European Commission designates first six gatekeepers under the Digital Markets Act
The European Commission has announced the designation of six “gatekeepers” under the new Digital Markets Act (DMA). These are the first companies to receive this status under the new Act. In addition, the Commission confirmed that 22 of these gatekeepers’ online operations will be considered “core platform services” (CPSs), which will be subject to increased regulatory requirements.
Background
The DMA is designed to regulate the activities of large platforms and to encourage greater contestability and fairness in the digital economy. Together with the Digital Services Act, the DMA will help regulate large technology companies and their influence on vital online services.
The designation process
Under the DMA, “gatekeepers” are large online platforms which are regarded as acting as a gateway between businesses and platform users and who are, as a result, in a position to cause imbalances in the digital economy. The DMA places a number of restrictions and obligations on such entities.
At a very high-level, the Commission has authority to designate a company as a gatekeeper where:
- The company has a significant impact on the internal market (generally requiring an annual EU turnover of at least €7.5b in each of the last 3 financial years);
- It provides a CPS which is an important gateway for business users to reach end users; and
- 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.
Against this criteria and following a 45-day reviewal process, the Commission has designated six “gatekeepers” under the DMA – Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft.
The Commission has further identified a total of 22 services provided by these gatekeepers as CPSs. The CPSs include a mix of social networking sites, video sharing platforms, online intermediation services, search engines, communication services, web browsers, operating systems and online advertising services.
The gatekeepers and associated CPSs are outlined in the below infographic:
Source: Image adapted from European Commission
In parallel, the Commission has also opened four market investigations to further consider submissions made by certain gatekeepers that some of their core services should fall outside the scope of the DMA.
What designation means
Following designation, gatekeepers must ensure CPSs comply with a wide range of obligations including:
- ensuring user’s ability to easily change default settings, un-install software applications or effectively use third-party software applications
- maintain certain interoperability standards across hardware and software
- complying with restrictions on self-preferencing their own goods/services and pre-installing software
- establishing an independent compliance function to organise and monitor compliance with the DMA
A more detailed list of obligations, as well as many other relevant aspects of the DMA, are discussed in the ALG Guide to the EU’s Digital Markets Act.
In respect of the majority of obligations, the designated companies have a grace period of six months, to allow for the implementation of the necessary structural and operational changes to their CPSs. Once completed, the gatekeepers must furnish full compliance reports to the Commission, detailing all the changes made in order to display full compliance with the DMA provisions.
Failure by a gatekeeper to comply with obligations under the DMA could result in fines of up to 10% of the gatekeeper’s worldwide turnover, or in the event of repeated breaches the penalty can rise to as much as 20% of worldwide turnover. The Commission is also empowered to force the sale of a gatekeeper’s business or part of a business in the event of systemic infringement.
For more information, please contact John Cahir, partner or another member of the ALG Commercial & Technology team.
Date published: 12 September 2023