Today marks a milestone in EU platform regulation. The European Commission adopted the first “designation” decisions under the Digital Markets Act (or DMA). Those decisions designate as “gatekeepers” certain tech companies which offer core platform services that meet specific quantitative criteria (e.g., they reach 45 million end users). The tech companies that have been designated as gatekeepers are Alphabet, Meta, Amazon, Apple, Microsoft, and ByteDance.
Which services have been designated?
In total, 22 core platform services provided by gatekeepers have been designated as follows.
In addition, the Commission has opened four market investigations to assess in more detail Microsoft’s and Apple’s submissions that, despite meeting the DMA thresholds, the following core platform services do not qualify as gatekeepers:
- Microsoft: Bing, Edge and Microsoft Advertising.
- Apple: iMessage.
If these market investigations conclude that the above services do not act as gateways for businesses to reach consumers, they will not be designated. The investigations will be completed within five months (i.e., by February 2024).
Moreover, the Commission has opened a market investigation to assess whether Apple’s iPadOS should be designated as gatekeeper, despite not meeting the thresholds. Under the DMA, this investigation should be completed within 12 months and the Commission’s assessment will be based on a mix of quantitative and qualitative criteria, such as the size of the undertaking and user lock-in.
Which services have not been designated?
The Commission has concluded that, although Gmail, Outlook.com and Samsung Internet Browser meet the thresholds under the DMA to qualify as gatekeepers, the companies presented sufficiently substantiated arguments that these services do not qualify as gateways for the respective core platform services. Therefore, the Commission decided not to designate the above as core platform services. As a result, Samsung is not designated as gatekeeper under the DMA.
The Commission’s designation decisions mainly concern services that we expected to be designated (e.g., Google Search, the App Store, the advertising services of Google, Meta and Amazon). However, the Commission has not designated any voice assistants (e.g., Google Assistant, Alexa) and cloud services (e.g., AWS). It remains to be seen whether the Commission will adopt the approach it took for iPadOS by opening market investigations into the likes of Google Assistant, Alexa and AWS in order to assess whether they should be designated despite not meeting the thresholds. If the Commission suspects that the above services meet the thresholds and gatekeepers have not notified it, it may have sent requests for information. If so (and if gatekeepers fail to respond to the Commission’s request), the Commission may designate them based on the information available to it.
It appears that rebuttals have been successful with respect to email services and Samsung’s browser. The DMA provides that rebuttals should be assessed narrowly and it will be important to monitor future announcements on this matter in order to understand the arguments that could bring a company outside the scope of the DMA without a market investigation. It also appears that the Commission was hesitant to designate companies that submitted rebuttals, which explains why it decided to open market investigations into Bing, Edge, iMessage and Microsoft Advertising. The outcome of these market investigations will be published early next year, which is when we will have a clear idea on the parameters that will factor into the decision to designate (or not) a service that meets the DMA thresholds.
What does designation mean in practice?
Designated gatekeepers will have six months to implement the DMA. This means in practice that gatekeepers must introduce changes in their business practices and commercial strategies by early March 2024 in order to comply with the DMA. The DMA establishes several obligations and prohibitions that will benefit businesses that rely on gatekeepers to reach consumers. Those include the gatekeepers’ obligation to share with their business users access to consumer data free of charge, and the prohibition to self-preference in ranking.
The period between now and March 2024 will be crucial for ensuring that the DMA is implemented to the benefit of gatekeepers’ business users because businesses can meet with the Commission, which is the sole enforcer of the DMA, to set out the measures that gatekeepers must take to address problematic practices. The DMA concerns complex technical matters and the Commission has been open to discussing implementation with industry players in order to ensure its effectiveness. Moreover, gatekeepers are required to submit, within six months after designation, a report describing in a detailed and transparent manner the measures they have taken to ensure compliance with the DMA obligations. According to the Commission’s compliance template, gatekeepers are expected to set out how the feedback provided by their business users on the proposed measures is reflected in their compliance reports.
In other words, now is the right time for your organisation to influence the implementation of the DMA.
Can designation decisions be appealed?
Designation decisions are decisions specifically “addressed to a legal person”. This means that gatekeepers can bring an action for annulment before the General Court of the EU to have a designated decision annulled. However, an appeal against a designation decision does not have a suspensive effect. This means that designated gatekeepers must comply with the DMA until the case is closed.
Contrary to competition law, which treats a company as dominant if several market-specific conditions are met (e.g., high entry barriers, market shares), the DMA works in a more straightforward manner; if the thresholds set in Article 3(2) are met, a company is presumed to act as a gatekeeper. As a result, the grounds for successfully appealing a designation decision under the DMA are limited.
Will other tech companies be designated?
Some companies that already meet the DMA thresholds may not have notified the Commission in early July (contrary to the requirement to do so). If a gatekeeper fails to notify and refrains from answering the Commission’s request for information about whether it meets the DMA thresholds, the Commission can still designate it as a gatekeeper, based on the information it has at its disposal. This includes the information it has been gathering from industry players over the past months and publicly available information.
Moreover, whenever a gatekeeper meets the DMA thresholds, it must notify the Commission within two months after those thresholds are met. This means that other designation decisions will follow suit as certain services become more popular.
Designation was an important milestone in the implementation of the DMA. Completion of this first step illustrates the difference between competition/antitrust law proceedings and regulation; assessing whether six companies are dominant under competition law would arguably have taken longer than 45 working days. We are now bracing ourselves for effective compliance, which will play a significant role in levelling the playing field in digital markets.