From ex-post to ex-ante digital regulation
Brussel’s DMA regime
Tech companies have become the main gateway into the EU digital economy. However, the market power of a few of those companies has resulted in high barriers to entry and anticompetitive practices. To address this, traditional EU competition law has employed an ex-post regulatory approach. In fast-moving digital markets prone to tipping, slow-moving ex-post regulation was ill-equipped to address these concerns fully.
The EU’s Digital Markets Act (DMA) introduces ex-ante regulation for companies designated by the European Commission (EC) as gatekeepers in relation to a core platform service (CPS). The DMA covers eight CPS, including app stores and search engines. To be designated as a gatekeeper, a company must meet certain quantitative and qualitative thresholds.
Once designated, a gatekeeper must abide by two sets of obligations within six months: obligations that apply without qualification, and obligations capable of being further specified. If an obligation is breached, the EC can impose fines of up to 10% of worldwide turnover and up to 20% for repeated infringements. Systematic infringements will warrant behavioural or structural remedies.
Since September 2023, the EC has designated seven companies as gatekeepers under the DMA, with Booking, the parent company of Booking.com, being the latest.
The DMA’s first major test
In April, Apple and Meta were fined €500 million and €200 million, respectively, by the EC for breaching DMA obligations.
The DMA requires that app developers who use Apple’s App Store must be able to inform customers of alternative offers available outside the App Store, direct them to those offers and allow them to make purchases there. Due to various restrictions Apple imposed on app developers that prevented them from informing customers of such offers, the EC found that Apple breached DMA obligations.
Likewise, the DMA requires users’ consent for combining their personal data across online platforms for personalised ads and requires that companies offer an equivalent, less personalised alternative to those who refuse. In November2023, Meta introduced the ‘Consent or Pay’ advertising model, which breached DMA obligations because it did not provide an equivalent, less personalised alternative, and because users’ consent was not freely given. The fine related to the period before this new model was introduced. In November 2024, Meta introduced another version of this model, which the EC is currently assessing.
Apple and Meta were required to comply with the EC’s decisions within 60 days; otherwise, they risked periodic penalty payments of up to 5% of their average daily worldwide turnover.
To avoid paying the daily fines, Apple has made changes to its EU App Store, including enabling app developers to inform customers of alternative offers outside the App Store.
Meanwhile, Meta has claimed that its new version of the free personalised ads model is sufficient to meet DMA obligations.
Both companies have appealed the decisions and are now close to settling their cases with the EC.
Westminster’s DMCCA regime
The Digital Markets, Competition and Consumers Act 2024 (DMCCA) empowers the Competition and Markets Authority (CMA) to designate companies with Strategic Market Status (SMS) in relation to a digital activity. SMS designations are time-bound for review every 5 years. To be designated as having SMS, a company must meet certain qualitative thresholds. Unlike the DMA, the DMCCA does not rely on any quantitative thresholds.
Once a company is designated as having SMS, the CMA can introduce tailored conduct requirements. Alternatively, the CMA can conduct pro-competition interventions, following which an order can be imposed to remedy any harmful effects on competition identified during the investigation. This includes both structural and behavioural remedies. If a conduct requirement or pro-competition order is breached, the CMA can impose fines of up to 10% of worldwide turnover.
In recent months, Google has been designated as having SMS in relation to its search and search advertising services, as well as its mobile platform. Similarly, Apple has been designated as having SMS in relation to its mobile platform. Itremains to be seen what interventions the CMA will undertake.
Comparing the two regimes
While the EU and UK competition regimes both aim to create a fairer and more competitive digital sector, they have taken notably different approaches.
The DMA has adopted a more rigid approach. Its focus is on predetermined obligations, which will likely lead to more legal certainty.
In contrast, the DMCCA has taken a more flexible approach, accounting for the specific anticompetitive behaviour and responding with tailored conduct requirements or pro-competition interventions. Because the decision to designate Apple and Meta as gatekeepers is undergoing an appeal, and the CMA has yet to take any action against companies with SMS, it is still uncertain whether the case-by-case approach taken by the DMCCA will be better placed to address anticompetitiveness.
By Maria Chihai
