This article was co-written by Hayley O'Callaghan and Richard Ferguson.

Background

The Digital Markets Act (‘DMA’) is a pro-competition piece of EU legislation designed to provide a fairer digital sector by preventing monopolies and enabling consumer choice. An overview of the DMA and a full copy of the legislative text can be found here and here. The DMA is complemented by the Digital Services Act (‘DSA’), which focuses more on consumer safety.

The DMA’s main remit is to identify ‘gatekeepers’ (i.e., large digital platforms providing core platform services, such as online search engines, app stores, messenger services). The threshold for ‘gatekeeper’ status under the DMA provides that a company must have:

• a market size that impacts the internal market (annual turnover in Europe of at least €7.5 billion in the last three financial years or fair market value of at least €75 billion in the last financial year and operations in at least 3 Member States)
• have served more than 45 million monthly active end users and more than 10,000 yearly active business users in the EU during the last three years on a number of core platform services, such as search engines, social networking services and operating systems.

Gatekeepers will need to follow a set of “do’s” and “don’ts” as part of their their daily operations. For example, permitting interoperability of third-party services with the gatekeeper’s own services and not preventing users from un-installing any pre-installed software or app.

Developments

In July 2023, the European Commission announced the first seven companies that self-referred themselves as meeting the gatekeeper threshold under the DMA. The companies who declared that they met the thresholds included: Alphabet, Amazon, Apple, ByteDance, Meta, Microsoft, and Samsung.

However, some Big Tech companies have pushed back subsequently on their gatekeeper status, arguing that some of their services within their ecosystem are not popular enough to meet the thresholds. For example, Bytedance (owner of TikTok) pushed back on their gatekeeper status, stating that whilst it meets to quantitative criteria of the DMA, it falls short of the requirements of having an “unavoidable platform to conducting online business in the EU” and an “entrenched” gateway between consumers and businesses. Similarly, Apple and Microsoft have argued that some of their services are not popular enough to be classified as gatekeepers.

Present Position

However, on 6 September 2023, the EU Commission announced that Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft have been designated as gatekeepers after reviewing their submissions. Samsung, notably, has been removed from the list after providing sufficient evidence that their services did not qualify as gateways to core platform services. In addition, the Commission also concluded that Gmail and Outlook.com did not qualify as gateways despite meeting the threshold.

The gatekeeper designations for core platform services include:

• Social Networks - TikTok, Facebook, Instagram, LinkedIn
• Intermediation - Google Maps, Google Play, Google Shopping, Amazon Marketplace, App Store and Meta Marketplace
• ADS - Google, Amazon and Meta
• Video Sharing - YouTube
• Browser – Chrome and Safari
• Search – Google Search
• Operating System – Google Android, IOS and Windows PC OS
• N-IICS – WhatsApp and Messenger

In addition to the designations, the Commission has opened four market investigations to assess Microsoft and Apple’s claims that their core platform services such as iMessage, Bing, Edge and Microsoft Advertising do not qualify as gateways. The Commission has also opened a market investigation as to whether Apple’s iPadOS should be designated as gatekeeper, despite not meeting the threshold.

Next Steps

The six remaining designated gatekeepers have until March 2024 to comply with the requirements under the DMA. At the end of this period a detailed compliance report must be provided to the Commission on how each gatekeeper complies with the requirements set out in the DMA. The market investigations are also expected to be concluded between February and September 2024.

If the Commission finds that the gatekeepers have not met the requirements of the DMA, fines can be imposed of up to 10% of the company’s total worldwide turnover. Clearly, such a significant sum is designed to promote adherence to the legislation. The recent €1.2bn fine handed to Meta by Ireland’s Data Protection Commission for a perceived breach of EU data protection regulation may also provide further impetus for Big Tech to adhere to the DMA.

Conclusion

The next 6 – 12 months will be a formative period for the EU’s designated gatekeepers of Big Tech: in addition to the March 2024 reporting deadline and investigations into certain gatekeepers, the DSA will also apply from February 2024 (see our coverage here). A lot of work will need to be conducted by tech companies in the background to ensure that they meet the requirements of the DMA and DSA.

It remains to be seen which companies will adjust best to the EU’s push for a regulated digital sector, and how the EU will respond to any failures to comply. One certainty is that as with any new piece of legislation, legal wranglings and disputes are bound to arise. Watch this space…