The EU Digital Markets Act enters into force

On 1 November 2022, Regulation (EU) 2022/1925 of the European Parliament and of the Council of 14 September 2022 on competitive and fair markets in the digital sector and amending Directives (EU) 2019/1937 and (EU) 2020/1828, also known as the Digital Markets Act (the “Act“), entered into force in the European Union. Its purpose is to ensure a level playing field for all digital businesses, regardless of their size, and to eliminate unfair business practices by companies providing so-called core platform services.

 

The Act will only apply to large global companies that are designated as ‘gatekeepers’ in accordance with the criteria set out in the Act. These are digital platforms that provide an important intermediate link between users and providers.

 

To qualify as a gatekeeper under the Act, a company must provide at least one of the following core platform services:

 

·        Online intermediary services,

·        online search engines,

·        online social networking services,

·        video-sharing platform services,

·        number-independent interpersonal communication services,

 

·        operating systems,

·        web browsers,

·        virtual assistants,

·        cloud computing services,

·        online advertising services.

 

 

Such an undertaking shall be designated as a gatekeeper if it has a significant impact on the internal market, provides a core platform service that is an important entry point through which business users reach end-users, and has an established and lasting position in the conduct of its activities or is expected to have such a position in the foreseeable future. The above will be assessed based on three main quantitative criteria, namely:

 

  1. the undertaking has an annual turnover in the Union equal to or greater than EUR 7,5 billion in each of the last three financial years, or its average market capitalization or its equivalent fair market value in the last financial year is at least EUR 75 billion and provides the same core platform service in at least three Member States;
  2. the undertaking provides a core platform service which, in the last financial year, has at least 45 million monthly active end-users established or located in the Union and at least 10,000 annual active business users established or located in the Union;
  3. the undertaking meets the thresholds set out in criterion 2 in each of the last three financial years.

 

The Act introduces a number of obligations and prohibitions that companies identified as gatekeepers will have to comply with in their day-to-day operations, specifically, they will have to proactively implement certain practices to make markets more open and competitive, while at the same time refraining from unfair practices. For example, they should no longer prevent business users from offering the same products or services to end-users through third-party online intermediary services or through their own direct online sales channel at prices or on terms different from those offered through the gatekeeper’s online intermediary services, nor should they treat services and products offered by themselves more favourably than those offered by a third party in comparison to similar services or products offered by a third party in the ranking and indexing process.

 

With its entry into force, the Act has entered the implementation phase and will apply after six months, from 2 May 2023. Potential gatekeepers will have two months to notify their underlying platform services to the EU Commission if they meet the thresholds set by the Act. Once the Commission has received a complete notification, it will have 45 working days to assess whether the company in question meets the thresholds and, to the extent that it does, to designate it as a gatekeeper. Once appointed, gatekeepers will have six months to comply with the requirements of the Act.

 

The implementation of the obligations under the Act will be monitored by the EU Commission, which may impose a fine of up to 10%, or up to 20% in the case of repeated infringements, of the company’s total worldwide turnover in the preceding financial year. In the case of systematic infringements, the Commission may also impose on the infringer any behavioural or structural measures necessary to ensure the effectiveness of the obligation, including a prohibition on further concentrations in relation to core platform services or other services provided in the digital sector, or in relation to services enabling the collection of data affected by the systematic non-compliance.

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