The Clock is Ticking: Implications of Big Tech Compliance with the EU Digital Markets Act

February 26, 2024 Advisory

Big Tech giants find themselves at a critical juncture. As of 6 March 2024, those digital platforms designated as gatekeepers under the European Union’s Digital Markets Act (DMA) must be in full compliance with the stringent requirements of the legislation. They are required by the deadline to implement a number of behavioural obligations which will have potentially wide-ranging impact on their business policies, as well as refrain from engaging in anti-competitive practices. The DMA aims to open up digital markets, promote fair competition, and safeguard consumers’ interests.

The implications for Big Tech are far-reaching and their compliance with the requirements is likely to benefit users of such digital platforms.

Designation Process

On 6 September 2023, the EU Commission officially designated six major players as gatekeepers under the DMA. These Big Tech companies operate major digital platforms that meet the requirements of the legislation, namely each operates a core platform service which serves as an important gateway for business users to reach end users, has a significant impact on the internal market, and 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 companies designated include Alphabet (Google), Amazon, Apple, Facebook (Meta Platforms Inc.), Microsoft and ByteDance. These platforms were singled out due to their significant market influence, posing potential barriers to competition and consumer well-being. These designated gatekeepers collectively offer 22 designated core platform services: TikTok, Facebook, Instagram, LinkedIn, Google Maps, Google Play, Google Shopping, Amazon Marketplace, App Store, Meta Marketplace, Google, Amazon, Meta, Whatsapp, Messenger, YouTube, Google Search, Chrome, Safari, Google Android, iOS and Windows PC OS.

A number of appeals against designation decisions have been launched by Big Tech before the General Court of the Court of Justice of the EU, but none have been suspended pending the outcome of the appeals. So, they will come into full force and effect on 6 March 2024.

Gatekeepers' Obligations under the DMA

The gatekeeper designation triggers a series of obligations aimed at promoting fair competition and safeguarding consumer interests. Gatekeepers are required to implement behavioural measures, including data sharing with competitors, ensuring interoperability, and maintaining transparent information regarding data usage. Additionally, they must grant users access to their generated data and equip advertising partners with independent verification tools. Furthermore, gatekeepers are prohibited from engaging in anti-competitive practices such as impeding users from uninstalling pre-installed software, unfairly favouring their own products and services over third-party offerings or limiting consumer interactions outside their platforms. To ensure compliance, gatekeepers must establish independent compliance functions led by designated compliance officers, tasked with monitoring and supervising adherence to the DMA.

Market Investigations of Core Platforms

Where the EU Commission is unsure whether the turnover thresholds and/or quantitative thresholds for designation under the DMA are met, or where they have insufficient information to take a view on designation, the Commission is empowered to carry out Market Investigations. Following the initial designations of the platforms mentioned above, the EU Commission has undertaken Market Investigations into certain core platform services of Microsoft, Apple and Samsung. As a result of those investigations, Apple's iMessage and Microsoft's Bing, Edge and Microsoft Advertising were not designated as gatekeepers. Samsung is not designated as a gatekeeper with respect to any core platform service. However, Apple's iPadOS is currently under investigation for potential gatekeeper designation.

The Commission is continuing its ongoing scrutiny of potentially qualifying core platforms, which underscores the Commission’s dynamic regulatory oversight of digital markets. It is also incumbent on those Big Tech firms with platforms that may qualify to notify the Commission under the DMA as and when the tests under the DMA may be satisfied.

Enforcement and Penalties

The EU Commission serves as the primary enforcer of the DMA's rules, with the authority to open proceedings against suspected noncompliant gatekeepers. Noncompliance may result in severe penalties, including fines of up to 10% of the company's total worldwide turnover for breaches of behavioural obligations, interim measures or remedies. Repeat offenders face fines of up to 20%, with the possibility of increased penalties for systematic infringements. In extreme cases, the Commission may impose nonfinancial remedies such as behavioural or structural changes, including divestiture of business units or restrictions on further acquisitions.

The rules under the DMA regulatory system lend themselves to quicker and more effective enforcement against noncompliant gatekeepers, giving digital platform users the hope of more rapid resolutions to abusive behaviour. In the case of anti-competitive behaviour, starting from 6 March the Commission will have a choice whether to take action under the EU competition rules or under the DMA regime. It is likely that in most cases the Commission will want to use the quicker enforcement mechanisms under the DMA regulatory regime.

Navigating the DMA Landscape

In conclusion, the countdown to full compliance with the EU DMA is underway for designated gatekeepers. As the 6 March 2024 deadline approaches, businesses must proactively align with DMA regulations to avoid substantial penalties and regulatory scrutiny. By now, all designated gatekeepers should have submitted plans to the EU Commission about how they intend to align their business practices with their obligations under the DMA and have taken appropriate action ahead of the deadline.

Industry reaction is divided about how quickly the Commission will commence enforcement action from 6 March. Some are persuaded that an ongoing dialogue between regulators and Big Tech is likely to continue post-March, with enforcement action being seen as a last resort. Others close to Big Tech characteristically see a far stricter enforcement policy which is likely to commence soon after the deadline.

Whichever is nearer the truth, continued dialogue between Big Tech, regulators and industry stakeholders will remain essential for effective regulation and fair competition within the evolving digital market landscape.

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