The DMA, or the ruling that rattles the gafam

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The European Parliament adopted on Wednesday 15 December in Strasbourg one of the main texts of the legislature: the Digital Market Act (DMA). It pledges to regulate the digital space by tackling the tech giants’ anti-competitive practices. This text is completed with another regulation under negotiation on digital services (DSA).

Allowing the emergence of new competitors

The digital transformation has led to so-called network effects. This means that the more people use a digital service, the more useful it becomes for all other users. When a platform reaches a certain size, it becomes difficult for newcomers to challenge the established players, »[1] explains Nicolas Köhler-Suzuki, research associate at the Jacques Delors Institute.

The new legislation will introduce data portability for business customers, making it easier for them to switch online sales platforms, for example, while taking their customer data with them.

In addition, large platforms will be required to comply with rules increasing the transparency of their algorithms and limiting their use of private data, which is central to their business model. They will also have to notify the Commission of any proposed acquisition of a company in Europe.

What is the difference between DSA and DMA?

The draft Digital Services Act (DSA) aims to oblige behemoths such as Google, Facebook and Amazon to tackle illegal content online (incitement to hatred, disinformation, etc.) and to control the goods sold on their platforms (counterfeits, dangerous products, etc.). Not all companies would have the same obligations. The larger the platform, the greater the responsibility.

The DMA, on the other hand, tries to ensure that large online platforms provide a level playing field for the companies that use them to sell their goods and services online.

The Gafam are in the firing line

All groups with an EU turnover of more than EUR 8 billion or a stock market value of more than EUR 80 billion are involved. These groups must also be present in three Member States and have more than 45 million end-users and more than 10,000 business users.

About ten companies whose omnipotence threatens the free play of competition are therefore involved. Among them are the five Gafams (Google, Apple, Facebook, Amazon and Microsoft), but also Samsung.

High-level sanctions

Failure to comply with the DMA could result in fines of up to 10% of the turnover of the previous year. According to the French Commissioner, these sanctions could be applied swiftly to protect innovators.

However, this raises the question of the minimum thresholds for sanctions. On the European Parliament’s side, 4% of global turnover is called for.

A paradigm shift in European regulation

The Digital Markets Act would break with the pattern adopted so far of ex post determination of infringements of EU competition rules by large companies, thereby establishing a clear competition framework for the digital economy and allowing competition authorities to act much more quickly than in the past.

France, which holds the six-month rotating presidency of the Council of the European Union from January,  aims at ensuring DSA and DMA’s entry into force on 1 January 2023.

 

[1] CAZENAVE., Fabien. “Gafam : Comment L’union Européenne Veut Mettre Fin Au  » Far West  » De L’économie Numérique.” Ouest, https://amp-ouest–france-fr.cdn.ampproject.org/c/s/amp.ouest-france.fr/europe/ue/gafam-comment-l-union-europeenne-veut-mettre-fin-au-far-west-de-l-economie-numerique-4a048324-5cdd-11ec-9120-6497cd4074da.

 

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