DMA Article 3. Designation of gatekeepers

Weak contestability and unfair practices in the digital sector are more frequent and pronounced for certain digital services than for others. This is the case in particular for widespread and commonly used digital services that mostly directly intermediate between business users and end users and where features such as extreme scale economies, very strong network effects, an ability to connect many business users with many end users through the multisidedness of these services, lock-in effects, a lack of multi-homing or vertical integration are the most prevalent. Often, there is only one or very few large undertakings providing those digital services. Those undertakings have emerged most frequently as gatekeepers for business users and end users, with far-reaching impacts. In particular, they have gained the ability to easily set commercial conditions and terms in a unilateral and detrimental manner for their business users and end users. Accordingly, it is necessary to focus only on those digital services that are most broadly used by business users and end users and where concerns about weak contestability and unfair practices by gatekeepers are more apparent and pressing from an internal market perspective.

The fact that a digital service qualifies as a core platform service does not in itself give rise to sufficiently serious concerns of contestability or unfair practices. It is only when a core platform service constitutes an important gateway and is operated by an undertaking with a significant impact in the internal market and an entrenched and durable position, or by an undertaking that will foreseeably enjoy such a position in the near future, that such concerns arise. Accordingly, the targeted set of harmonised rules in this Regulation should apply only to undertakings designated on the basis of those three objective criteria, and they should only apply to those of their core platform services that individually constitute an important gateway for business users to reach end users. The fact that it is possible that an undertaking providing core platform services not only intermediates between business users and end users, but also between end users and end users, for example in the case of number-independent interpersonal communications services, should not preclude the conclusion that such an undertaking is or could be an important gateway for business users to reach end users.

In order to ensure the effective application of this Regulation to undertakings providing core platform services which are most likely to satisfy those objective requirements, and where unfair practices weakening contestability are most prevalent and have the most impact, the Commission should be able to directly designate as gatekeepers those undertakings providing core platform services which meet certain quantitative thresholds. Such undertakings should in any event be subject to a fast designation process which should start once this Regulation becomes applicable.

The fact that an undertaking has a very significant turnover in the Union and provides a core platform service in at least three Member States constitutes compelling indication that that undertaking has a significant impact on the internal market. This is equally true where an undertaking providing a core platform service in at least three Member States has a very significant market capitalisation or equivalent fair market value. Therefore, an undertaking providing a core platform service should be presumed to have a significant impact on the internal market where it provides a core platform service in at least three Member States and where either its group turnover realised in the Union is equal to or exceeds a specific, high threshold, or the market capitalisation of the group is equal to or exceeds a certain high absolute value. For undertakings providing core platform services that belong to undertakings that are not publicly listed, the equivalent fair market value should be used as the reference. It should be possible for the Commission to use its power to adopt delegated acts to develop an objective methodology to calculate that value.

Whereas a market capitalisation at or above the threshold in the last financial year should give rise to a presumption that an undertaking providing core platform services has a significant impact on the internal market, a sustained market capitalisation of the undertaking providing core platform services at or above the threshold over three or more years should be considered as further strengthening that presumption.

By contrast, there could be a number of factors concerning market capitalisation that would require an in-depth assessment in determining whether an undertaking providing core platform services should be deemed to have a significant impact on the internal market. This could be the case where the market capitalisation of the undertaking providing core platform services in preceding financial years was significantly lower than the threshold and the volatility of its market capitalisation over the observed period was disproportionate to overall equity market volatility or its market capitalisation trajectory relative to market trends was inconsistent with a rapid and unidirectional growth.

Having a very high number of business users that depend on a core platform service to reach a very high number of monthly active end users enables the undertaking providing that service to influence the operations of a substantial part of business users to its advantage and indicate, in principle, that that undertaking is an important gateway. The respective relevant levels for those numbers should be set representing a substantive percentage of the entire population of the Union when it comes to end users and of the entire population of businesses using core platform services to determine the threshold for business users. Active end users and business users should be identified and calculated in such a way as to adequately represent the role and reach of the specific core platform service in question. In order to provide legal certainty for gatekeepers, the elements to determine the number of active end users and business users per core platform service should be set out in an Annex to this Regulation. Such elements can be affected by technological and other developments. The Commission should therefore be empowered to adopt delegated acts to amend this Regulation by updating the methodology and the list of indicators used to determine the number of active end users and active business users.

An entrenched and durable position in its operations or the foreseeability of enjoying such a position in the future occurs notably where the contestability of the position of the undertaking providing the core platform service is limited. This is likely to be the case where that undertaking has provided a core platform service in at least three Member States to a very high number of business users and end users over a period of at least 3 years.

Such thresholds can be affected by market and technical developments. The Commission should therefore be empowered to adopt delegated acts to specify the methodology for determining whether the quantitative thresholds are met, and to regularly adjust it to market and technological developments where necessary. Such delegated acts should not amend the quantitative thresholds set out in this Regulation.

An undertaking providing core platform services should be able, in exceptional circumstances, to rebut the presumption that the undertaking has a significant impact on the internal market by demonstrating that, although it meets the quantitative thresholds set out in this Regulation, it does not fulfil the requirements for designation as a gatekeeper. The burden of adducing evidence that the presumption deriving from the fulfilment of the quantitative thresholds should not apply should be borne by that undertaking. In its assessment of the evidence and arguments produced, the Commission should take into account only those elements which directly relate to the quantitative criteria, namely the impact of the undertaking providing core platform services on the internal market beyond revenue or market cap, such as its size in absolute terms, and the number of Member States in which it is present; by how much the actual business user and end user numbers exceed the thresholds and the importance of the undertaking’s core platform service considering the overall scale of activities of the respective core platform service; and the number of years for which the thresholds have been met.

Provision should also be made for the assessment of the gatekeeper role of undertakings providing core platform services which do not satisfy all of the quantitative thresholds, in light of the overall objective requirements that they have a significant impact on the internal market, act as an important gateway for business users to reach end users and benefit from an entrenched and durable position in their operations or it is foreseeable that they will do so in the near future. When the undertaking providing core platform services is a medium-sized, small or micro enterprise, the assessment should carefully take into account whether such an undertaking would be able to substantially undermine the contestability of the core platform services, since this Regulation primarily targets large undertakings with considerable economic power rather than medium-sized, small or micro enterprises.

Such an assessment can only be done in light of a market investigation, while taking into account the quantitative thresholds. In its assessment the Commission should pursue the objectives of preserving and fostering innovation and the quality of digital products and services, the degree to which prices are fair and competitive, and the degree to which quality or choice for business users and for end users is or remains high. Elements can be taken into account that are specific to the undertakings providing core platform services concerned, such as extreme scale or scope economies, very strong network effects, data-driven advantages, an ability to connect many business users with many end users through the multisidedness of those services, lock-in effects, lack of multi-homing, conglomerate corporate structure or vertical integration. In addition, a very high market capitalisation, a very high ratio of equity value over profit or a very high turnover derived from end users of a single core platform service can be used as indicators of the leveraging potential of such undertakings and of the tipping of the market in their favour. Together with market capitalisation, high relative growth rates are examples of dynamic parameters that are particularly relevant to identifying such undertakings providing core platform services for which it is foreseeable that they will become entrenched and durable. The Commission should be able to take a decision by drawing adverse inferences from facts available where the undertaking providing core platform services significantly obstructs the investigation by failing to comply with the investigative measures taken by the Commission.

A particular subset of rules should apply to those undertakings providing core platform services for which it is foreseeable that they will enjoy an entrenched and durable position in the near future. The same specific features of core platform services make them prone to tipping: once an undertaking providing the core platform service has obtained a certain advantage over rivals or potential challengers in terms of scale or intermediation power, its position could become unassailable and the situation could evolve to the point that it is likely to become entrenched and durable in the near future. Undertakings can try to induce this tipping and emerge as gatekeeper by using some of the unfair conditions and practices regulated under this Regulation. In such a situation, it appears appropriate to intervene before the market tips irreversibly.

However, such early intervention should be limited to imposing only those obligations that are necessary and appropriate to ensure that the services in question remain contestable and enable the qualified risk of unfair conditions and practices to be avoided. Obligations that prevent the undertaking providing core platform services concerned from enjoying an entrenched and durable position in its operations, such as those preventing leveraging, and those that facilitate switching and multi-homing are more directly geared towards this purpose. To ensure proportionality, the Commission should moreover apply from that subset of obligations only those that are necessary and proportionate to achieve the objectives of this Regulation and should regularly review whether such obligations should be maintained, suppressed or adapted.

Applying only those obligations that are necessary and proportionate to achieve the objectives of this Regulation should allow the Commission to intervene in time and effectively, while fully respecting the proportionality of the measures considered. It should also reassure actual or potential market participants about the contestability and fairness of the services concerned.

Gatekeepers should comply with the obligations laid down in this Regulation in respect of each of the core platform services listed in the relevant designation decision. The obligations should apply taking into account the conglomerate position of gatekeepers, where applicable. Furthermore, it should be possible for the Commission to impose implementing measures on the gatekeeper by decision. Those implementing measures should be designed in an effective manner, having regard to the features of core platform services and the possible circumvention risks, and in compliance with the principle of proportionality and the fundamental rights of the undertakings concerned, as well as those of third parties.

In order to ensure contestable and fair markets in the digital sector across the Union where gatekeepers are present, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of amending the methodology for determining whether the quantitative thresholds regarding active end users and active business users for the designation of gatekeepers are met, which is contained in an Annex to this Regulation, in respect of further specifying the additional elements of the methodology not falling in that Annex for determining whether the quantitative thresholds regarding the designation of gatekeepers are met, and in respect of supplementing the existing obligations laid down in this Regulation where, based on a market investigation, the Commission has identified the need for updating the obligations addressing practices that limit the contestability of core platform services or are unfair, and the update considered falls within the scope of the empowerment set out for such delegated acts in this Regulation.