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The Digital Markets Act – Advertising, Marketing & Branding

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The Digital Markets Act (DMA) will establish
rules concerning the market power of “core platform
services” who are “gatekeepers” (e.g. online search
engines, social networking services, app stores, messaging
services, etc. that meet certain thresholds) in the digital sector.
The DMA aims to open up the digital market to new players by
ensuring more competition and preventing gatekeepers from abusing
the market power they hold (e.g. by imposing unfair conditions on
end-users of online platforms) while ensuring the transparency of
key services.

The DMA entered into force on the 1 November 2022 and the
notification and review process by which the European Commission
(EC) will designate companies as
‘gatekeepers’ starts six months later on 2 May 2023.

Key Features

The DMA will govern the activities of online gatekeepers,
regulate how businesses access gatekeeper platforms, provide
internet users with new rights to uninstall pre-loaded apps, and
place fresh restrictions on the use of users’ personal
data.

Once a platform is designated as a gatekeeper, it will have to
comply with a number of obligations in relation to the use of data,
interoperability and self-preferencing. The obligations prescribed
by the DMA require gatekeepers to both proactively implement
certain behaviours (the “do’s”) and to refrain from
engaging in certain practices which the DMA classifies as unfair
(the “don’ts”). (For more on this see previous WF analysis
here
).

A company will have gatekeeper status and fall under the scope
of the DMA if it meets the following three criteria (notably, there
are certain thresholds where the status of gatekeeper is
presumed):

  1. The company is a size that impacts the internal
    market
    : There is a presumed status if the threshold for
    meeting this requirement is met. It is where the company has annual
    turnover of at least €7.5 billion within the EU in each of the
    past three financial years or an average market valuation of at
    least €75 billion in the past financial year, and it provides
    the same core platform service in at least three Member
    States;

  2. The company provides a core platform service
    which is an important gateway for business users to reach end
    users. There is a presumed status if the threshold is met where a
    core platform service in the last financial year has on average a
    minimum of 45 million monthly end users established or located in
    the EU and at least 10,000 yearly business users established in the
    EU. ‘Core platform service’ includes any of the following:
    online intermediation services, online search engines, online
    social networking services, video-sharing platform services,
    number-independent interpersonal communications services, operating
    systems, web browsers, virtual assistants, cloud computing services
    and online advertising services (including any advertising
    networks, advertising exchanges and any other advertising
    intermediation services); and

  3. The company has an (established or will in the future)
    entrenched and durable position. There is a
    presumed status if the threshold is met, where a core platform
    service has on average a minimum of 45 million monthly end users
    established or located in the EU and at least 10,000 yearly
    business users established in the EU in each of the previous three
    financial years.

An undertaking that is a core platform service and meets the
additional presumed status thresholds set out above, needs to
notify the EC without delay and in any event within 2 months after
those thresholds are met.

The DMA also equips the EC with investigative powers and the EC
has the power to conduct on-site inspections, having given prior
notice to undertakings.

The EC is charged with enforcement of the DMA, but Member States
can also empower their national competition authorities (in Ireland
the Competition and Consumer Protection Commission) to investigate
any alleged infringements and transmit their findings to the EC.
Furthermore, third parties alleging harm by an infringement of the
DMA may bring an action against a gatekeeper in their national
courts for damages suffered as a result of the alleged
infringement. If found to be in breach of its obligations, a
gatekeeper will be exposed to fines of up to 10% of its total
worldwide annual turnover and periodic penalty payments of up to 5%
of the average daily turnover.

Impact on businesses

Relevant businesses will therefore to now start considering
whether they meet criteria set out by the EC which would designate
them as gatekeepers. If the entity considers that it falls within
these criteria, it will need to inform the EC by 3 July 2023. The
EC will have 45 working days to make an assessment and will, on the
basis of the three criteria being satisfied, it will designate the
relevant entity as gatekeeper. Within six months of such
designation, the relevant entity will have to follow the sets of
do’s and don’ts prescribed by the DMA. This set out
timeline should prompt the relevant entities to start reviewing
their practices soon (if not now), given the potentially sizeable
amount of preparation required to comply with the new detailed
rulebook at the six-month deadline and avoid any enforcement
actions. If you require assistance in this regard, do reach out to
your usual William Fry contact.

The EC will soon launch a public consultation on the DMA’s
implementing regulation, which will include a draft form for
designation as a market gatekeeper as well as other procedural
rules.

Contributors: Cormac Little and Karolina Rozhnova

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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