The EU - Digital Markets Act and the Digital Services Act

To keep up with and regulate the #digitalrevolution, the EU Parliament on the 5th of July 2022 adopted the Digital Markets Act and the Digital Services Act, together forming the ‘Digital Services Package’. The political agreement on the new law was reached on 24 March 2022 by the European Parliament and the Council (representing the 27 EU Member States). (link)

This package is meant to regulate the digital space and includes other legislative proposals like

•  the Artificial Intelligence Act, 
• the Data Governance Act, and 
• the Digital Operational Resilience Act (DORA), and 
• more than 15 different Regulations and Directives in the coming years.

The DMA and DSA together establish an ex-ante system of regulation to address the anti-competitive behavior of major digital platforms. Such ex-ante regulation is unlike ordinary competition law, which normally allows only ex-post investigations and remedies.

DMA will impose a stringent regulatory regime on large online platforms (so-called “gatekeepers”) and give the European Commission new enforcement powers, including the power to impose severe fines (up to 10% of the total worldwide revenue) and remedies for non-compliance, both in the European Single Market and globally. (link)

Andreas Schwab (EPP, DE), the rapporteur from Parliament’s Internal Market and Consumer Protection Committee, speaking about the negotiations amongst the EU lawmakers said in a press release:

"The agreement ushers in a new era of tech regulation worldwide. The Digital Markets Act puts an end to the ever-increasing dominance of Big Tech companies. From now on, they must show that they also allow for fair competition on the internet. The new rules will help enforce that basic principle. Europe is thus ensuring more competition, more innovation, and more choice for users.

With the Digital Markets Act (DMA), Europe is setting standards for how the digital economy of the future will function. It will now be up to the European Commission to implement the new rules quickly.

As the European Parliament, we have made sure that the DMA will deliver tangible results immediately: consumers will get the choice to use the core services of Big Tech companies such as browsers, search engines or messaging, and all that without losing control over their data.

Above all, the law avoids any form of overregulation for small businesses. App developers will get completely new opportunities, small businesses will get more access to business-relevant data and the online advertising market will become fairer."

Expected to be effective as early as October 2022, the DMA mandates the gatekeepers to comply with the respective obligations and prohibitions by February 2024.

Once it comes into force, the DMA is set to revolutionize the way in which so-called Big Tech is regulated in the EU, shifting toward ex-ante rulemaking and away from traditional after-the-fact enforcement.

The DMA only places obligations on “gatekeepers,” which are companies that create bottlenecks between businesses and consumers and have an entrenched position in digital markets. The DMA’s threshold is very high: companies will only be hit by the rules if they have an annual turnover of €7.5 billion within the EU or a worldwide market valuation of €75 billion. Gatekeepers must also have at least 45 million monthly individual end-users and 100,000 business users. Finally, gatekeepers must control one or more “core platform services” such as “marketplaces and app stores, search engines, social networking, cloud services, advertising services, voice assistants and web browsers.” In practice, this will almost certainly include Meta (Facebook), Apple, Alphabet (Google), Amazon, and possibly a few others. (link)

While the DMA will hold online platforms "responsible for their actions" and "ensure fair competition online, more convenience for consumers and new opportunities for small businesses, the Digital Services Act applies to a wide range of online intermediaries, which include services such as internet service providers, cloud services, messaging, marketplaces, or social networks.

The Digital Services Act (DSA) aims to create a safer digital space in which users’ rights are protected, including rules to tackle illegal content online, enhance the accountability and transparency of algorithms, and deal with content moderation and targeted advertising.

On the other side of the Atlantic, the Big Tech bills lined up before Congress, are the Open App Markets Act, the American Innovation and Choice Online Act, and the ACCESS Act, which also seeks to impose a set of requirements and restrictions on Big Tech and to give space for competition. (link)