This month’s “CLIP” is an article by Frontier Economics which considers a number of open questions regarding the designation of ‘gatekeepers’ for the Digital Markets Act (DMA), the EU’s ex-ante regulatory tool intended to enhance digital competition.
We have recently written about the DMA ourselves explaining why we have the DMA, how it works (including the objectives, obligations and enforcement powers) and the challenges that may arise from the regime. Essentially, the DMA imposes ex ante rules designed to limit the market power of large digital platforms providing certain categories of services (which are designated as ‘gatekeepers’). Gatekeepers are primarily identified on the basis of quantitative thresholds – companies must have (1) an EU turnover of at least EUR 7.5 billion or a market capitalisation of at least EUR 75 billion and (2) at least 45 million active monthly end users and 10,000 active annual business users.
Much of the commentary to date has focussed on the obligations to which gatekeepers will be subject but, in this month’s CLIP, Frontier Economics discusses three open questions in relation to the process of designating ‘gatekeepers’ in the first place:
- In what circumstances may companies be able to rebut the gatekeeper presumption despite meeting the DMA’s quantitative thresholds?
The article explains that in general companies will most likely find it challenging to rebut the gatekeeper presumption but suggests that this route may be relevant for some of the Big Techs’ other services and/or the services of other providers. The authors provide the illustrative example of Microsoft’s Bing which may satisfy the relevant quantitative criteria but not have material market power to justify falling within the DMA regime.
- In what circumstances may companies be able split their core platform services into distinct services, each to be assessed separately against the DMA’s quantitative thresholds?
The article explains that the DMA allows core platform service providers to split into distinct services for the purposes of assessing whether they meet the quantitative thresholds, although notes that there is likely to be some debate where splits are deemed artificial, or where splits are made by technology (e.g. whether desktop and mobile operating systems can be assessed separately). We would also observe that some of the obligations in Articles 5 and 6 of the DMA apply to the combination of gatekeeper services with other services, so an artificial split may also be unhelpful for actual compliance with the rules.
- How the European Commission should approach the designation of ‘emerging gatekeepers’?
The authors warn that the European Commission should take a cautious approach towards the designation of ‘emerging gatekeepers’. The authors argue that the Commission should take into account that the market may start tipping in favour of emerging firms but also pay attention to the potential impact of regulating these firms too early, or too harshly. For example, naming additional companies as emerging gatekeepers could under certain circumstances hinder their ability to challenge more established gatekeepers.
This interesting article raises some important questions in regards to the very first hurdle of the DMA regime – which companies will be designated as gatekeepers. There are of course many other open questions regarding the operation of the rules more generally which will also need to be answered. As we explain in our article the DMA is extraordinary in its ambition and complexity and gatekeepers will require timely and meaningful regulatory guidance from the European Commission in order to comply with the new rules.