The Digital Markets Act (EU Regulation 2022/1925) is a regulation from the European Union that was signed into law in September 2022 and went into effect in May 2023 with the aim of making the digital economy more fair. While the Digital Markets Act regulates “gatekeeper platforms” such as Google and Facebook, we have seen that its impacts and requirements are trickling down to small business websites as well. In this article, we will discuss the Act, including its benefits, who it applies to, its requirements, and how it may affect small businesses.
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Why was the Digital Markets Act passed?
European Union lawmakers have found that certain platforms are so large that they present an unfair impact on other businesses (as these large platforms cannot be challenged) and consumers as well (as they may lead to consumers having less choices). For example, businesses who want to advertise their products or services have very little choice as to where to obtain effective advertising (e.g. Facebook and Google) and cannot negotiate pricing or who those ads appear to as these platforms do not engage in such negotiations. In addition, consumers who want to use social networking platforms (e.g. Facebook or TikTok) have very little control over which platforms to use as other platforms have too few users to make them viable.
Due to the economic power of such platforms, they are essentially acting as a “gatekeeper” to the ability of businesses and consumers to access digital services. Gatekeepers connect businesses to many end users and thus are able to leverage their advantages (e.g. access to potential customers). The legislators found that this existing structure negatively impacts prices, quality of services, the ability to compete, choice and innovation. The legislators have also found that existing laws are not sufficient to correct these imbalances and thus the Digital Markets Act was passed to ensure fair and equal access to everyone.
Who does the Digital Markets Act regulate?
The Digital Markets Act regulates core platform services that act as gatekeepers. Core platform services include online intermediation services, online search engines (e.g. Google), online social networking sites (e.g. Facebook or TikTok), video-sharing platforms (e.g. YouTube), number-independent personal communication services, operating systems, web browsers (e.g. Chrome), virtual assistants, cloud computing services and online advertising services.
To be considered a gatekeeper, the core platform service must meet the following factors:
- Have a significant impact on the internal market. To have a significant impact on the internal market, a platform must have annual turnover in the European Union of EU 7.5 billion over the last three financial years;
- Provide a core platform service which is an important gateway for business users to reach end users. To meet this factor, the platform must have at least 45 million active end users in the European Union and at least 10,000 active business users that are established in the European Union;
- Enjoy an entrenched and durable position, in its operations, or it is foreseeable that it will enjoy such a position in the future. To meet this factor, the platform must meet the factor above for the last three financial years.
It is important to note that the Digital Markets Act applies to any platform services that meet the factors above and that offer services to users established in the European Union. However, the platform service does not need to be located in the European Union for the Act to apply to them, meaning that companies located in the United States, for example, will need to comply with the Act.
What are the requirements of the Digital Markets Act?
To change the current imbalances caused by gatekeepers, the Digital Markets Act imposes the following requirements on them:
- Users must provide their consent prior to being tracked for advertising purposes;
- Gatekeepers cannot combine personal data from third-party services to further the gatekeepers’ services;
- Gatekeepers cannot sign in end users to other gatekeeper services to combine personal data without the user’s consent;
- Gatekeepers must allow businesses to promote their products or services through third-party online services or through their direct channels, even if the pricing is different from what is offered through the gatekeeper;
- Gatekeepers must allow businesses users and end users to raise non-compliance issues with legal authorities;
- Gatekeepers that offer advertising services must present certain information to business users using such advertising services (e.g. the price and fees paid by that advertiser);
- Gatekeepers cannot rank their own products or services higher than others in online searches;
- Allow individuals to change their default settings and uninstall any applications;
- Provide businesses with access to their data;
- Allow users to stop using certain platform services.
Not meeting the requirements above can cost gatekeepers up to 10% of their total worldwide revenue for the preceding financial year.
How does the Digital Markets Act impact small businesses?
First, the Digital Markets Act provides certain protections for small businesses that will allow them to use core platform services in a more fair manner. For example, small businesses will no longer have to compete with core platform services on search engine results. In addition, small businesses will gain access to more information regarding their advertising efforts and will be able to deduce whether their advertising efforts are working and what restrictions are being placed on those efforts.
Second, since the Digital Markets Act requires consent to be obtained for tracking for advertising purposes, more and more gatekeeper platforms such as Google, are requiring users of their advertising platforms to obtain consent from consumers. Multiple businesses have received notices from Google asking them to implement a Google certified cookie consent banner to obtain consent from users for advertising:
In addition, Google’s notice states that it will no longer provide Google AdSense services to businesses that do not have a cookie consent notice that allows users to opt out of advertising cookies.
If you are currently running Google ads or any other advertising, you should be aware of the fact that these platforms are increasingly requiring their business users to implement a cookie consent banner, trickling down the requirements of the Digital Markets Act to small businesses. If you do not currently have a cookie consent banner, make sure to check out the Termageddon <> Usercentrics cookie consent banner solution, which is Google Certified.
As you can see from the above, the Digital Markets Act provides a solution to a more fair access to online services, helping both businesses and users. However, the requirements of the Act are also trickling down to small businesses and thus small businesses should ensure that they have a comprehensive cookie consent solution in order to retain their advertising.