Head of Europe at tech advisory firm Access Partnership Simona Lipstaite spoke at the recent MEF Global Forum in Barcelona, discussing the impact of Digital Markets Act on the EU. Here, she and Policy Manager for Europe Lydia Dettling, outline in more detail the implications of the act, and what businesses need to know. The sessions from Barcelona are available to watch on demand.
The European Union’s landmark Digital Markets Act (DMA) entered into force on 1 November 2022. Big tech’s ‘gatekeepers’ will face new constraints on their business practices in order to open digital markets for competitors, and encourage innovation and scaling in the EU. Does this mean the mobile ecosystem finally has a level playing field with Big Tech? Potentially – and only if the sector acts now.
Purpose of the Digital Markets Act (DMA)
On 1 November 2022, the European Union’s (EU) landmark Digital Markets Act (DMA) entered into force. The law, which is designed to rein in big tech’s dominance, open the digital markets for competitors, and encourage innovation and scaling in the EU, will apply to so-called ‘gatekeepers’ from next month (2 May).
The DMA provides the foundations for increased competition and business growth in the mobile ecosystem.
Under the DMA, companies controlling significant sales channels or ‘core platform services’, such as messaging services, app stores, operating systems, and cloud services, are subject to obligations to ensure that consumer choice remains free and open, and that businesses users and competitors are not subject to unfair conditions. These apply to core platform services with more than 45 million monthly active end users and 10,000 yearly active business users in the EU.
To realise the potential benefits of the DMA, businesses must actively involve themselves throughout its implementation and oversight. To ensure the effective and proportionate implementation of the DMA, the EU will seek input from stakeholders throughout the process.“
The benefits of this will only be realised if two conditions are met:
- European institutions must provide sufficient resources to effectively enforce the law
- Businesses must actively engage to capitalise upon this opportunity.
Interoperability to increase digital market competition
Mandated interoperability is a frequently used tool in EU law to improve market competition (e.g. the Access Directive (2002/19/EC)). The DMA introduces vertical interoperability requirements for gatekeepers to enable the sideloading of applications and app stores, as well as access to the essential functionalities of operating systems. The act also introduces horizontal interoperability obligations for access to number-independent interpersonal communication services (messaging services).
This means that, by default, gatekeeper services must allow third-party software applications on their operating systems. Accessing vast consumer bases may follow quickly, as competing messaging services will be able to request that gatekeepers open up their services and provide free-of-charge solutions to facilitate interoperability with the basic functions of their services (individual and group text messaging, file sharing, and voice and video calling).
Gatekeepers’ compliance with these obligations will be determined by whether they undertake actions to apply obligations in good faith. There is no guarantee or requirement that the outcome of such actions will, in fact, result in improved competition. Gatekeepers may take actions to make the market more contestable, but, ultimately, it will be up to business users and competitors to take advantage of those efforts.
Learning from the past
The Access Directive played a significant role in opening up the European telecommunications markets. The directive encouraged competition by mandating interoperability and the unbundling of the local loop, which allowed new entrants to use the existing infrastructure of national monopolies, enter the market, and offer services to consumers. Increased competition, lower prices, and improved quality of services for consumers are some of the resulting benefits to the European economy.
This success was not achieved solely upon the introduction of the EU Access Directive obligations. Member-state investment, detailed implementation and enforcement, complementary legislation, as well as multistakeholder cooperation in the development of technical standards all played a part in creating the modern ecosystem we enjoy today.
The DMA entails significant implementation and enforcement costs for both EU-level and national authorities. Significant manpower and technical expertise are needed in the new Digital Platform Unit within the European Commission, and increased time and financial resources are required by the Commission and NRAs to enable timely and effective oversight and action.
Ensuring the success of the DMA
To realise the potential benefits of the DMA, businesses must actively involve themselves throughout its implementation and oversight. To ensure the effective and proportionate implementation of the DMA, the EU will seek input from stakeholders throughout the process.
To ensure that requirements for interoperability, as well as other obligations, are designed optimally, businesses should engage with the Commission and gatekeepers from the outset via:
1) DMA Workshops: The European Commission is holding a series of workshops on a number of areas under the DMA, including horizontal interoperability and data access obligations. This is a chance to contribute to the regulatory dialogue, which will involve stakeholders ranging from industry association representatives and consumer groups to academic experts and regulatory bodies, and to inform the Commission ahead of the development of guidelines on how obligations may be most effectively and proportionately implemented.
2) Implementing Acts and Standards development: The Commission may adopt an implementing act specifying the technical measures that the gatekeeper concerned is to implement in order to effectively comply with its obligations.
The Commission is responsible for the development of technical standards to facilitate interoperability and data access and portability obligations. It may mandate European standardisation bodies or consult with relevant stakeholders to develop such standards.
3) Advisory Committee: The Commission will be supported by an advisory committee composed of a delegation from each member state. The committee will provide ongoing input on the implementation of the DMA, and member state delegations may include representatives from a range of stakeholders, including industry associations, consumer groups, and academic experts.
4) Ongoing monitoring and evaluation: The Commission is required to periodically review the DMA to determine the need for amendments. This ongoing monitoring and evaluation will involve input from stakeholders. Continued regulatory dialogue and public consultation to gather input on specific aspects of the DMA should be open to all interested parties and provide an opportunity for stakeholders to express their views and concerns.