EU halter for platforms: what new opportunities will it bring to businesses and consumers?

Laurynas Totoraitis​
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The Digital Markets Act (DMA), which entered into force on May 2nd, will significantly contribute to the legal protection of Lithuanian companies that use online marketplaces, search platforms, social networks, cloud computing and online advertising services. The new rules will also improve the situation of consumers.

The new act will limit unfair practices and abuse of market position. The specific list of platforms that will be subject to the new requirements will be published by the European Commission in September at the latest, but it is likely to include Amazon, eBay, Alibaba, Meta, TikTok, Twitter, Alphabet (Google Search, Adsense or DoubleClick advertising), as well as the Apple App Store and Google Play.

What are the risks involved?

In recent years there has been a lot of talk about challenges related to the platform economy. Social networking platforms contribute to political, social, even national security risks – in this case, it is worth remembering the meetings of the US Congress regarding the activities of Facebook and TikTok. Meanwhile, marketplace platforms use the practice of unfair linking with other services, put their own products on search lists, and do not give businesses and consumers the opportunity to transfer data to another platform.

Currently, the largest platform operators are companies from the USA and Asian countries. According to the global capitalization of large platforms, the EU accounts for only 4% of the total market "pie". It is true that the platforms still provide opportunities for innovation and business development of EU companies that use this model to sell their goods and services online. For example, European app developers generate 30% of global revenue on the most popular app distribution platforms.

However, in the market of platform operators, a small number of large companies that provide services and have great economic power have formed. By providing services, access managers can connect many business customers with many end-users, which in turn allows them to leverage advantages gained in one area of ​​activity, such as access to large amounts of data, to other areas of activity. Some of those companies (like Amazon) control entire ecosystems of platforms. It is structurally extremely difficult for new entrants to compete with them, no matter how innovative or efficient those market entrants are. The EU has decided to take action in this area.

Practical significance for business

The Digital Markets Act will help businesses in several ways. The goals of the restrictions are to increase competition and create more opportunities for business growth and innovation, to limit unfair competition practices and the exploitation of market power.

First, access managers will need to provide clear and transparent terms of service for businesses to make informed decisions. The terms will reduce the legal jargon that now occurs plus quam tolerabile ('more than tolerable'). Detailed information about prices, services, platform operation methods must be provided. This will help companies understand the benefits of individual platforms and make informed choices.

In addition, access managers will be required to disclose information about the ranking and search algorithms they use to display search results and product listings. It will be possible to change the terms of the contracts only by giving an adequate notice period. Suspension or removal of a business account will only be possible after a thorough investigation and provision of counterarguments and an out-of-court appeal of the decision.


Companies will be able to access more data

The act mandates that access managers will have to provide free access to the data that users generate when using the services of that business. This includes data about customer behavior, preferences and interactions with the platform. By having access to this data, companies will be able to better understand their customers and make more informed decisions about improving their service and sales pipeline.

For example, a company that sells products on an online platform can analyze customer behavior data to understand which products are more popular and in demand. This information can help a business optimize its inventory and pricing strategy. In addition, access to data can help companies identify new markets, follow competitors and create more effective marketing strategies.

More positioning control

Platform operators sometimes provide core platform services and compete with their business customers by providing similar services or products to the same end users. The Digital Markets Act aims to tackle the problem of access managers exercising market power by unfairly favoring their own products or services over those of businesses using the platform. Access managers will be prohibited from using the data obtained through the platform to advertise the operator's own products or services in such a way that their competitors find themselves in a discriminatory position.

For example, if an access manager manages an online marketplace, it will not be allowed to give its products more visibility or a better position in search results.


Protection against unfair competition

The DMA will prohibit certain unfair business practices. In addition to the above, another such practice is tying products . Access managers will not be able to require the use of one service to access another. This will increase business flexibility and increase opportunities to offer your products on several different platforms at the same time.

The practice of bundling is also prohibited . Bundling is similar to bundling, but instead of requiring a business user to use a specific service or product, an access manager combines multiple products or services and offers them as a package.


The EU initiative was necessary

Concentration is increasing in the platform market, they are forming into monopolies, so EU intervention in the market by setting certain rules is welcome and necessary. The Digital Markets Act should create a fair, predictable, sustainable and reliable legal framework for business-platform operator relations. In addition, policy makers aim to ensure that online platforms operate responsibly.

The act provides several new rights for businesses, thus protecting EU entrepreneurs against platform operators based in the US and Asia. On the one hand, the EU is becoming a more attractive jurisdiction for e-commerce sellers and service providers to establish their businesses here. However, this initiative also shows that the EU has largely lost the competition at the level of platform management, and is therefore now taking only the necessary countermeasures. 

The original article is in Lithuanian language

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