European Union: Digital Markets Act Update: Implementing Act, Timelines, Workshops And Institutional Changes

The EU's groundbreaking Digital Markets Act (DMA) came into force on 1 November 2022 and applies from 2 May 2023. In this update we summarise key developments: the Implementing Regulation, institutional changes in DG COMP, workshops, and national proposals granting National Competition Authorities powers.

The DMA aims at improving the contestability and fairness of digital markets, by imposing obligations and prohibitions on companies that provide "core platform services" and are designated as "gatekeepers" by the European Commission.

For further details on the DMA itself, including the process and criteria under which the Commission will designate a 'gatekeeper', the obligations and prohibitions to which gatekeepers will be subject, the Commission's investigatory powers, sanctions and private enforcement, see our previous blog post here.

CURRENT STATUS OF DMA IMPLEMENTATION

Most provisions of the DMA and of the Implementing Regulation apply from 2 May 2023.

From that date companies meeting the quantitative thresholds in the DMA must submit certain information to the Commission so that the Commission can designate them as 'gatekeepers'. The companies in scope have until 3 July 2023 to submit the information.

In practice, many such companies are already in pre-notification discussions with the Commission.

Following submission of the information, the Commission will then have 45 working days to designate the company as a gatekeeper. Designations are therefore likely to be around 6 September 2023 (assuming submission of the information around 3 July).

Following the Commission's designation decision, a gatekeeper will have six months to comply with the obligations and prohibitions in the DMA.

Gatekeepers must therefore be in compliance with the obligations and prohibitions by around March 2024. This is therefore the date at which enforcement may start either by the Commission or private enforcement by litigants in national courts.

In the meantime, the various stakeholders will be considering the potential changes to their businesses and engaging with the Commission including through workshops (see further below). This includes not just gatekeepers but also companies dealing with, or competing with, gatekeepers, as well as trade associations, consumer organisations etc.

DMA IMPLEMENTING REGULATION

On 14 April 2023 the Commission adopted an Implementing Regulation for the DMA.

This deals with the procedural aspects of the DMA, including notifications and submissions of information, the protection of confidential information, access to file and time limits.

The final version of the Implementing Regulation follows a draft published on 9 December 2022, and a short consultation over Christmas closing on 9 January 2023. The most significant change in the final version relates to access to the Commission's file (which is expanded, but still limited to the recipient of the Commission's provisional findings, with no role for the Hearing Officer or access by third parties such as complainants).

A summary of key provisions in the Implementing Regulation is below.

Articles 2, 3 and 4 deal with notifications and submissions of information.

• The Implementing Regulation includes as an annex "Form GD" (gatekeeper designation), which presumptive gatekeepers (those meeting the quantitative thresholds in the DMA) must use to submit information to the Commission.
• Form GD requires these companies to delineate their core platform services under "any plausible alternative delineation" (a potentially onerous task), and provide information on turnover, market capitalisation, user numbers etc. They may also submit arguments seeking to rebut a presumption of designation.
• The information submitted must be correct and complete and must be presented in a clear and intelligible manner. As in EU merger control reviews, if the Commission considers that the submission is not complete it will not "start the clock" on its review. To this end, as with merger control reviews, the Commission encourages presumptive gatekeepers to enter into pre-notification discussions with the Commission in advance of filing the Form GD.
• The Form and supporting documents must be supplied in the format set out in Annex II of the Implementing Regulation. This includes stringent requirements on formatting and page limits.
• As with EU antitrust and merger control procedures, the notifying undertaking can submit reasoned requests that information be treated confidentially.

Articles 5, 6, 7 and 8 cover conduct of proceedings.

• Article 5 provides that the Commission may decide to open proceedings, which it must make public, at any time, but no later than the date on which it issues preliminary findings (akin to a "statement of objections" in antitrust investigations).
• Article 6 provides that the recipient of preliminary findings can respond in writing, but must do so "succinctly" and in accordance with the format set out in Annex II (see above) and within the time limit set by the Commission (which may not be less than 14 days). Notably the presumptive gatekeeper has no right to an oral hearing.
• Article 7 relates to confidential information. It establishes that information collected by the Commission must not be disclosed in so far as it contains business secrets or other confidential information. However, ultimately the Commission can disclose information over which confidentiality is claimed, either because it decides that it does not constitute confidential information or there is an overriding interest, having followed a process of engagement with the entity claiming confidentiality. Notably, information may be disclosed to a 'confidentiality ring' of advisors in access to the file (see below).
• Article 8 covers access to the file. This Article has been significantly revised compared to the consultation draft, however it remains the case that the Hearing Officer does not have a role and complainants have no access to the file.
• The approach to access to the file is different to that in EU antitrust proceedings, and provides for more limited disclosure to the company itself and full disclosure to a "confidentiality ring" of advisors. Upon request, the Commission shall grant access to its file to the addressee of its provisional findings as follows:
  • the entity itself will have access to non-confidential versions of all documents mentioned in the preliminary findings.
  • the entity's external advisors, e.g. legal, economic and technical experts, will have access to the complete file (i.e. including confidential versions, subject to possible exceptions at the Commission's discretion) on terms set out in a Commission decision. To enable this new approach, third parties submitting information to the Commission will need to consent to such disclosure (and objections may be overruled by reasoned decision of the Commission).

Articles 9 and 10 concern time limits, and Article 11 procedures for the transmission and receipt of documents.

Whilst relatively short, the Implementing Regulation needs to be read alongside the DMA itself, which sets out detailed rules in relation to various procedural matters.

One notable absence from the DMA was a formal role for complainants, and thus the Implementing Regulation does not refer to them or provide them with any procedural rights.

In addition, we note that, as expected given its purpose, the Implementing Regulation does not provide substantive guidance on the DMA. It is hoped that the Commission will provide this separately.

Overall it is clear that in the Implementing Regulation the Commission is seeking to balance the need for swift enforcement of the DMA (in particular compared to antitrust enforcement) with the due process rights of gatekeepers. There is a risk that this has come at the expense of some procedural safeguards and processes, and it will be interesting to see if there is litigation on such points in future.

NEW DG COMP DIRECTORATE

In order to facilitate enforcement of the DMA, the Commission has created a new directorate within DG COMP.

Directorate J on digital platforms is headed by Alberto Bacchiega and is composed of three units: Digital Platforms I (Head of Unit: Lucia Bonova), Digital Platforms II (Head of Unit: Michael Koenig) and Digital Platforms III (Head of Unit: Thomas Kramler).

These units will deal with the DMA and also antitrust investigations into platforms, indicating that the Commission sees enforcement synergies between the DMA and the Commission's traditional antitrust tools.

In addition to DG COMP, DG CNECT will play a role in the enforcement of the DMA. Dedicated teams within DG CNECT will be organised around thematic domains, including the societal, technical and economic aspects.

EC INTERACTIONS WITH STAKEHOLDERS

The Commission has stressed its desire to have an open dialogue with stakeholders in relation to the DMA, to give them the opportunity to express their views as regards the implementation and compliance.

In line with this approach, the Commission has to date organised three workshops on matters of interest to a variety of stakeholders, with a fourth to be held tomorrow.

Those to date have been well-attended by potential gatekeepers, industry representatives and consumer associations, and have been an opportunity to discuss implementation challenges and concerns.

The Commission moderated the discussions but did not provide guidance on implementation and compliance. In line with an open approach, the Commission has published materials from presenters and a recording of each workshop (see here).

The workshops to date are as follows:

" Self-preferencing (5 December 2022): The series of workshops kicked off with the DMA prohibition of self-preferencing.

• The discussion revolved around the identification of self-preferencing practices and compliance with the prohibition with potential gatekeepers and other stakeholders providing different ideas of compliance mechanisms.
• Various views were expressed on the interpretation of certain notions of the provision, such as on its scope, the obligation to ensure equal treatment, the processes of ranking/indexing/crawling, the similarity of competing products or services, and the application of fair and non-discriminatory conditions. Reference was also made to the need to focus on the process leading to the production of a result as well as display of the result.

" Interoperability between text messaging communications services (27 February 2023): The next workshop concerned the DMA's obligation to ensure interoperability in the case of messaging services (which is on a different timeline to other DMA obligations, being introduced in phases).

• The discussion focussed on the objectives, issues and solutions that the interoperability requirement raised, as well as technical aspects that the gatekeeper would need to observe.
• Challenges discussed included how interoperability could be achieved with end-to-end encryption and the preservation of high security standards, including the extent to which interoperability can be achieved without sacrificing user privacy, as well as challenges around data collection, user identification, design of user interfaces and risk mitigation in case of misuse of the service.
• The discussion predominantly concerned the technical aspects of interoperability, with stakeholders providing various views as to the most suitable technical method for implementing interoperability, including whether solutions should be individualised or standardised.

" App store provisions (6 March 2023): The third workshop dealt with obligations relevant to app stores.

• Discussions included around provisions related to in-app user experience, such as alternative in-app payment systems, steering and consumption-only apps; competition that could arise from alternative apps or platforms such as web-based apps, side-loading apps and alternative app stores; and the provision of fair, reasonable and non-discriminatory (FRAND) conditions of access to app stores for business users by gatekeepers.

" Data-related obligations (5 May 2023): An upcoming workshop will cover data-related obligations of the DMA:

• Panels will focus particularly on processing of data for the purpose of providing online advertising services; the combination and cross-use of personal data; how to foster contestability and fairness regarding the use of non-publicly available data of business users; and effective, privacy compliant data portability for end users.

NATIONAL IMPLEMENTING LEGISLATION

The DMA is an EU Regulation (rather than a Directive) and thus does not require national implementing regulation.

However, although the Commission is responsible for the enforcement of the DMA, Member States can grant their National Competition Authorities (NCAs) powers to initiate investigations into possible non-compliance with the DMA on their territory.

To date, the German government has stated that in its 11th Amendment of the Act Against Restraints of Competition it will authorise the Bundeskartellamt to conduct investigations into cases of possible non-compliance with the DMA, and will facilitate private enforcement and align it to existing competition law private enforcement to create "a good national infrastructure for private enforcement of the DMA".

Similarly, the Netherlands government is consulting on a bill to give the Netherlands Authority for Consumers and Markets the authority to monitor compliance with the DMA, to initiate investigations and to exchange information with the Commission. The bill also provides for other adjustments that it considers necessary for the implementation of the DMA, such as an amendment to its Code of Civil Procedure to clarify the cooperation between the Commission and courts in the Netherlands.

We expect that other Member States may also introduce legislation empowering their NCAs and facilitating private enforcement in national courts.

NEXT STEPS

The next year is likely to be busy on various aspects of the DMA. Potential gatekeepers will be engaging in pre-notification discussions with the Commission, then notifying Form GD. They will also be discussing potential compliance with the Commission, as will other stakeholders. The Commission will have a busy summer considering and taking designation decisions. Gatekeepers, companies dealing with them, and their competitors, will be considering what compliance will mean for their business models and what costs and opportunities this may bring. Member States will be consulting on and legislating to give their NCAs powers to launch investigations, and if necessary to amend their court procedures in anticipation of private enforcement actions. We may also see the first litigation if gatekeepers challenge designation decisions, and once the deadline for gatekeepers' compliance with the DMA passes next March, the prospect of enforcement by the Commission or private enforcement. A busy time for all stakeholders!