17/04/2023
On 23 March 2023, the Luxembourg Chamber of Deputies enacted Bill N°8164, amending the Law of 30 November 2022 on competition_ ("Law") and thereby increasing the powers of the Luxembourg Competition Authority by implementing both Regulation 2022/1925, also known as the Digital Markets Act_ ("DMA"), and Regulation 2022/2560 on foreign subsidies distorting the internal market_ ("FSR").
1. New ex-ante EU competition rules for Gatekeepers under the DMA
The DMA, which entered into force from 1 November 2022, aims at rebalancing the relationship between the large digital platforms that control access to digital markets (defined as "gatekeepers") and user businesses by imposing harmonised rules to avoid unfair or unethical behaviour by gatekeepers.
The DMA was conceived as a solution to address the challenge of regulating digital behemoths ex post. Accordingly, it imposes obligations to be implemented beforehand.
Notion and designation of gatekeeper
The DMA applies to large companies which provide core platform services ("CPS"), such as online intermediation services, search engines, social networking services, advertising services, cloud computing services etc.
A CPS provider will be designated as a gatekeeper if the following three cumulative criteria are fulfilled:
- it has a significant impact on the internal market; the CPS provider is assumed to have such an impact if it reaches at least EUR 7.5 billion annual EU turnover in each of the last 3 financial years or at least EUR 75 billion average market capitalization or equivalent fair market value in the last financial year, and if the same CPS was provided in a least 3 EU Member States;
- it is an essential gateway for business users to reach end users, which is presumed when the CPS provider has at least 45 million monthly active end users established or located in the EU, and at least 10.000 yearly active business users established in the EU in the last financial year;
- it has or is expected to have an entrenched and durable position in its operations, which is assumed when, in each of the last three financial years, the CPS had at least 45 million monthly active end users established or located in the EU, and at least 10.000 yearly active business users established in the EU.
Key requirements for gatekeepers
The DMA aims to ensure that gatekeepers behave in a fair, non-discriminatory, and transparent way online. It provides several sets of obligations for gatekeepers, enshrined in its Articles 5, 6 and 7. These obligations include:
- interoperability obligations;
- enabling business users to access gatekeepers’ services on fair, reasonable and non-discriminatory terms;
- not preventing business users from offering the same products/services to users through third-party platforms or through their own websites at different terms and conditions;
- enabling business users to access the data they generate;
- restrictions on the processing of personal data (including a prohibition on processing users’ data for targeted advertising).
In case of non-compliance with the obligations and prohibitions laid down, the gatekeeper may be fined up to 10% of its total worldwide turnover in the preceding financial year, or up to 20% for repeated infringements.
Next steps
The implementing regulation, which will detail the procedural rules, should be published soon as the EC is aiming for the text to apply from the same date as the DMA.
Most of the provisions of the DMA will apply from 2 May 2023. The CPS providers that meet the three criteria to be designated as gatekeepers must notify the European Commission ("EC") no later than 3 July 2023. Within 45 working days the European Commission will identify and designate the undertakings that qualify as gatekeepers. Even if the quantitative thresholds are not met, a CPS provider can be classified as a gatekeeper by the EC if they meet the qualitative criteria (significant impact, essential gateway, entrenched and durable position) following a market investigation.
The designated gatekeepers will then have to comply with the DMA requirements by March 2024 at the latest.
2. The Foreign Subsidies Regulation
To avoid distortions caused by subsidies from third countries within the EU internal market, the FSR targets any undertaking engaged in an economic activity in the internal market that has received a foreign subsidy distorting the internal market.
Since the publication of our previous newsflash for the entering into force of the FSR_, the Commission published on 6 February a Draft Implementing Regulation ("Draft") which provides further clarifications and a first glimpse of what the detailed procedural rules could be.
The Draft proposes notification forms in the context of M&A and public procurement which exclude de minimis foreign financial contributions from the disclosure obligation if:
- for concentrations: the individual amount of contribution is below EUR 200,000 and the total amount of the contribution per third country and per year is below EUR 4 million;
- for tenders: the financial contribution falls into certain listed categories considered “most likely to distort the internal market” or relates to operating costs and lies below 4 million EUR per third country in the three years prior to the notification.
3. New powers for the Luxembourg Competition Authority
Even though the EC is the only authority empowered to enforce and monitor the correct application of the rules arising from both Regulations, the Luxembourg Competition Authority ("Authority") is expected to assist the EC, at the request of the EC or even on its own motion, for the purpose of collecting communications and carrying out the duties referred in these Regulations.
The framework for cooperation and assistance with the EC provided in the Law now includes specific references to the Articles laying down the rules regarding inspections in both Regulations.[1]This support would come into play when the EC conducts necessary inspections in Luxembourg[2].
Pursuant to both Regulations, officials authorised or appointed by the Member State in whose territory the inspection is to be conducted – which thus includes for Luxembourg officials of the Authority – must actively assist the EC at its request or that of the concerned Member State.
In addition, it must be recalled that the DMA specifically provides that national authorities must not take decisions which run counter to a decision adopted by the EC on the basis of the DMA[3]. Instead, Member States are expected to coordinate their enforcement actions (relating to the application of EU and national competition law rules, in particular regarding anti-competitive practices) and work in close cooperation with the EC.[4]
In its opinion ahead of the adoption of the amendments, the Authority specified that the support it will bring to the EC will be similar to the support that it is already entrusted with under Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the competition rules and Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings, e.g. through participation in inspections but also exchanges of information[5].
Regarding the DMA, the effectiveness of the newly proposed amendments is dependent on their applicability, which is scheduled for 2 May 2023. As for the FSR, the new amendments will take effect from 12 January 2024, notwithstanding the fact that the Regulation itself is set to become applicable from 12 July 2023.
Our expertise
Contact our experts Ursula Bassoukou, Philippe-Emmanuel Partsch, Achet-Billa Saleh and Lynn Waem in the EU Financial & Competition Law practice for assistance in understanding this new legal framework and how it could potentially impact your activities.
[1] Article 73 of the Law
[2] Article 14 of the FSR
[3] Article 1(7) of the DMA
[4] Article 38 of the DMA
[5] In this regard, the FSR specifically provides in its Article 13(6) that Member States must provide the EC with all necessary information to carry out the duties assigned to it by the FSR.
