Designating large platforms under the DMA and the DSA: Comparing apples and oranges? 

The Digital Markets Act (“DMA”) and the Digital Services Act (“DSA”) will soon start to apply. Broadly speaking, both instruments have the same objective, which is to address concerns arising from the increasing reliance on online platforms. However, despite being presented as parts of the same “package”, the DSA and the DMA do not have many similarities because they target different problems. The DMA imposes obligations to protect businesses and consumers against unfair platform practices. The DSA imposes obligations for a “safe, predictable and trusted online environment” through a framework for conditional liability exemptions and rules on due diligence obligations. In other words, the DMA primarily seeks to improve market conditions whereas the DSA, which is essentially content regulation, attempts to strike a balance between restricting the dissemination of illegal content online and the effective exercise of fundamental freedoms (e.g., freedom of speech, freedom to conduct business). The two instruments are also based on a different logic. The DMA only applies to “gatekeeper” platforms, that is, platforms that act as gateways between businesses and consumers. The DSA sets a baseline for all intermediaries and adopts a “graduated” approach whereby the rules become stricter depending on the category to which an intermediary belongs (intermediaries; intermediaries that are hosting service providers; hosting service providers that qualify as online platforms; and very large online platforms). 

However, the DMA and the DSA have certain similarities with respect to the regulation of the large service providers that fall under their scope. The entire text of the DMA and Section 4 of the DSA are based on the premise that “gatekeeper platforms” and “very large online platforms” (or “VLOPs”) pose unique challenges that can only be addressed through rules that target them specifically. Both instruments are based on user thresholds to determine the size (and, by extension, the power) of platforms that should be subject to such rules and they both envisage a designation process. Such similarities may be the reason for the misunderstanding that platforms that fall under the scope of the DSA will certainly abide by the DMA. This may not necessarily be the case because the definitional criteria, the designation process, and the methodology to calculate the size of the platform concerned are different. This blog post discusses this issue, detangling the conditions and the process pursuant to which a platform may qualify as a gatekeeper or as a VLOP under the DMA and the DSA respectively.  

The conditions under which a platform qualifies as a gatekeeper or a VLOP

Based on Article 3(2) of the DMA, for a platform to qualify as a gatekeeper, it needs to meet the following three criteria. The platform must (a) have an annual Union turnover of EUR 7,5 billion in each of the last three financial years and provide its service in at least three Member States; (b) provide a “core platform service” that has at least 45 million monthly active end users established or located in the Union and 10,000 yearly business users; and (c) meet the business and end user thresholds in each of the last three financial years. 

The DSA establishes only one criterion. Under Article 25(1), a platform qualifies as a VLOP if it reaches at least 45 million monthly active “recipients of the service” in the Union.   

A notable difference between the two instruments concerns the definition of “user” or “recipient of the service”. Though the DMA distinguishes between business and end users, the DSA does not. The latter broadly refers to “recipients of service”, defined as “any natural or legal person who uses an intermediary service, in particular for the purposes of seeking information or making it accessible”. This definition clearly covers both consumers (those that seek information) and businesses (those that make the information accessible). 

Another important difference concerns the metrics that may be used to calculate user numbers for the purposes of each instrument. The DMA includes an annex to its main text that sets out the methodology that gatekeepers must follow to make calculations. According to this annex, gatekeepers are allowed to choose the metric(s) that best reflect(s) “user engagement” with the platform and such metrics vary based on the type of core platform service under consideration. Taking the example of online intermediation services, end users that engaged with the platform at least once in the month are those that logged in, made a query, clicked, scrolled, or concluded a transaction through the service concerned. “Exposure” to the information offered through the online intermediation service (e.g., through visits or “views”) is not relevant. Despite the fact that the European Parliament had made a proposal to include this metric, the suggested amendment did not make it to the final text (the only type of services for which exposure is relevant for DMA purposes is advertising). 

Contrary to the DMA, Article 2(ma) of the DSA defines an active recipient of an online platform as “the recipient of the service that has engaged with an online platform by either requesting the online platform to host content or by being exposed to contenthosted by the online platform and disseminated through their online interface”.

That the two instruments follow different directions is understandable given the different objectives they pursue. The DMA methodology attempts to identify the most accurate way of engaging with a platform in order to establish whether gatekeeping power exists. This explains why different metrics are proposed for each core platform service (this is arguably an attempt to reflect specific market conditions and patterns of consumption). “Engagement” under the DSA is a looser concept because the DSA primarily addresses issues related to the dissemination of illegal content, that is, information which a user is affected by without necessarily clicking, scrolling, making a query, etc. 

In comparing the methodologies set by the two instruments, we do see some similarities. For example, both the DMA and the DSA seek to avoid over and under-counting by focusing on “unique” users. Moreover, both tools establish that the user thresholds must be calculated for “each service” individually (delineating the boundaries of a service is subject to its own set of challenges and worthy of another blog post). However, since the DSA (a) does not establish conditions other than the 45 million user threshold, (b) the 45 million threshold covers both consumers and business users, and (c) relies on a metric that is more inclusive than the metrics deemed appropriate by the DMA, it is likely that it will apply to a larger number of platforms than the DMA.

The designation process

The designation process concerns the procedural steps leading to a decision whether a platform qualifies as a gatekeeper or as a VLOP. 

Under Article 3(3) of the DMA, an undertaking meeting the thresholds discussed above is required to notify the Commission accordingly within two months after those thresholds are met. In practice, platforms that already meet the thresholds must notify within two months after the DMA starts to apply. In the absence of a notification, the process can unfold in two ways. The platform may either reply to the request for information (“RFI”) sent by the Commission or it may refrain from engaging with the Commission. In the former case, the Commission will take account of the information provided by the gatekeeper. In the latter case, the Commission will adopt a designation decision based on other information available to it. 

The DSA does not envisage notification. However, it establishes a reporting requirement. Under Article 23(2), at the latest within three months after the date of entry into force and at least once every six months thereafter, “providers of online platforms shall publish in a publicly available section of their online interface information on the average monthly active recipients of the service in the Union, calculated as an average over the period of the past six months”. Based on this information, the Commission will adopt the designation decision. Failure to comply with Article 23(2) (i.e., failure to report) means in practice that the Digital Services Coordinator of establishment or the Commission will send an RFI, and the process may unfold in the same way as under the DMA; depending on whether the platform replies, the Commission will adopt a designation decision based on the information provided by the platform or other information available to the Commission. 

However, there is a difference in the process that is worth pointing out. Under the DSA, when the Commission relies on the data provided by the platform following an RFI or other available data, it must give the opportunity to the platform concerned to provide its views within 10 working days on its preliminary findings. The Commission must also take due account of the views provided by the concerned provider (Article 25(4)). This requirement apparently seeks to protect due process and the platform’s right of defence. It is not clear why the DMA does not follow the same approach and the question arises as to whether this exposes the Commission to legal challenge if a designation decision is adopted without a “final attempt” to engage with the gatekeeper under consideration. 

Finally, one important difference regarding designation concerns the conditions under which a platform may fall outside the scope of the two instruments. Pursuant to Article 25(5) of the DSA, the Commission will repeal designation if, during an uninterrupted period of one year, the online platform does not have 45 million monthly active recipients of the service. The DMA establishes something similar; under Article 4(1)(a), the Commission may repeal at any moment a designation decision if there has been a substantial change in any of the facts on which the designation decision was based. This clearly includes the thresholds that need to be met to qualify as a gatekeeper. However, the DMA also establishes a mechanism that may prevent the Commission from adopting a designation decision in the first place. Based on Article 3(5), a platform that meets the thresholds may present, with its notification, “sufficiently substantiated arguments” to demonstrate that, exceptionally, although it meets the thresholds due to the circumstances in which the relevant core platform service operates, it is not a gatekeeper. The Commission may then decide to (a) conduct a market investigation or (b) reject those arguments and adopt a designation decision. Compared to the DSA, which does not establish the possibility for a rebuttal, this appears a more balanced process by reference to due process and the rights of defence. 

Conclusions 

We tend to think of the DSA and the DMA as two “sister” instruments that will apply to the same set of platforms. This is not at all clear. Though both tools target large platforms, the DMA establishes stricter criteria and a less inclusive metric than the DSA that will determine whether a platform falls under its scope. In other words, VLOPs under the DSA may not necessarily qualify as gatekeepers under the DMA. In terms of designation, it remains to be seen whether the procedural steps the two instruments lack (e.g., a rebuttal in the case of the DSA) expose them to legal challenge, potentially leading to the annulment of the designation decision concerned.  

Authored by Konstantina Bania.

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