Influential MEP aims to increase the threshold for companies to be designated ‘gatekeepers’

To recall, the proposed DMA, which was published by the European Commission in December 2020, aims to introduce new ex ante tools to complement competition law and introduces a new set of rules governing core platform services deemed to be “gatekeepers”. The aim is to ensure that digital markets remain contestable and fair.

A wide range of activities could constitute “core platform services” including marketplaces, app stores, online search engines, social networks, video sharing platforms, number-independent interpersonal communication services, operating systems, cloud services and advertising services.

According to the Commission’s original proposal a core platform service will be designated as a “gatekeeper” if:

• It has a significant impact on the EU internal market;
• It operates a core platform service which serves as an important gateway for business users to reach end users; and
• It enjoys an entrenched and durable position, or it is foreseeable that it will enjoy such a position in the future (tipping point risk).

Such gatekeepers will have a number of specific obligations designed to ensure competition on digital markets. They will also be prohibited from certain activities including:

• Self-preferencing with respect to ranking requirements;
• Preventing consumers from linking up to businesses outside their platforms;
• Preventing users from un-installing any pre-installed software or app if they wish and;
• Using data obtained from their business users to compete with these business users;
• Tying/bundling of identification services and other core platform services.

The first draft of Mr Schwab’s report proposes an initial 122 amendments to the proposal. Among its suggestions is to introduce a higher threshold for technology companies to be designated as gatekeepers, with reference to a market capitalisation of EUR 100 billion rather than EUR 65 billion in the Commission’s original proposal. Gatekeepers should also have a EUR 10 billion turnover in the last three financial years, rather than a turnover of EUR 6.5 billion or more in the last three financial years, which was indicated in the original proposal.

Mr Schwab’s draft report also makes reference to the description of a core platform service as one which has more than 45 million monthly active end users located in the Union and more than 10,000 yearly active business users in the Union in the last financial year. He suggests including a list of indicators in annex to the Regulation to enable providers of core platform services to know in advance how to measure the number of monthly active end users and active business users.

In view of the rapidly changing technological environment, the draft Report foresees a regular review of the status of gatekeepers, at least every three years. There is also a proposal for the Commission to assess whether new services, such as voice-enabled services, should be added to the list of core platform services.

Core platform services that meet these thresholds would have to present “compelling arguments” and demonstrate “exceptional circumstances” to avoid being designated as gatekeepers. If such exceptions are granted, they should be reviewed every two years. The draft report also foresees the establishment of a group of regulators with responsibilities in the digital sector with the power to advise the Commission on a number of decisions.

In a reference to so-called “killer acquisitions”, one amendment suggests that gatekeepers should inform not only the Commission, but other competent national authorities of all their intended or concluded acquisitions of other providers of core platform services. Other amendments emphasise the important role of national courts. Suggestions include the possibility for business users to raise concerns about unfair behaviour by gatekeepers not just with administrative or other public authorities, but with national courts.

Elsewhere, the draft Report indicates that the obligations contained in this new legislation should apply not only to practices by a gatekeeper, but to any “behaviour” by a gatekeeper.

Regarding advertising, one amendment suggests that transparency obligations should require gatekeepers to provide advertisers and publishers “with free of charge, effective, high-quality, continuous and real-time information.” In general, the draft report proposes that to avoid any conflicts of interests, gatekeepers should be required to treat their own products or services “as a separate commercial entity”.

Overall, Mr Schwab’s draft report appears to be aligned with key recommendations from France, Germany and The Netherlands which have indicated that the scope for designating gatekeepers should not be too wide. These influential Member States have also suggested that countries should have some flexibility to introduce their own rules in this area, particularly with regard to enforcement, and targeted action should be taken with regard to “killer acquisitions” when large multinationals buy up emerging new players in the market.

Next Steps

The Internal Market & Consumer Affairs Committee is due to have a consideration of the draft Report on the Digital Markets Act on 21 June and the deadline for tabling amendments will be 1 July at noon. A vote on the report on the DMA in the Internal Market Committee is currently foreseen for 8 November 2021, with adoption by the European Parliaments expected in December 2021.

For further information contact: Francine Cunningham, Regulatory & Public Affairs Director, Bird & Bird (Brussels).

Sign up for our Connected newsletter for a monthly round-up from our Regulatory & Public Affairs team.