Developments in European technology regulation: Digital Markets Act and Digital Services Act | Perspectives & Events

Following its publication in the Official Journal of the European Union, the Digital Markets Act (“DMA“)1 entered into force on November 1, 2022 and the Digital Services Act (“DSA“)2 comes into force on November 15, 2022. This alert gives an overview of the main targets and deadlines for the implementation of this important new European legislation.

goals of the laws

In summary, the stated overarching goals of the DMA and DSA are as follows:

  1. Creating a level playing field to foster innovation, growth and competitiveness both in the European single market and globally; and
  2. Creation of a digital space in which the fundamental rights of all users of digital services are protected.

In addition, the DMA aims to “fairer and [more] contestable“.3 To that end, the DMA will essentially regulate large digital companies by, among other things, preventing these companies from:

  • Engaging in self-preference or unfair discrimination (particularly related to payment systems);
  • Targeted advertising without consent; or
  • Hindering Interoperability.

In practice, this means that companies regulated by the DMA are required to conduct or permit certain activities, such as:

  • Ensure end users can uninstall pre-installed core platform services;
  • allow developers to use alternative in-app payment systems;
  • grant business users access to the data they generate; and
  • Allow end users to download alternative app stores.

A supplementary law, the DSA, aims to regulate the content of online platforms. For example, major online platforms and search engines are required to:

  • mitigating risks related to the spread of disinformation and cyber violence;
  • Take action against illegal content online; and
  • Promote transparency measures for online platforms (including transparency about algorithms used to recommend content or products to users).

Which digital companies are covered by the laws?

The DMA applies to so-called “gatekeepers”4 where they have an established position in relation to “core platform services” including search engines, social networking services, app stores, certain messaging services, virtual support, web browsers, operating systems and online intermediation services.

Digital businesses are identified as “gatekeepers” based on the following revenue and user metrics:

  • You have a market capitalization of at least €75 billion in the previous financial year or annual sales of €7.5 billion in the previous three financial years;
  • They offer certain services such as web browser, messenger or social media, which had at least 45 million monthly end-users in the EU and ten thousand annual business users in the last three financial years.5

In contrast, the DSA will apply to various online intermediation services, including “very large online search engines” (including online marketplaces, social networks, content-sharing platforms, app stores and online travel and accommodation platforms) that provide more than 10% of the approximately 450 million consumers in the EU as users.

Monitoring and Enforcement

The European Commission (“ground floor’) will oversee and enforce the DMA and the DSA and form specialized teams to ‘centrally manage very large platforms and very large online search engines as well as gatekeepers“.6 Enforcement of both texts is expected to be a key priority for the EC. To ensure compliance with the above rules, the EC could impose fines of up to 10% of gatekeepers’ global turnover in the previous financial year, increasing to up to 20% for repeated breaches.

In particular, on September 1, 2022, the EU opened a satellite office in San Francisco, which “global center for digital technology and innovation“; this is called “concrete step to further strengthen the EU’s work on issues such as cyber and hybrid threats and manipulation and interference of foreign information“.7

Effects?

Both the DMA and DSA seek to regulate digital companies based on their size – that is, based on revenue, average market capitalization, or equivalent fair market value. This approach departs from traditional principles of competition law, which seek (among other things) to regulate firms on the basis of their exercise of market power in defined markets, and arguably reflects a return to a linear “structure-behaviour-performance” view of market behavior contrary. In essence, the laws may sacrifice flexibility for certainty, in a way ostensibly similar to how public utilities are regulated.

A comparison of the laws and parallel reforms in the United States is presented in this published article by Daniel Fenske and Felipe Pereira of Mayer Brown.

In Germany, a related provision – Section 19a of the Act Against Restraints of Competition – was introduced in 2021. This provision, like the DMA, focuses on gatekeepers while providing various tools and enforcement powers for the Bundeskartellamt. The provision applies in particular to abusive behavior by companies of “paramount importance” for cross-market competition. Coordination between the European Commission, the Federal Cartel Office and other national competition authorities will be important for the application of the DMA and other similar national legislation.

Next Steps

After the DMA comes into force, there will be a six-month transition period before the DMA becomes applicable in practice. The DSA, on the other hand, applies from February 17, 2024.8th After designation, gatekeepers and very large online platforms and search engines have six and four months to comply with the DMA and DSA, respectively.


1 Regulation (EU) 2022/1925 of the European Parliament and of the Council of September 14, 2022 on contestable and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 220/1828.

2 Regulation (EU) 2022/2065 of the European Parliament and of the Council of October 19, 2022 on an internal market for digital services and amending Directive 2000/31/EC.

3 See https://competition-policy.ec.europa.eu/sectors/ict/dma_en.

4 Defined as “Companies that play a particularly important role in the internal market due to their size and importance as gateways for business users to their customers“. See https://ec.europa.eu/commission/presscorner/detail/en/QANDA_20_2349.

5 See https://www.europarl.europa.eu/news/en/press-room/20220315IPR25504/deal-on-digital-markets-act-ensuring-fair-competition-and-more-choice-for-users.

6 See https://ec.europa.eu/commission/presscorner/detail/en/STATEMENT_22_4327.

7 See https://www.eeas.europa.eu/eeas/usdigital-eu-opens-new-office-san-francisco-reinforce-its-digital-diplomacy_en?s=253.

8th See Article 93(2) of the DSA.

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