The Digital Markets Act (DMA) represents a significant step in regulating the influence of major tech companies across the internet. This pioneering European legislation aims to curb the dominance of Big Tech and ensure fair competition in digital markets.
What is the Digital Markets Act (DMA)?
The Digital Markets Act (DMA) is a new EU law designed to create fairer digital markets by regulating major tech companies, known as “gatekeepers,” that dominate core services like search engines, app stores, and messaging platforms. It establishes specific rules that these gatekeepers must follow, including obligations and prohibitions, to prevent them from unfairly promoting their services over competitors. While the DMA introduces new regulations, it works alongside existing EU competition laws rather than replacing them, aiming to ensure a more level playing field in the digital sector.
Who are the gatekeepers?
Gatekeepers are large digital platforms providing any of a pre-defined set of digital services (‘core platform services’), such as online search engines, app stores, and messenger services. These companies have:
- a strong economic position, significant impact on the internal market, and are active in multiple EU countries;
- a strong intermediation position, meaning that they link a large user base to a large number of businesses;
- an entrenched and durable position in the market, meaning that their position has been stable over time.
What is the key goal of the Digital Markets Act?
The main goal of the Digital Markets Act (DMA) is to make the Internet more competitive and safer by reducing the power of a few big tech companies. It focuses on major digital platforms like social networks, search engines, web browsers, online marketplaces, messaging services, and video-sharing sites that have at least 45 million active users in the EU. In short, the law targets the largest companies that have too much control in the digital world.
© European Commission
What will be the impact of the Digital Markets Act (DMA)?
- Third-Party App Stores:
Apple and Google will now have to allow alternative app stores on iOS and Android devices. The consumers will have the freedom to choose from a variety of app stores for downloading the apps. This will allow the introduction of various other apps and, in turn, will give app developers a new avenue of revenue.
- Interoperability of Messaging Services:
Messenger services (e.g., WhatsApp, Facebook Messenger) will be required to work together. This means users will be able to send messages across different platforms without being restricted to one service, allowing ease of communication.
- User Tracking Restrictions:
Tracking users across different platforms will become more difficult. Gatekeepers will need explicit consent to track users beyond their services. This can have an impact on the advertising revenue for major tech companies, limiting them to use the data for targeted marketing activities.
- Transparency for Advertisers:
Online advertisers will have the right to access data collected during their campaigns, leading to greater transparency about their advertising performance.
- Fair Marketplace Practices:
Gatekeepers (e.g., Amazon, Google) will be prohibited from giving preferential treatment to their own services in search rankings or marketplace listings. This aims to ensure a level playing field for competitors.
© European Commission
What are the consequences of non-compliance?
Fines and Penalties:
- Companies can be fined up to 10% of their total global annual revenue. If they keep breaking the rules, fines can increase to 20%.
- They might also face daily penalties of up to 5% of their average daily revenue.
Additional Remedies:
- Systematic Violations: If a company repeatedly breaks the rules, extra measures may be taken after a market review.
These could include:
- Behavioral Remedies: Changes in how the company operates.
- Structural Remedies: Selling parts of the business or other significant changes.
Download the Regulation on Digital Markets Act here.
The Bottom Line
The Digital Markets Act (DMA) is a ground breaking EU law designed to limit the power of major tech companies that dominate the digital landscape. By enforcing stricter rules on how these platforms handle user data and compete, the DMA aims to foster more competition and innovation on the internet. This could lead to better choices, improved quality, and fairer prices for consumers.
Frequently Asked Questions (FAQs)
- How does the Digital Markets Act impact the competitiveness of new digital companies?
The DMA aims to reduce the barriers to entry and expansion that have allowed a few large platforms to dominate the tech industry. This creates more opportunities for smaller competitors and start-ups to challenge incumbents and innovate.
- Which companies are considered “gatekeepers” under the Digital Markets Act?
Under the Digital Markets Act (DMA), the European Commission designated six companies as “gatekeepers” on September 6, 2023. These companies are:
These gatekeepers provide a total of 22 core platform services that are considered crucial for their role in the digital market, acting as significant intermediaries between businesses and consumers.
- What are the core platform services that qualify a company as a gatekeeper?
The core platform services are designed to address the concerns of market contestability and ensure fair competition in the digital economy. Below is the list:
- Online Intermediation Services
- Online Search Engines
- Online Social Networking Services
- Video-Sharing Platform Services
- Number-Independent Interpersonal Communications Services
- Operating Systems
- Web Browsers
- Virtual Assistants
- Cloud Computing Services
