The European Commission designates six gatekeepers under the Digital Markets Act
The DMA provides that an undertaking should be designated as a gatekeeper where it meets three qualitative criteria: (1) it has significant impact on the internal market; (2) it provides a specified service that is an important gateway for business users to reach end users; and (3) it enjoys an entrenched and durable position (or it is foreseeable that it will enjoy such a position in the near future).
The DMA further obliges undertakings to notify the Commission where they meet three quantitative thresholds which act as a presumption for gatekeeper status:
- The undertaking generates EU revenues of at least €7.5bn in each of the last three financial years, or had an average market capitalisation of at least €75bn in the last financial year, and the undertaking provides the same core platform service in at least three Member States.
- In each of the last three financial years, the undertaking provides a core platform service with at least 45m EU monthly active end users in the last financial year, and at least 10,000 yearly active EU business users.
- The undertaking met the second criteria in each of the last three financial years.
Undertakings that meet these thresholds have the opportunity to argue why they should not be designated as a gatekeeper and thus to rebut the presumption. Conversely, the Commission can designate an undertaking as a gatekeeper where it does not meet the quantitative thresholds but nevertheless satisfies the qualitative criteria.
The Commission’s designations confer gatekeeper status on 22 “core platforms services”: Alphabet (Google Maps, Google Play, Google Shopping, Youtube, Google Search, Google (ads), Google Chrome and Google Android), Meta (Facebook, Instagram, WhatsApp, Messenger, Meta Marketplace and Meta), Apple (App Store, Safari and iOS), Amazon (Amazon Marketplace and Amazon (ads)), ByteDance (Tiktok) and Microsoft (LinkedIn and Windows PC OS). More than one gatekeeper has therefore been designated for certain services.
Gmail, Outlook.com and Samsung Internet Browser also met the quantitative notification thresholds, but their owners (Alphabet, Microsoft and Samsung) were able to persuade the Commission that the relevant services should not be designated as they did not satisfy the qualitative criteria. Having examined the submissions that were made to it, the Commission has accepted that the presumption attached to the quantitative thresholds had been successfully rebutted for each of those services.
Similar submissions were made to the Commission in relation to Bing, Edge, Microsoft Advertising, and iMessage and these remain pending. The Commission has decided that it needs more time to consider the position of these five services. A market investigation has therefore been opened for each of those services (due to be completed by February 2024) to determine if those services should not be designated, despite meeting the notification thresholds. Conversely, the Commission has initiated a market investigation (which must be completed within the next twelve months) to determine if iPadOS, should be added to the list of designated core platform services, notwithstanding the fact that the quantitative notification thresholds are not met.
Alphabet, Amazon, Apple ByteDance, Meta and Microsoft now have six months to comply with the obligations set out in the DMA that apply to designated gatekeepers. These obligations are principally designed to prevent the leveraging of market power across different digital services (including through a prohibition on self-preferencing), reduce barriers to entry or expansion across digital markets, facilitate switching and multi-homing between services (e.g., through data portability and interface interoperability requirements), and control how user data are processed and when such data must be made available to users as well as third party competitors. Advertising-related transparency obligations will also apply to gatekeepers that provide online advertising services. In addition, all designated gatekeepers will also be under a duty to report planned acquisitions to assist the Commission in monitoring market developments and potentially problematic transactions which may fall below EU and national merger control thresholds. The Commission can then, if necessary, invite EU Member States to refer such transactions to it for review (pursuant to the Article 22 referral mechanism under the EU Merger Regulation)
Designated gatekeepers will also have to submit detailed compliance reports to the Commission. The first reports are due in six months and must explain the measures that have been adopted by designated gatekeepers to comply with the DMA, including any action taken to inform end users and/or business users of these measures and the feedback received from those users.1 If a designated gatekeeper fails to comply with its obligations, the Commission, as sole enforcer of the DMA, has the power to impose fines up to 10% of worldwide annual turnover, or up to 20% in the event of repeated infringements. It also has the power to impose periodic penalty payments of up to 5% of average daily turnover and (in case of systematic infringements of DMA obligations) behavioural and structural remedies, including by ordering the divestiture of (parts of) a business.
The separate designations decisions adopted against Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft represent the first concrete implementation measures taken by the Commission under the DMA and further core platform services could be designated in due course.
In addition, services that have escaped designation could become subject to designation in the future, especially if they continue to grow and to increase their user base, or otherwise evolve into significant gateways through which end users can be reached. Notably, cloud storage and computing services, which are presently not subject to any designation decision from the Commission, could become subject to such decisions in the future depending on market developments. The same could apply to virtual assistants which are embedded into mobile devices and are now rapidly being rolled out across many household appliances, increasing the possibility that some of these services may at some point become sufficiently widespread to meet the quantitative notification thresholds.
The potential for additional digital services to come within the scope of application of the DMA in the future means that it will be important to understand the factors which have been instrumental in persuading the Commission not to confer gatekeeper status on core platform services which meet the quantitative notification thresholds (or conversely to confer such status on services which fall below those thresholds) and the extent to which economic analysis has played a role in the Commission’s assessment and decision making process. This will hopefully become clearer when the Commission’s decisions are published and once the market investigations which it has opened have been completed.
This piece was prepared by Richard Pepper, Christophe Humpe, Louis Delvaux and Roque Botas, all of whom are based in the Brussels office of Macfarlanes.