EU Digital Markets Act (DMA): What Businesses Must Know

On 1 November 2022, the European Union's Digital Markets Act (DMA) came into effect. It became applicable from May 2023 and marked a significant shift in how digital markets are regulated, aiming to promote fair competition and curb the dominance of tech giants in the European Union.

The EU digital sector has to comply with the many regulations coming out from the European Commission. The Digital Markets Act follows the Digital Services Act and the General Data Protection Regulation which have come into effect earlier. Companies working in any of the EU member states need to comply with them.

It aims to regulate how digital platforms and the digital economy operate and to prevent them from getting an entrenched and durable position on the market.

In this blog post, we delve into the intricacies of the DMA, exploring its key provisions, the impact on big tech companies, and the potential benefits for consumers and small businesses. We'll also determine whether small and medium companies need to care about this law.

What is the EU Digital Market Act (DMA)?

The Digital Markets Act (DMA) of the European Union is a comprehensive law regulating the work of large online platforms in the single European market. It aims to provide a fairer market environment by putting some constraints on large online platforms acting as gatekeepers.

The European Commission found that large platforms have vast market power due to the massive business user base, which gives them significant power over other market players, therefore resulting in stifled competition and unfair market conditions for smaller companies.

The key benefits of the DMA

The key aims of the Digital Markets Act include:

• Promote fair competition by preventing gatekeepers from anti-competition practices
• Increase consumer choice by enabling more market players
• Boost innovation by providing more space for more companies to compete

The European leadership wants to prevent companies like Meta, Google, or Amazon from amassing even larger user bases and make it harder for consumers to move to other platforms. The EU wants to enable and market where a new company could eventually fight for its market share with the big guys in the industry.

The key provisions of the DMA

The key provisions of the DMA include:

• Defining what a gatekeeper is;
• Banning specific unfair practices, including self-preferencing and unfair ranking. For example, Amazon is banned from ranking its own products on top of the search results on its platform without clear criteria;
• Provides the European Commission with powers and controls over mergers involving large platforms, such as those between Facebook and Instagram, or Facebook and Whatsapp;
• Prescribes large fines for non-compliance, such as:
  undefinedundefinedundefinedundefined

The key question for your business now is what is a gatekeeper under the DMA and how does that affect you?

What are gatekeepers under the European DMA?

Gatekeepers are the companies that are well-positioned in the market, have a large user base, and due to the strong network effects hamper the market conditions. A company is a gatekeeper only if explicitly designated as one by the European Commission. 

The following types of companies could be designated as gatekeepers:

• Online intermediation services;
• Online search engines;
• Online social networking services;
• Video-sharing platform services;
• Number-independent interpersonal communications services;
• Operating systems;
• Web browsers;
• Virtual assistants;
• Cloud computing services; or
• Online advertising services, including any advertising networks, advertising exchanges, and any other advertising
  intermediation services, provided by a gatekeeper.

These types of companies are considered to provide a core platform service that could be subject to this law.

What are the six gatekeepers designated by the European Commission?

The six gatekeepers designated by the European Commission are:

• Alphabet (Google, Youtube, Android)
• Meta (Facebook, Instagram, Whatsapp)
• Bytedance (TikTok)
• Microsoft
• Amazon
• Apple

This means that the Digital Markets Act, for now, applies only to these six companies. Which means the DMA does not apply to you.

The European Commission will add more companies to the list with more companies when necessary.

What does the DMA mean for your compliance with the EU law?

As we mentioned above, the Digital Markets Act does not apply to you. It was designed to target major tech players and does not apply to small and medium-sized enterprises located in the EU or elsewhere. Therefore, compliance with the DMA obligations is nothing to worry about if you don't belong to the group of the largest digital platforms.

This legislation aims to level the playing field by addressing practices that lead to unfair competition and market dominance by larger companies. It gives you the chance to fight against them. SMEs stand to benefit from this regulation as it fosters a more competitive and fair digital market, potentially opening up new opportunities for growth and innovation.

As we move forward, it will be interesting to see how this act reshapes the digital market dynamics in Europe and potentially sets a precedent for similar regulations worldwide.