EU legislators reach agreement on Digital Markets Act

The EU Parliament and Council reached political agreement on the Digital Markets Act (DMA) late on Thursday night (24 March). The Commission has been quick to welcome the agreement, stating that the DMA "will bring fairer conditions to consumers and businesses for many digital services across the EU" (see Commission Press release).

Although the DMA relates to activities in the EU, it is likely to influence the approach of companies and regulators in other jurisdictions. In a press conference today, Commission Executive Vice President Margrethe Vestager emphasised that “This is a global movement, that is really good... We hope our take on [digital markets] will inspire all over the planet”. Andreas Schwab, the European Parliament's rapporteur on the DMA file, commented that "The agreement ushers in a new era of tech regulation worldwide" (see Council Press release).

Our blog post on the Commission's legislative proposal from December 2020 explaining amongst other things the structure and key principles of the DMA is here. Although the final text agreed yesterday is not yet published, certain points have been reported:

• The scope of 'core platform services', a key part of the gatekeeper definition, now includes web browsers and virtual assistants, but not virtual TVs. The final list therefore appears to include online intermediation services, social networks, search engines, operating systems, online advertising services, cloud computing, video-sharing services, web browsers and virtual assistants.
• Thresholds for designating a platform as a gatekeeper. The turnover threshold is set at EUR 7.5 billion (US$ 8.3 billion) EEA turnover in each of the last three years. The market capitalisation threshold is set at EUR 75 billion (US$ 83 billion) in the last year. The user threshold requires the platform to have had at least 45 million monthly end users, and 10,000 yearly business users, in the EU in the last year.
• Obligations have been amended. In addition to those in the Commission's initial proposal, the final text includes an interoperability requirement forcing a gatekeeper to make its messaging apps interoperable with smaller messaging services (although this does not appear to apply to social networks). Gatekeepers will also only be able to combine data from different sources with a user's explicit consent which will have to be made easy for users (either to give or to withdraw). Fair access for business users to gatekeeper services will extend to social media, search engines and app stores. The proposed ban on targeted advertising to children, a proposal from the EU Parliament, has not been included in the agreed text although it might be included in the Digital Services Act which is still under discussions.
• Sanctions have been increased. The Commission will be able to impose fines of up to 10% of annual worldwide turnover for a first infringement, and up to 20% for repeated infringements. In addition, the Commission will have the power to block temporarily acquisitions by gatekeepers should they systematically fail to comply with the DMA.
• Formal approval still required. Yesterday's agreement was the end of trilogue – the Council and Parliament negotiators (supported by the Commission) reached agreement on the text. That text will now pass to the European Parliament and Council for formal approval.
• In force in October. Commission EVP Margrethe Vestager has suggested that the DMA will come into force in October.
• Six months to comply. The Commission has said that it will work quickly on designating gatekeepers. A gatekeeper will have to comply with the new obligations within 6 months of being designated.

This is a key piece of legislation in the digital sector and will fundamentally alter the regulatory environment both for companies designated as gatekeepers and those dealing with them. We will continue to monitor the situation closely and post an update once the final text is published. In the interim, if you have any question please don't hesitate to let us know.