Digital Markets Act: European Commission designates further gatekeeper and core platform services

The European Commission ("Commission") has designated the hotel booking and travel portal Booking as a new gatekeeper and Apple as a gatekeeper for its core platform service ("CPS") iPadOS under the Digital Markets Act ("DMA"). The Commission has also decided not to designate X Ads (X, formerly Twitter) and TikTok Ads (ByteDance). Finally, the Commission has opened a market investigation into whether a designation should be refuted for the social network X despite the designation thresholds being met.

What are gatekeepers and CPS within the meaning of the DMA?

The DMA aims to ensure fair competition and to safeguard the contestability of the markets for digital services by regulating so-called “gatekeepers”. Gatekeepers are companies providing the CPS defined in the DMA. These services can be considered a gateway between a large number of business users and consumers (for further details see our Noerr News article).

How are gatekeepers designated?

Only CPS that have a significant impact on the European internal market, serve as intermediaries to end users for a large number of business users, and enjoy an entrenched and durable position in their operations, or will enjoy such position in the foreseeable future, will be designated as gatekeepers. To assess these conditions, the regulation relies primarily on quantitative thresholds which, if met, lead to the presumption that a gatekeeper position exists. Companies are obliged to monitor the thresholds themselves and notify the Commission if they are met.

If, despite meeting the thresholds, the gatekeepers present substantiated arguments that they do not have a significant impact on the European internal market or represent an important gateway for business users to reach end users over a stable period of time, the Commission can refrain from a designation – as was the case with X Ads and TikTok Ads. If the arguments are substantiated but do not clearly rebut the presumption of the thresholds, the Commission can open a market investigation, which it should conclude within five months. In this respect, it remains open whether the Commission will designate the online social networking service X as a gatekeeper once it has closed the recently opened market investigation.

Finally, the Commission can – as happened for the first time with iPadOS – designate a CPS on the basis of further qualitative criteria in individual cases even if the thresholds are not met.

Who are the gatekeepers and which CPS have been designated?

In September 2023, the Commission already designated six businesses as gatekeepers (Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft) in relation to 22 CPS operated by them. By 7 March 2024 – the so-called DMA Compliance Day – the gatekeepers had to implement the DMA obligations and prepare (regularly updated) reports setting out how they comply with the DMA obligations (for further details see our Noerr News article).

Due to the new designations, Booking and Apple are required to ensure that the explicitly designated CPS are fully compliant with the DMA within six months. This concerns booking.com, designated as an online intermediation service, and iPadOS, designated as an operating system.

For the time being, a total of seven gatekeepers and 24 CPSs have been designated  (Click here or on the image to enlarge it):

 

What are the gatekeepers’ obligations?

The DMA contains over twenty obligations, some of which apply to all CPS, while others only apply to certain CPS. The regulation distinguishes between obligations that are applicable without further specification (e.g. the prohibition of tying or bundling and the prohibition of using most-favoured nation clauses) and obligations that are directly applicable but can be further specified for the individual gatekeeper by the Commission (e.g. the prohibition of self-preferencing).

Our articles on Noerr News highlight the most important DMA obligations which are likely to result in particularly far-reaching changes to the rights and opportunities of app developers (see Noerr News article) and online intermediary services (see Noerr News article).

What is the consequence of non-compliance and what enforcement rights do third parties have?

Non-compliance can be sanctioned with significant fines of up to 10 % of the company’s total worldwide annual turnover – up to 20 % in case of repeat infringements – or periodic penalty payments of up to 5 % of the average daily turnover. Less than twenty days after the DMA Compliance Day, the Commission has opened official investigations against Alphabet, Apple und Meta, which should be completed within twelve months (for further details see our Noerr News article).

Business users and competitors of the gatekeepers can inform the Commission or the German Federal Cartel Office about any compliance violation to promote public enforcements of the DMA provisions by the Commission. The Commission is the sole enforcement authority of the DMA; the national authorities only have a supporting role. However, if authorised by the Member States, national authorities can also carry out preliminary investigations and therefore act as a first point of contact for third-party complaints.

The Commission has recently published a whistleblower tool that can be used to report gatekeeper anonymously.

In addition to public enforcement of the DMA by the Commission, there is also the possibility of private enforcement for business users and competitors (see our Noerr News article for more information), i.e. the assertion of rights in legal proceedings before national courts. In the event of violations of DMA obligations by gatekeepers, affected parties can bring civil actions for injunctive and affirmative relief (including interim relief) and, if necessary, claims for damages before the national courts in the EU.

Once the Commission have found a breach of the DMA, so-called follow-on actions for damages against gatekeepers will also be possible. With the 11th Amendment to the German Competition Act, the German legislators have extended the binding effect of Commission decisions – familiar from antitrust law – to Commission decisions on the DMA.

The book “New Digital Markets Act – A Practitioner’s Guide” recently published by Jens Peter Schmidt and Fabian Hübener is our take on the background, implementation and compliance with the DMA. For further advice and individual solutions concerning the DMA and related competition matters, do not hesitate to contact us.