 12 provides for an obligation to notify the Commission of any intended concentrations involving another digital platform provider or any other service provided in the digital sector, regardless of whether or not the transaction is notifiable to a European or national competition authority.
Sanctions applicable to gatekeepers
In the event of a breach of the obligations under Articles 5 and 6, failure to comply with the measures imposed by the Commission pursuant to Article 7(2) to ensure compliance with these obligations, where a market investigation establishes systematic breaches of these obligations (Art. 16), in case of non-compliance with urgent interim measures imposed by the Commission under Article 22 on a gatekeeper because of a risk of serious and irreparable damage for business or end users of its platform, or in case of breach of commitments made by the gatekeeper to comply with its obligations and made legally binding pursuant to Article 23, the Commission will adopt a non-compliance decision whereby it may impose fines not exceeding 10% of its total worldwide annual turnover on the gatekeeper (Art. 26) and periodic penalty payments of up to 5% of its total worldwide annual turnover (Art. 27).
In addition, where the market investigation into systematic non-compliance referred to in Article 16 establishes that a gatekeeper has systematically breached its obligations and has further strengthened its position, the Commission may impose additional remedies. Under Article 16, a gatekeeper is deemed to have engaged in a systematic non-compliance with the obligations laid down in Articles 5 and 6, where the Commission has issued at least three non-compliance or fining decisions pursuant to Articles 25 and 26 within a period of five years prior to the adoption of the decision opening a market investigation pursuant to Article 16. The gatekeeper is also presumed, under Article 16, to have further strengthened or extended its gatekeeper position where its size and impact on the internal market has increased, its importance as a gateway for business users to reach end users has further expanded and if its position has become more entrenched. In such cases, the imposition of structural remedies, in the absence of an equally effective behavioral measure, may be justified. Recital 64 of the DMA refers to a possible divestiture of the business or parts of it. However, since no specific provision of the DMA provides for the effective implementation of this structural injunction power, it would seem that, as we had hoped, this power may have been abandoned.