Author: Ludovica Formicola
This is the first of a series of articles entitled ‘The Digital Markets Act: The Future of Online Platforms’. With this project, Netwerk Democratie wishes to inform EU citizens about the most recent developments in Internet regulation, making complex topics fun and accessible. This introductory article will provide a brief overview of the Digital Markets Act (DMA) and the Digital Services Act (DSA). The second article is an interview with Dr. Cristina Caffarra, a senior economic consultant and an expert on antitrust and competition law. She discusses the “almost grotesque market power” of Big Tech companies. In the third article Dr. Ian Brown, a leading specialist in Internet regulation, discusses the importance of interoperability end better online services as a result of the DMA.
The DMA was first tabled in 2020 alongside the DSA. The DMA and DSA are two complementary legislative proposals aimed at reinforcing the EU Digital Single Market. Specifically, among the two proposals, the DMA is the first initiative of its kind to regulate the systemic misbehaviour of big tech companies with gatekeeper positions. Moreover, it is the first waiting to be adopted by the European Parliament and the Council of the EU, which may be expected to take effect in October 2022. As the European Commission executive Vice-President for a Europe Fit for the Digital Age, Margrethe Vestager, stated “This regulation, together with strong competition law enforcement, will bring fairer conditions to consumers and businesses for many digital services across the EU.” We hope that this article series will help citizens understand the DMA’s main provisions and form an opinion on the most recent developments in EU digital law.
Background
Internet governance became a topic of general interest in the early 2000s. Since then, a wide range of measures was adopted to protect online users both at the national and international levels. The European Union (EU) has recently increased its efforts to protect online users through the development of the DSA and DMA, comprising a digital services package. The first drafts were presented by the European Commission in December 2020. The Council of the EU and the European Parliament reached a political agreement on the content of the DMA on 25 March 2022 and on the DSA on 23 April 2022. While the provisional agreement on the DSA is still waiting for the approval of the Permanent Representatives Committee (Coreper), the legislative proposal on the DMA is currently undergoing the co-decision procedure.
Main features of the digital services package: the DMA and DSA
The purpose of the package is to create a digital space in which the fundamental rights of all users of digital services are protected, alongside fostering innovation, growth, and competitiveness in the European Single Market. The rapid growth of digital services worldwide implies both benefits and threats for society and businesses. On one hand, their development fosters innovation, facilitates cross-border trading, and increases the efficiency of the EU’s internal market. While on the other, popular platforms became a medium for the spreading of illegal content, including goods, information, and services; and a portal to cyber security threats.
The DSA and DMA work in synergy, building the future two main pillars of EU digital law. The package applies the concept of progressive obligations, meaning the provisions will be proportionate to the number of users and tailored to the nature of the services provided. In principle, the larger the online platform or intermediary is, the more stringent the requirements.
The package’s aim is to ban unfair practices, enhancing consumers’ freedom to choose new innovative services. By introducing the concept of interoperability of services, the companies qualifying as gatekeepers will no longer be allowed to self-preference their own services compared to the services offered by smaller businesses. Consumers will be able to switch between better quality services at lower prices, enhancing competition in the Single Market where antitrust law has failed to deliver.
Digital Services Act
The DSA primarily concerns all online intermediaries providing digital services within the EU, such as online marketplaces, social networks, content-sharing platforms, app stores, and online travel and accommodation platforms. The DSA will introduce a set of provision aimed at protecting users and enhancing the transparency of data handling, including:
• content moderation criteria will be fully transparent;
• advertising and targeted ads will include relevant information on sponsorship and why it targets a specific user;
• users should have a clear understanding of why material is recommended to them and will always be allowed to opt-out from profiling-based content recommendations;
• the systems and search engines of big online platforms will have to be designed to deal with the threats of misinformation;
• the platforms’ risk management, including their algorithmic systems, will be subject to independent auditing;
• better data availability for authorities and academics to better understand internet virality and its impact, with the goal of reducing societal risks.
Digital Markets Act
In parallel, the DMA establishes clearer regulations for large online platforms, qualified as “gatekeepers”. Specifically, the rules apply to companies with a market valuation of over EUR 75 billion and an annual turnover of minimum EUR 7.5 billion within the EU. Moreover, such platforms must have a minimum of 10.000 business users and above 45 million monthly end users on EU territory. A final requirement is having control over at least one core platform services, such as online search engines, online intermediation services (i.e. app stores and marketplaces), social networks, cloud and advertising services. Noncompliance by gatekeepers may result in sanctions of up to 10% of total worldwide revenue, with penalty escalating to 20% for subsequent infractions. The economic nature of the DMA has a major focus on ensuring a competitive and fair digital sector for companies. The DMA establishes a wide set of rules, notably:
• gatekeepers will not be allowed to self-preference their own services compared to other services or products offered on their platform;
• consumers will always be able to connect with a business outside of the gatekeepers’ platform;
• gatekeepers’ services will have to inter-operate with third party services under certain circumstances to provide consumers with a broader choice;
• business users will be able to conclude contracts with the customers even outside of the platform;
• businesses will always be able to access their data generated using a specific gatekeeper’s platform;
• advertisers and publishers will be provided with the necessary instruments to carry out independent verifications of their advertisements hosted on a gatekeepers’ platform;
• users will be able to delete any pre-installed software or app on their devices;
• gatekeepers will no longer be allowed to pursue targeted advertising by tracking users outside of the gatekeeper’s core platform service without explicit consent.
