Short Reads

Gatecrashing gatekeepers? The EU’s digital reform is out

Gatecrashing gatekeepers? The EU’s digital reform is out

Gatecrashing gatekeepers? The EU’s digital reform is out

16.12.2020 EU law

Christmas is a time for contemplation, and the proposals of the long-awaited Digital Markets Act and Digital Services Act may give gatekeepers and other online intermediaries even more reason to be pensive this year. The proposals introduce more rules for them to abide by, while also providing greater safeguards to fair competition and online users.

Even though it will likely be another year before the Acts become effective, online intermediaries may already wish to begin considering their internal processes and business policies in light of the new rules. Similarly, competitors and online users can use this time to prep for further gatecrashing opportunities.

Meanwhile, ongoing investigations and national initiatives are likely to keep Big Tech in check.

Proposed Digital Markets Act: tipping or tripping?

The proposed Digital Markets Act (DMA) includes a watered-down version of the earlier-suggested New Competition Tool (see our July 2020 newsletter). However, it is still a force to be reckoned with, as it enables the Commission to intervene in tipping markets by pointing out new gatekeepers or conduct that need to be included in its rules. It also lists a number of obligations which online platforms will need to abide by as soon as they qualify as gatekeepers.

The DMA provides a rebuttable presumption for identifying gatekeepers based on turnover, market value and user thresholds. It seems likely that the ‘GAFA’ companies (Google, Apple, Facebook and Amazon) will be required to take up the challenge of rebutting this presumption. However, platforms not fulfilling the quantitative thresholds are not safe either: they may still be identified as gatekeepers depending on factors such as size, market structure and lock-in effects. Identified gatekeepers will need to comply with a list of obligations relating to, for example, (i) data access, (ii) across-services use of data (iii) platform interoperability, (iv) self-preferencing and (v) pre-installed software or apps. Interestingly, identified gatekeepers will also have to inform the Commission of any intended ‘digital’ concentration, regardless of whether the concentration is caught under the EU Merger Regulation or national merger control rules. This obligation seems complementary to the recently-revived system of referrals to the Commission for concentrations falling short of an EU dimension (see our October 2020 newsletter), but without providing any additional merger control powers.

Non-compliance with the DMA obligations may result in fines of up to 10% of the gatekeeper’s worldwide turnover. In addition, the Commission can impose behavioural as well as structural remedies, including the legal, functional or structural separation of (all or part of) a business. Structural remedies will, however, only be used as last resort.

Small(er) online intermediaries, and new entrants not falling under the DMA’s gatekeeper presumption, may breathe a sigh of relief. The upcoming requirements on gatekeepers will allow them to get a ‘foot in the digital door’, and the Commission will likely respond to complaints more easily and swiftly.

Proposed Digital Services Act: beyond gatekeepers

However, these smaller intermediaries are not completely off the hook. The Commission’s proposed Digital Services Act (DSA) introduces a number of obligations on such parties, with the scope of these obligations varying depending on the online intermediary’s size, all aimed at protecting their users more effectively. The DSA introduces measures relating to inter alia (i) illegal content, goods or services and (ii) transparency on advertising or algorithmic processes.

The national Digital Services Coordinators, appointed by each EU Member State, will be in charge of enforcing the DSA’s measures, with the possibility for the Commission to step in with enhanced supervision and enforcement for very large platforms. Non-compliance with the DSA’s requirements can result in fines – up to 6% of a very large platform’s total turnover – as well as the imposition of interim measures or the offering of commitments.

Still waiting?

Although long-awaited and much discussed, the DMA and DSA are far from fully operational yet. They will need to proceed through the ordinary legislative procedure, with the European Parliament and the Member States discussing their content and implications, before becoming effective. It will probably take another year before the DMA and DSA can actually bite; however, tech giants are unlikely to get through this period unscathed, considering the current number of ongoing ‘digital’ investigations and developments.

‘Big Tech wreck’: full steam ahead

In the UK, the CMA’s dedicated Digital Markets Unit is set to oversee the conduct by dominant platforms, whereas Germany is about to gain additional competition tools to tackle digital platforms. Meanwhile, the European Commission and the Dutch Authority for Consumers and Markets (ACM) are ploughing through various ongoing ‘digital’ investigations, including:

Amazon AT.40462 Amazon Marketplace
AT.40703 Amazon Buy Box
Facebook AT.40628 Facebook Data-related practices
AT.40684 Facebook Marketplace
Apple AT.40437 Apple App Store Practices (music streaming)
AT.40452 Apple Mobile Payments
AT.40652 Apple App Store Practices (e-books/audiobooks)
AT.40716 Apple App Store Practices
ACM investigation – Apple App Store
Payment apps  ACM investigation – payment apps on smartphones

Conclusion

Online intermediaries, and particularly gatekeepers, have several ongoing competition law investigations to keep in mind. Nevertheless, this Christmas period may be a good time to consider how to incorporate the upcoming obligations and requirements into their internal processes and business policies. Similarly, users and online competitors could use the time to find their way through the various protective measures and redress mechanisms. Online Christmas shopping may never be the same again.

Team

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