Digital markets act and the interoperability of communications platforms

22 April 2022

The new law on digital markets

With an eye on the “Big Tech” the EU continues to enact legislation aiming to protect both consumers and the free market. Both the Council and European Parliament are considering digital services as a market that has been leaning towards an Oligopoly so the EU carries on drafting new regulations to revert this situation. The latest move in this area is the Digital Markets Act (or DMA), a regulation that aims to both guarantee users privacy as well as providing room for new competitors to enter the markets.

About the regulation scope, this piece of legislation will affect those companies that are defined as a “Gatekeeper”. For a company to be a Gatekeeper it has to offer a “Core Platform Service” and that due to its size and user base has a dominant position in the market.

What is a "Core Platform Service:

When talking about Core Platform Service, the law defines them as those platforms that provide:

  • Online intermediation services.
  • Online search engines.
  • Online social networking services.
  • Video-sharing platform services.
  • Number-independent interpersonal communication services.
  • Operating systems.
  • Cloud computing services.
  • Advertising services, including any advertising networks, advertising exchanges and any other advertising intermediation services, provided by a provider of any of the core platform services listed previously.

What is a "Gatekeeper" according to the DMA:

Any company providing any of the previous services is potentially bound to this law as long as it meets some sizing criteria to be considered a Gatekeeper. The threshold to meet the Gatekeeper condition are::

  1. Having a yearly turnover of €6.500 millions or higher in the EEA (European Economic Area) during the last 3 years or having a market capitalization of €65 billion or above during the last financial year.
  2. Having delivered the services during the last 3 years to more than 45 million end users (yearly) and over 10.000 professional users (monthly). The users must be located in the EU.

Taking into consideration this thresholds it is clear that this regulation is directly aiming towards the Big 5 technology providers also known as “GAFAM” (Google, Amazon, Facebook, Amazon and Microsoft) but there are also other players such as Booking, AirBnB or Ebay that can fall into this Gatekeeper category.

Three key aspects in the law

The EU is using this regulation with the objectives of easing the entrance of new competitors to the market, fostering innovation and also protecting the consumers. In order to achieve this goals the legislation introduces around 20 obligations and consumer rights that can be summed up in the following blocks:

  1. Opening sales channels. It is not allowed for Gatekeepers to limit distribution and price of the services that are offered on their platforms through other channels. Besides, the Gatekeeper must guarantee interoperability amongst the different channels so users can receive offers, subscribe to services and drop out using any channel indistinctly.
  2. Same conditions in the offer and promotion of services. Gatekeepers can’t treat their own offerings favorably in the various product and service rankings they provide to users. They have to provide to their customers with real time information of the prices paid for the ad services.  Besides, Gatekeepers can’t use for their own benefit private information generated by end users and professionals in the use of the platform.
  3. Freedom of choice. Gatekeepers can’t force users to register in a specific service of their own to access a third party offer. Users must be able to install, uninstall and change pre-installed services in the offer of a Gatekeeper, third parties must be guaranteed that their offerings can be offered in equality.

To guarantee these duties and rights the legislation applies monetary fines that vary in amount from a 10% of a Gatekeeper global turnover to a 20% of the global turnover in the case of repeated breaches.

Changes in the communications ecosystem

Even though this regulation is not set in stone and will not come into effect until (most likely) 2023 there are already some changes that will affect some number independent communications services and more specifically personal messaging apps. These services (which would include WhatsApp, Facebook Messenger or iMessage) will be required to offer the capability of interoperating with smaller third party companies so they can share messages, send files or make calls between the different applications.

When it comes to smaller details there are many things yet to interpret. For instance, when talking about interoperability of the previously mentioned messaging services it is unclear whether they are also bound to interoperate amongst each other or only with the smaller actors and also if video conferencing services that have established themselves as dominant player during the pandemic (such as MS Teams) will also be bound to interoperate with third parties.

Even though there are many details yet to be defined, this piece of regulation effectively opens the possibility for smaller companies to offer new services that can provide value to end users who have seen how in the latest years “lock-in” strategies have been crowding the market depriving them from real freedom of choice. 

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