The EU Digital Markets Act (DMA): Gatekeepers, Obligations and Penalties Explained

What is The Digital Markets Act?

The Digital Markets Act is the EU’s law which aims to improve contestability and fairness of digital markets, by imposing obligations and prohibitions on “gatekeepers” that provide “core platform services” (CPS).

Gatekeepers are large digital platforms providing core platform services on which businesses depend to reach their customers. The ten CPS are: 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 and online advertising services. Gatekeepers will have to comply with the obligations and be aware of prohibitions listed in the DMA.

Criteria to be a gatekeeper

The Digital Markets Act catches only those companies that provide a CPS and satisfy the criteria set out in Article 3(1) of the DMA. They must:

1. have a significant impact on the internal market;
2. provide a CPS which is an important gateway for business users to reach end users; and
3. enjoy an entrenched and durable position (or it is foreseeable that they will do so in the near future).

The three qualitative criteria to be designated a gatekeeper

• It has a significant impact on the internal market. This is presumed to be the case if it provides the same CPS in at least three EU Member States and achieves at least EUR 7.5 billion turnover in the EU in each of the last three years or has a market capitalisation of EUR 75 billion in the last year.
• Its core platform service is an important gateway for business users to reach end users. This is presumed to be the case if in the last financial year the undertaking had at least 45 million monthly active EU end users and at least 10,000 yearly active EU business users.
• It has an entrenched and durable position or it is foreseeable that it will do so in the near future. An undertaking is presumed to have an “entrenched and durable position” if it has met the “important gateway” thresholds in each of the last three financial years.

Obligations on Gatekeepers include but not limited to:

• Allow their business users to access the data that they generate in their use of the gatekeeper’s platform
• Ensure the interoperability of their instant messaging services’ basic functionalities
• Inform the European Commission of their acquisitions and mergers

Prohibitions on Gatekeepers include but not limited to:

• Track end users outside of the gatekeepers’ core platform service for the purpose of targeted advertising, without the effective consent of such users.
• Self-preferencing and bundling e.g. search engine providers with gatekeeper status must not rank their own services higher than competing services when displaying search results
• Establish unfair conditions for business users

Example of legal challenges (TikTok (case T-1077/23))

Social network TikTok, a subsidiary of the Bytedance Group, challenged its categorisation as a “gatekeeper” by the DMA on 16 November 2023. TikTok said its categorisation threatens to strengthen the power of dominant technology companies as it “could hinder the company’s ability to develop”.

In disputing its designation in the “core platform service” category, according to TikTok, its core function is to simply allow users to view short videos on the platform, instead of connecting the end users with each other.

General Court (GC) dismissed the action brought by Bytedance. Bytedance lodged an appeal on 26 September 2024.

Consequences of non-compliance

Fines of up to 10% of the company’s total worldwide annual turnover, or up to 20% in the event of repeated infringements.

Periodic penalty payments of up to 5% of the average daily turnover.

How can Waterfront help?

• Compliance assessments:We can evaluate your businesses current operations against DMA requirements.
• Strategy development: We can help create tailored compliance strategies to meet DMA standards.
• Draft policies:Develop clear and comprehensive policies for your business.

Reach out to Andrew Gordon to discuss any of the above services.