In the previous blog, the Digital Service Act was discussed and its importance in the new digital era. This post is concluded by stressing the importance of large digital organisations or platforms that could influence our daily lives. This leads us to the second new law regarding digital platforms, which is the Digital Markets Act (DMA), which will probably be effective in 2024. In the upcoming part, why this law is developed and what this means for society is described.
The Digital Markets Act is a law developed in the context of the “European fit for the digital age” (PricewaterhouseCoopers, n.d.; Deloitte Netherlands, 2022). The aim is to regulate digitization in combination with other laws. Digitization becomes more important in the business models of organisations. Firms use platforms and digital business models to create even higher values for their customers and the competition is fierce. Because some business strategies can lead to a winner-takes-all situation, large companies may abuse their market power or prevent new entrants from entering the market. For this reason, the Digital Markets Act is developed. The Digital Markets Act focusses on the large online platforms, which have -according to the law- the function of a gatekeeper (European Commission, 2022; Rijksoverheid, 2021; Digital Markets Act, 2022). The organisations are called gatekeepers, because they can prevent the benefits of competitive digital markets for both the users and businesses. Examples of these gatekeepers are search platforms, social media platforms, cloud service providers, operating systems and web browsers. Platforms are considered gatekeepers by evaluating a couple criteria, such as number of active users per month, turnover or market capitalization. These evaluations may happen every 3 years. For these gatekeepers, there will be extra obligations to adhere to. These obligations are (Digital Markets Act, 2022):
- Prohibition of favouring their own products or services unfairly and untransparent.
- Transparency for business users on pricing and performance.
- Data portability across core platforms and side services.
- Prohibition of combining personal data across multiple platforms, unless consent is given.
- Guarantee competition by allowing users to use other platforms and by allowing contact between users and businesses on the platform.
The European Commission (Digital Markets Act, 2022; Deloitte Netherlands, 2022) is going to enforce this law by fining the gatekeepers, similar to the fining system in the GDPR. But instead of 4% of the annual turnover, the maximum fines the European Commission may give to firms is 10% or 20% of the annual turnover. If after these fines further actions are required to adhere to the DMA, the European Commission has the power to force the sale of business parts in order to adhere to the DMA.
In the author’s perspective, the development of these laws, including the Digital Services Act, will not be singular or one-time. Because new digital innovations will probably evolve over time, it may be the case that other laws could be planned or drafted within a couple of years. Moreover, when comparing the Digital Markets Act with the Digital Services Act, the predictions are that the DMA will have a greater impact. For some organisations, the recommendations system or algorithm is one of the main value propositions towards the customer. By forcing these organisations to be transparent about the system and how the algorithm functions, the platforms must enclose some of their key resources of the business model. Moreover, by fining the organisations to a large extend, the organisations will respond to and comply with the law. However, similar with the GDPR, there will be probably a lot of grey areas included in the law. This grey area will result in interpretation questions, which will defocus the real purpose of the new law: protecting the free market and the customers.
References
PricewaterhouseCoopers. (n.d.). Digital Markets Act legt digitale platforms aan banden. PwC. Retrieved 4 October 2022, from https://www.pwc.nl/nl/actueel-en-publicaties/themas/digitalisering/digital-markets-act-legt-digitale-platforms-aan-banden.html
Deloitte Netherlands(2022, July 8). The EU Digital Markets Act is here!. Retrieved 4 October 2022, from https://www2.deloitte.com/nl/nl/pages/risk/articles/digital-markets-act.html
European Commission (2022, July 5). The Digital Services Act package: Shaping Europe’s Digital Future. Retrieved 4 October 2022, from https://digital-strategy.ec.europa.eu/en/policies/digital-services-act-package
Rijksoverheid. (2021, November 25). EU-ministers akkoord met regelgeving voor digitale diensten en markten. Nieuwsbericht | Rijksoverheid.nl. Retrieved 4 October 2022, from https://www.rijksoverheid.nl/actueel/nieuws/2021/11/24/eu-ministers-akkoord-met-regelgeving-digitale-diensten-en–markten
Digital Markets Act, A9-0332/256 (2022). https://www.europarl.europa.eu/doceo/document/A-9-2021-0332-AM-256-256_EN.pdf
