The Digital Market Act Becomes Operational

Legal - March 18, 2024

As of 7 March, new rules in the EU. Six big tech and twenty-two services affected

As of 7 March 2024, the obligations arising from the Digital Market Act, the regulation wanted by the European Union in order to regulate the system of competition in the world of services offered in the digital market in a fairer and more careful manner, will become operative. The regulation had been proposed by the European Commission at the end of 2020. Following the planned timeline, after adoption by the European Parliament and the European Council, the regulation had come into force on 1 November 2022. From May 2023, the rules had started to be applied.

The Digital Markets Act introduces a new regulatory provision aimed at limiting unfair commercial practices, which is intended to ensure a competitive regime, which promotes a better balance between public and private interests, which is intended to improve the governance of the digital world.

Identification of gatekeepers and regulatory provisions

With the Digital Markets Act (‘DMA’), the EU first wanted to regulate the positions of the so-called Big Teck in the digital market. The term ‘big tech’ refers to companies that today have a monopoly in the digital sector, with a capital turnover ranging from USD 500 billion to 2 trillion.

The EU has established, first and foremost, the objective criteria needed to identify who are the so-called ‘gatekeepers’, i.e. the large platforms that provide digital services. This list immediately included, for example, search engines, social networks, and instant messaging services. The regulation tells gatekeepers what obligations they have to comply with in order to work within the European Union and what actions are prohibited. In order to ensure compliance with the provisions of the DMA, the European Commission has carried out market surveys, firstly to qualify companies as gatekeepers, as required by the regulation, and secondly, in itinere, both to update where necessary the obligations to be enforced and to provide useful tools and strategies to hinder transgressions of the regulation.

Starting in May 2023, the regulation stipulated that the companies concerned would have to inform the European Commission within two months whether they could meet the required criteria to operate within the EU. The Commission would have to decide within 45 days on the designation of gatekeepers. The identified companies would then have to comply with the DMA within six months of the Commission’s decision.

Six so-called Big Teck companies are involved to date, namely Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft, for a total of 22 services that fall within the scope of the new European regulation. These include, for example, in the social networking field Facebook, TikTok and Instagram; instant messaging services such as WhatsApp and Messenger; search engines Chrome and Safari; and operating systems (Google Android, iOs and Windows Pc Os. There are 6 so-called Big Tecks involved.

The EU is among the first in the world (both internationally and nationally) to take action on this issue, and the DMA is therefore one of the first pieces of legislation to set rules in this economic and commercial sector. Until now, companies operating in the digital market carried out their activities without specific rules, or relied on rules that had been issued in the pre-digital era. In this way, the EU wants to limit the dominance of the big techies and encourage the participation of other players.

However, it is important to emphasise and clarify that the DMA does not intervene by modifying the system of competition rules already in force in the EU, but complements what is already applied.

But what are these obligations and prohibitions of the Digital Market Act? Among the ‘things to do’ (i.e. obligations), for example, we find the possibility of allowing third parties to be able to interact with the gatekeeper’s services; allowing platform users to promote offers and sign new contracts with their customers also outside the gatekeeper’s platform; allowing those who publish advertisements on the platforms to make independent verifications, providing all the tools and information useful for this purpose. The ‘things not to do’ (i.e. prohibitions) include, for example, treating one’s own services more favourably than similar services or products offered by third parties; hindering consumers from linking to companies outside the platforms; preventing pre-installed software and apps from being uninstalled; tracking users and sending advertisements without express consent.

Uniform regulation and sanctions

The adoption of the Digital Market Act has not only brought clarity to the regulation of an economically increasingly important sector that had hitherto lacked clear and certain rules, but has also helped to standardise the provisions in the Member States, whose national laws on the subject were fuelling the fragmentation of EU legislation.

The regulation provides for penalties of up to 10% of the total turnover for companies that do not comply with their obligations. In addition, the regulation provides that the penalty can be doubled if the company violates the rules a second time. In response to this, Big Tech has begun to announce that major and substantial changes will be made in the coming months in the provision of its services. For the time being, however, nothing is certain and concrete as the companies are waiting for the European Commission to rule on the proposed adjustments.

What changes for users and the case of Apple

What changes, then, in the use of the services identified by the European Commission among those that are subject to the DMA rules? Meta has provided for paid versions of Facebook and Instagram, without advertising, in order to comply with the new European rules; in addition, Meta will offer the possibility of blocking the exchange of data between different services, for instance between Facebook and Instagram. Google has given itself a new look, working on its design in order to offer spaces of greater visibility on its search engine to services similar to its own offered by others. Google also announced that it is working on making the Google Ads system more transparent. Finally, just as Meta has done, Google has also planned to introduce the possibility of blocking the exchange of data between the different services offered, for instance between Google Maps and Chrome.

More complex is the situation of Apple, which until now has had a stronger control and less open to competition over the services it offers. The American big tech is waiting for the European Commission’s response on the adaptation plan, but the climate between the company and the EU is already boiling hot, due to the fine the EC has already issued in recent weeks of 1.8 billion euros for anti-competitive behaviour.

Specifically, for the EC, Apple did not comply with EU antitrust rules by providing restrictions that prevented iOS users from learning about and using cheaper music subscription services. For the EC, the Californian company’s behaviour violated Article 102 of the Treaty on the Functioning of the European Union (TFEU). Margrethe Vestager said that for more than ten years Apple “abused its dominant market position” and prevented “developers from informing consumers about the availability of alternative and cheaper music services outside the Apple ecosystem. This is illegal under EU antitrust rules” and is, as mentioned, the reason behind the fine issued against the Cupertino-based big tech company.

Precisely for this reason, one of the first innovations that Apple is offering its customers is precisely the possibility of access to alternative and competing app stores.

We are therefore waiting to see how in the coming months this new regulation will make the market in Europe fairer and further improve the services offered to citizens.