Europe on its way with a new regulation for digital platforms : the Digital Markets Act
Although the EU has not been able to create technological giants, unlike its American (GAFAM) and Asian (BATX) counterparts, it is nevertheless brimming with ideas to try to rebalance the balance of power with these economic operators, notably by regulating them. The sanitary crisis only accelerated the awareness of their economic power in the digital landscape and all the risks associated with it. With this in mind, Margrethe Vestager, Executive Vice-President of the European Commission, and Thierry Breton, European Commissioner for Internal Market, have presented an ambitious regulation project, the Digital Markets Act (DMA), which aims to combat the economic imbalances caused by these digital platforms.
As a reminder, the business model of large digital platforms is based on extreme economies of scale, powerful network effects, collection, exploitation and resale of data, which allows them to grow rapidly and gain considerable economic power. The concentration of the market in the hands of these actors leads inevitably to the emergence of anti-competitive practices (e.g. abuse of dominant position). These practices generate barriers to market entry — for example, by deploying foreclosure strategies or killer acquisitions practices that question the possibility for new competitors to emerge on the market into question.
The inability of European Competition Law to regulate certain behaviors of digital platforms acting as gatekeepers in the digital markets is at the heart of the concerns. Faced with these issues, the European Commission has decided to supplement the application of competition law with new ex ante regulation for the digital markets, meaning the apprehension of a situation before it arises. Therefore, this proposal aims at improving the monitoring of gatekeepers in order to detect, upstream, the infringing conduct.
The DMA establishes a set of criteria to characterize a large online platform as a« gatekeeper » (1).
- When its economic position has a significant impact on the internal market. A market capitalization and a significant turnover are two indicators that show their ability to take advantage of their financing to strengthen their position.
- When its position as an intermediary is strong, that it connects a large user base to a large number of businesses.
- When its position in the market is entrenched and sustainable (it either already has or is about to have).
Social networks, search engines, and online intermediation services are directly targeted by the DMA. Gatekeepers are subject to numerous obligations and prohibitions (2) that they will have to respect in the digital market:
Gatekeeper platforms will have to :
- Allow third parties inter-operate with the gatekeeper’s own services in some specific situations.
- Allow their business users the data that they generate in their use of the gatekeeper’s platform.
- Provide companies advertising on their platform with the tools and information necessary for advertisers and publishers to carry out their own independent verification of their advertisements hosted by the gatekeeper.
- Allow their business users to promote their offer and conclude contracts with their customers outside the gatekeeper’s platform.
Gatekeeper platforms may no longer :
- Treat services and products offered by the gatekeeper itself more favorably in ranking than similar services or products offered by third parties on the gatekeeper’s platform.
- Prevent consumers from linking up to businesses outside their platforms.
- Prevent users from un-installing any pre-installed software or app if they wish so.
In case of non-compliance with the provisions of this legislation, the Commission may impose fines of up to 10 % of the company’s worldwide annual turnover. The amount of the fine shall be determined according to the “gravity, duration and repetition” (3) of the violation. Periodic penalty payments of up to 5% of the average daily turnover, as well as additional remedies may be imposed after investigation. Will the technological giants be able to comply with these new rules?
The text is part of a strategic path for Europe’s digital future to fill the gaps in the competition rules. The aim is to promote effective and fair competition in the digital markets. This requires the establishment of a business ecosystem based on rules of fairness, which will allow the emergence of start-ups and small businesses on the market. Likewise, the interests of the consumer are at the heart of this initiative as they will be able to benefit from a greater number of services.