On 12 October 2022, the European Commission (“Commission”) took the final step in enacting the Digital Markets Act (“DMA”), by publishing its text in the EU Official Journal and thereby starting a 6 month transition period before the DMA becomes enforceable.
The DMA is a revolutionary piece of EU legislation, in that never before has the EU created such a detailed rulebook and powerful enforcement toolbox in a law designed to foster fair competition. Big Tech is the focus and the DMA's stated purpose is to force Big Tech to discontinue practices which – are claimed to – dampen competition and exploit customers. The DMA centralises enforcement power in the EU Commission but the DMA is also likely to lead to regulatory and private enforcement cases at national level throughout the EU.
While much has been written about what needs to be done to comply with and enforce the DMA at a EU-wide level, little has been written about the impacts of the DMA at the national level within the EU. The potential Irish-specific impacts which we are advising businesses to start to consider include:
- Private litigation in the Irish courts: Ireland may be an attractive litigation forum for claimants seeking damages for an alleged DMA infringement, given that certain 'gatekeepers' trade through Irish companies, Ireland is English-speaking, and Ireland has a litigation discovery regime which is regarded as generous compared to other EU jurisdictions.
- EU Dawn Raids in Ireland: While the EU is likely to be reluctant to exercise the inspection powers granted to it under the DMA, 'gatekeepers' with a significant presence in Ireland should be aware of this new risk of their Irish facilities being visited by the EU Commission.
To contextualise the above, we include below a summary of some key aspects of the DMA.
The DMA introduces ex ante regulation of ‘gatekeepers’ and means that many practices (see below lists) will be forbidden for some (but not all) digital platforms.
The DMA's stated intention is to ensure that businesses who rely on 'gatekeepers' (eg, to advertise or distribute products) are treated fairly and that digital markets are contestable by smaller players.
The DMA rules are comparable to EU competition law rules against abuse of dominance. However, the DMA dispenses with the complex work of defining a market and identifying market power and market effects in accordance with economic principles. This has led some to argue that the DMA will lower the bar and lead to a switch from competition law to DMA complaints against 'gatekeepers', or at the very least give rise to confusion in relation to overlapping rules and regulatory powers.
'Gatekeepers' have positive obligations to:
- Ensure that users have the right to unsubscribe from core platform services;
- Ensure the interoperability of their instant messaging services’ basic functionalities;
- Allow app developers fair access to supplementary functionalities of smartphones;
- Give sellers access to marketing or advertising performance data; and
- Inform the European Commission of their acquisitions and mergers (regardless of whether the relevant transaction is mandatorily notifiable).
'Gatekeepers' must not:
- Pre-install certain important software;
- Rank their own products or services higher than those of others;
- Reuse private data collected during a service for the purposes of another service;
- Establish unfair conditions for business users;
- Require app developers to use certain services (e.g. payment systems or identity providers) in order to be listed in app stores.
In order to be subject to the DMA rules, you must be a 'gatekeeper' platform with (i) an annual turnover of at least €7.5 billion within the European Union (“EU”) in the past three years or a market valuation of at least €75 billion, (ii) at least 45 million monthly end users and 10 000 business users in the EU, and (iii) control of one or more core platform services in at least three EU Member States
A supplementary category of an ‘emerging gatekeeper’ is also provided for in the DMA, in order to regulate entities that hold a competitive position but that do not fit the terms of the general gatekeeper category. The ambiguity and potential radical consequences of this regulatory power will be a cause for concern. Anticipating that, the DMA provides that a platform may challenge its classification as a gatekeeper by means of specific procedure with the Commission.
Enforcement and Jurisdiction
The Commission has the exclusive right to enforce the provisions of the DMA but member states can empower national competition authorities to start investigations into possible infringements and transmit their findings to the Commission. In addition to this, third parties, allegedly harmed by an infringement of the DMA may sue a gatekeeper for damages in a national court.
The Commission’s proposed enforcement powers under the DMA are broadly similar to its current functions regarding EU competition rules. The DMA gives the Commission the power to issue formal information requests, to take witness statements, to launch ‘dawn raids’, to accept commitments and/or to adopt interim measures.
After giving the relevant gatekeeper the opportunity to contest any preliminary adverse findings, the Commission may impose significant fines of up to 10% of a gatekeeper’s most recent annual global turnover for any substantive breach. In addition, fines of a maximum of 1% of the relevant turnover may be levied for any procedural infringement. For a repeat offence, a fine of up to 20% of its worldwide turnover may be imposed.
If a gatekeeper systematically fails to comply with the DMA, for example by violating the rules at least three times in eight years, the European Commission can open a market investigation and, if necessary, impose behavioural or structural remedies.
When Will All This Happen?
As there is a 6 month transition period and it will take time for the EU to designate businesses as 'gatekeepers' who are subject to the DMA, it may be 2023/2024 by the time that (i) complaints / EU-initiated investigations of non-compliance with the DMA are in progress, (ii) the exercise of investigation powers (including unannounced inspections) is seen in Ireland, and (iii) complainants start to consider bringing private enforcement litigation including in Ireland.
It is difficult to overstate the huge amount of preparation which potentially affected companies need to complete in order to be ready to navigate this new maze of regulatory obligations and potential enforcement actions at EU and national level.