The EU Digital Markets Act (DMA) entered into force on November 1, 2022, and it will start to apply in early 2023, while its “partner in crime,” the Digital Services Act, still awaits its moment in the limelight, announced to ensue in a year. Together they form a single set of new rules which aim to apply across the whole of the EU to create a safer and more open digital space.
One may say it’s all about digital, but essentially, it’s all about undistorted competition in digital!
A New Digital Era Begins with the DMA!
The DMA rocked the tech industry as it granted the European Commission (“Commission“) extensive investigative and enforcement powers on the digital market. Namely, the DMA’s essence is to prevent or stop unfair business practices conducted by the most prominent digital companies, designated as the “gatekeepers.” It is not easy to be recognized as a gatekeeper though. One must meet the criteria. These include having a significant impact on the EU internal market, providing a core platform service that is an essential gateway for businesses to reach end-users, and having an entrenched and durable position in operations or expectations of such a position in the foreseeable future. Gatekeepers are presumed to meet these criteria based on certain quantitative thresholds.
The DMA has focused on the Big Five (Google, Amazon, Apple, Meta, and Microsoft), the world’s most dominating IT corporations. The aim is to prevent them from engaging in anti-competitive behavior and work more closely with them. For this reason, a new EU office was set up in San Francisco, run by the senior Commission official, Mr. Gerard de Graaf.
In contrast with its earlier practice, the EU intends to engage in a more interactive collaboration with these tech giants this time. What’s this all about? The history with these companies in the Google shopping case, Amazon e-books case, Apple Pay case, Microsoft Windows media player case, and Google and Meta investigation prompted the Commission to develop new, more effective, and far-reaching tools.
So how will this pan out in practice? For example, Apple will have to allow third-party developers to access the NFC technology on iPhones. Amazon and Google will have to stop prioritizing their services and products on their platforms, and each OS will have to allow the users to deinstall the preinstalled apps on their devices. The list can go on. The aim is to galvanize the market and allow more competition in different services and easier detection and prevention of anti-competitive practices.
DG Comp and DG Connect seem ready to work together and deal with the DMA. By the end of the coming year, there will be around 40 designated EU competition officers.
The DMA’s impact on the EU internal market is evident, but should the rest of us care? The answer is “yes, of course”!
The Brussels Effect
The Brussels Effect refers to the EU’s power to regulate the global market by setting standards that are eventually globally accepted. How does this happen, and why?
The EU is famous for being a dynamic regulator, often a pioneer in many areas. Other jurisdictions often mirror these rules due to the EU’s reputation and high standards. Therefore, the situation on the ground is often like this – a company that wishes to go global will certainly aim for the EU market as one of the wealthiest markets in the world. Simply put, it makes sense to implement the EU’s rules before entering its market to reduce or avoid operational costs.
The same happened with the General Data Protection Regulation (GDPR) introduction. Businesses now adhere to GDPR standards even if they are out of the GDPR’s scope to be on the safe side and run the race together with the EU companies until the time comes for their respective countries to implement similar standards.
Will the DMA Also Affect the Western Balkans’ economies?
Undoubtfully! The Brussels Effect is particularly powerful in our region, as many companies operate in the EU market. Indeed, the DMA is likely to have an even more significant impact in the Western Balkans (“WB“) jurisdictions since the EU is their largest trading partner, including digital services. Consequently, WB-based tech companies and their international branches are even more inclined to accept the EU terms of business as the price of admission. Due to the power of EU legislation, these companies comply nearly by automatism, as most of them apply EU laws directly to their global operations to reduce the possibility of potential fines and minimize their costs (as is the case with GDPR). On top of that, all WB jurisdictions have embraced the EU-level playing field and implemented the EU rules in various shapes and forms under the specific Free Trade Agreements known as Stabilization and Association Agreements. So, it is only a matter of time before their legislation mirrors the DMA.
The Future of Digital
With the DMA, the EU hopes to create a better digital environment that will encourage development and competitiveness in the market and support the scalability of start-ups and other innovative undertakings. DMA’s objectives are understandable and welcome, but the enforcement will be challenging and perhaps unpredictable. Tech businesses should closely monitor the Commission’s steps and align their operations with the EU practice to avoid high costs of compliance in the future. For more info, feel free to contact our digital team.
Authors: Nemanja Sladaković, Jasmina Glavšić, Vasilije Bošković
