Kingsley Hayes comments on the Digital Markets Act in Commercial Dispute Resolution

Partner and Head of Data and Privacy Litigation Kingsley Hayes and Dean Armstrong KC of Maitland Chambers comment on the EU’s Digital Markets Act and the future of Big Tech in Europe in Commercial Dispute Resolution.

Kingsley’s comments were published 11 September 2023, and can be found here.

What is the view of the DMA among lawyers in the UK?

The purpose of the Digital Markets Act (“DMA” or “Regulation”) is to seek to stop unfair practices by
so called “gatekeepers” operating in and out of online platforms. The three main indicators of who
qualifies as a ‘gatekeeper” are:

(1) A size that impacts the internal EU market based upon turnover in the EEA, and the
importance of the service;
(2) Significant influence over final consumers; and
(3) An established position based upon turnover or consumer access over the previous 3
financial years.

These criterial are presumptive, but that presumption can be rebutted. It is also open to the
European Commission (the “Commission”) to investigate specific situations to establish whether a
particular entity is caught.

The primary aim of the Regulation is to make digital markets safer, fairer, and, in economic terms,
contestable; it is a regulatory tool that intends to complement EU competition rules. To achieve its
objective, the DMA established a criterion that allows “gatekeepers” to be identified. Once a
gatekeeper has been identified, they will have to comply with the “do’s” and “don’ts” imposed by
the DMA, otherwise they will be subject to consequences, both financial and organisational. For
example in ensuring an open online environment which is fair to all users.

Digital markets are dominated by big tech companies. We, at Keller Postman UK (now KP Law), believe the DMA
aims to restore much needed equilibrium. This is a positive for innovators and consumers alike. For
instance, technology start-ups will have opportunities to compete in the digital platform
environment. Saliently, and stemming from this, consumers will be afforded more and, potentially
even better, services to choose from; they will have more opportunities to explore offerings from
other digital service providers and potentially even fairer prices, too. Further, the DMA also offers
consumers enhanced privacy protections. For example, gatekeepers are not permitted to track end
users outside of their core platform service for the purpose of targeted advertising, unless effective
consent has been obtained. This gives consumers more control over their data. The DMA should be
met with enthusiasm in terms of its stated aims. The practice and implementation of it may require
patience and resolve.

There is no homogeneity in enthusiasm, of course. Some critics contend the DMA will stunt
innovation, as certain companies will not be willing to take risks because of the fines system that
they would be subjected to if they failed to comply with parts of the regulatory regime.

Is there a danger that, as big tech faces more restrictions which impact their business
models, some companies may pull out of the EU altogether?

The argument that regulation serves to drive large entities away from jurisdictions is oft quoted and
sometimes threatened. It is fair to say that economic reality usually trumps these dangers. THe size
of the EEA market is so vast and lucrative, that large entities can, in reality, ill afford to turn their
backs on the opportunities it brings. Large entities have, over recent times, been faced with a
plethora of regulatory obligations but have not, for the most part, been driven away, Indeed some
have embraced the challenges with relish.”

Is this it, or is the Commission likely to (1) add more gatekeepers, or (2) tighten
restrictions?

On 6 September 2023, the Commission designated the first six gatekeepers: (1) Alphabet; (2)
Amazon; (3) Apple; (4) ByteDance; (5) Meta; and (6) Microsoft. A total of 22 core platform services
that these gatekeepers provide have been designated. These companies will now have six months to
ensure full compliance with the DMA. There is a proactive engagement with big players in the
industry to ensure that compliance can be effectively achieved.
In an area where the larger players are well known this spirit of cooperation will mitigate the effect
on future surprises. However, if another entity meets the quantitative thresholds then they will be
added as a gatekeeper, too. If the Commission designates that company as a gatekeeper, they will
then need to ensure full compliance with the DMA.
We do not anticipate that the Commission will tighten restrictions in the first few years of the
regulation coming into force. The Commission will need time to consider the DMA’s impacts before
it decides to change anything.

Is there a legal argument that it is unfair to impose restrictions on some companies but not
others?

There are two important contextual matters to be borne in mind when dealing with this issue. The
first is that the designation of a “gatekeeper” is not an arbitrary act. It is based upon criteria with a
right of challenge by the entity itself. This is significant in tempering concerns over unfair designation
and there is a proposed in built process to ensure fairness. Second, the Commission by its active
engagement is showing a desire to seek to understand and temper unwanted consequences whilst
dealing with what it sees as practices leading to unfairness. Those entities mentioned above enjoy
large resources gained from enjoyment of positions of power and strength over consumers. They are
also afforded the opportunity to seek to shape the ways that the Regulation is implemented due to
the consultation process. The aim of the Regulation is laudable. It is a matter of collaboration to
ensure that is enforced with due proportionality and balance of fairness and regard to commercial
objectives.