What Is the Digital Markets Act (DMA)?
The Digital Markets Act (DMA) is a groundbreaking European law aiming to prevent large online platforms that connect consumers with content, goods, and services from abusing their market power. The European Union (EU) believes that strict regulation of big technology companies, the so-called gatekeepers of the digital economy, will lead to more competition and choice, greater innovation, better quality, and lower prices.
DMA was first proposed in December 2020 and was signed into law in 2022. March 6, 2024 marked the compliance deadline for regulated entities. Failure to comply can result in hefty fines and even the possibility of being forced to offload assets or being banned from operating within European borders. While it only applies within the EU, the penalties make it a potentially game-changing piece of legislation that could have huge implications for Big Tech and how we use the internet.
Key Takeaways
- The Digital Markets Act (DMA) is a groundbreaking European law designed to rein in the power of the gatekeepers of the digital economy.
- The European Commission believes that keeping the big internet companies in check can lead to more competition and choice, greater innovation, better quality, and lower prices.
- Key measures include tighter restrictions on how data is collected, the option to uninstall preloaded applications on devices, and messaging services working together.
- Failure to comply with the DMA can result in hefty fines and even the possibility of a company breakup.
- The bulk of the DMA became enforceable during 2023; March 6, 2024 marked the law’s compliance deadline.
What Are the Key Goals of the Digital Markets Act (DMA)?
The core objective of the DMA is to make the internet more competitive and safer for its users. It plans to achieve this by stripping away the powers that a handful of anticompetitive, Big Tech companies have acquired over the years.
The law primarily targets the providers of key platform services, such as social networks, search engines, web browsers, online marketplaces, messaging services, or video-sharing platforms, that have at least 45 million monthly active users in the EU. In other words, it’s going after the big fish that have a monopoly or something close to it in the digital economy.
To qualify as a gatekeeper, the online platform must have at least 45 million monthly active users in the EU.
The EU has taken a hard stance on Big Tech companies for years now. The view in Brussels is that these companies wield too much power, control access to essential services that the world relies on, and are milking the situation to boost their profits at the expense of everyone else. The DMA antitrust law seeks to put an end to that.
The law will stop these gatekeepers from effectively forcing the population to use only their platforms and make it much harder for them to track users’ internet activity for advertising dollars. Taking such measures and essentially reducing the power of Big Tech, the European Commission claims, will lead to a fairer and safer internet and spawn new opportunities for innovators and startups, resulting in “more and better services” for consumers to choose from, “fairer prices,” and greater innovation.
Digital Markets Act (DMA) Key Measures
The DMA has many provisions. Some of its most eye-catching ones include:
- Tighter restrictions on how digital gatekeepers can use people’s data—users must give their explicit consent for their activities to be tracked for advertising purposes.
- Messaging services and social media platforms teaming up and sharing users. This could mean, for example, Meta-owned WhatsApp users being able to send messages directly to a completely different messaging service, such as Telegram.
- Presenting users with the option to uninstall preloaded applications on devices.
- Gatekeepers are banned from ranking their own products or services higher than others in online searches.
Consequences of Not Complying with the Digital Markets Act (DMA)
The European Commission isn’t messing around. Those that fail to abide by the DMA face steep financial penalties and, in extreme cases, other crippling punishments.
Most of the time, the offender will receive a fine of up to 10% of worldwide revenue, or up to 20% in the event of repeated infringements. However, if necessary, further action might be taken, including banning the culprit from making further acquisitions or forcing it to offload parts of its business.
When Was Digital Markets Act (DMA) Passed?
The DMA was proposed by the European Commission in December 2020 and greenlit in record time, winning approval from the European Parliament and the Council in March 2022. A few articles of the legislation then started to become applicable at the end of 2022, with the rest coming into force throughout the course of 2023.
Beginning May 2, 2023, potential gatekeepers had two months to get in touch with the Commission and provide it with the information that it required. After that, the Commission got 45 working days to decide who should be designated as gatekeepers. Once it had been decided, those classified as such were given six months to comply with the DMA.
By March 6, 2024, the gatekeepers of the digital economy will have to comply with the obligations outlined in the DMA.
What Impact Could the Digital Markets Act (DMA) Have?
The EU’s Digital Markets Act (DMA) is a really big deal. It’s the first law of its kind and, barring a substantial mishap, has the potential to end the dominance of a handful of tech companies. Some countries have since begun developing similar legislation of their own. And those that haven’t probably will, in one way or another, be caught up in it anyway.
As pointed out by international law firm Dentons, the DMA likely will become a point of reference for antitrust cases all around the globe. Once the bar is set in an important, influential jurisdiction such as Europe, it becomes hard to ignore and actually changes things.
Criticisms of the Digital Markets Act (DMA)
The idea of stopping the likes of Google, Apple, Facebook, Amazon, and Microsoft from ruling the internet has been met both with enthusiasm and anger. Plenty of pundits agree that stripping these behemoths of some power and increasing competition will benefit more people than not. Naturally, not everybody is convinced, though.
Big Tech lobbied hard to tone down the Commission’s original legislative proposal, yet their requests fell on deaf ears—in fact, the final draft is even more strict.
A common complaint is that the law will take away the incentive to innovate and, therefore, stifle the quality of goods and services. Some skeptics have even claimed that it is too broad and could, similar to what happened with the EU’s General Data Protection Regulation (GDPR), indirectly reduce competition and basically do the opposite of everything that it set out to achieve.
Then there’s the question of money. The DMA is fairly complex and will carry a hefty cost to implement, for not only the states but also the so-called gatekeepers.
These companies also happen to be among the most widely held stocks in the world, meaning that removing them from their thrones will arguably affect the finances of the regular people whom the law is supposed to protect.
How does the Digital Markets Act (DMA) seek to protect consumers?
The European Commission believes Big Tech companies are too dominant and don’t have consumers’ best interests at heart. It aims to change that by leveling the playing field, welcoming competition, and boosting privacy. It has been claimed that the measures introduced via the DMA can lead to greater choice and prices for consumers and ensure that they are treated with greater respect. Choice is the key, and the DMA aims to provide it.
How does the DMA seek to battle antitrust activity by Big Tech?
Big Tech’s high barriers to entry and its capitalizing on that have angered the European Commission. The DMA is designed to strip away some of their powers and enable other companies to get in on the action and grab some market share.
What is the DMA compared with the Digital Services Act (DSA)?
The DMA is a competition law targeting the gatekeepers of the digital economy. The Digital Services Act (DSA) obligates online platforms to be more transparent about how they collect data and outlines how to deal with illegal content and disinformation.
While there is some crossover between the two laws, they both address different things. The DMA is more concerned with stopping the big internet companies from abusing their market dominance.
The Bottom Line
The Digital Markets Act (DMA), a groundbreaking European law designed to limit the power of the gatekeepers of the digital economy, could put an end to years of Big Tech dominance and revolutionize the internet. The European Union (EU) has long been wary about the control that a handful of companies have over digital channels and, with this law, became the first to act on it.
With the DMA, large online platforms that connect consumers with content, goods, and services will have to be careful about how they handle user data and be more welcoming to competitors. Some say this will lead to greater choice, innovation, quality, and prices, which is what the law sets out to do. Others argue that it will do the opposite and that consumers will end up footing the bill for this pricey piece of legislation.
