State Secretary Giegold expects “more fairness and competition in digital markets” as EU adopts new code of conduct for large digital companies

Last night, the Council, the Parliament and the European Commission brought the negotiations on the “Digital Markets Act” (DMA) to a successful conclusion. The regulation is the first of its kind in this form. As a new instrument designed to promote competition in platform markets, the DMA provides for a code of conduct for large digital companies. Previously, only Germany had adopted similar rules in its ARC (Act against Restraints of Competition) Digitisation Act, which entered into force in 2021.

Sven Giegold, State Secretary at the Federal Ministry for Economic Affairs and Climate Action, commented: “Europe has agreed some of the world’s most stringent rules to promote competition and fairness among major digital players. Large platform companies will be bound by a set of clear-cut and tough rules and they will no longer be able to set the rules of the game all by themselves. For too long, digital giants like Google, Facebook, Amazon and the like have been dominating the market, making it virtually impossible for new competitors to gain a foothold. In future, all large digital companies will be bound by a clear code of conduct. Germany’s ARC Digitisation Act has given a decisive stimulus to this effort. The German Federal Government has successfully championed a rigorous EU regulatory framework without this being to the detriment of the rights of the Bundeskartellamt. Not least, it is consumers who will benefit from the new rules. There will be clearer rules for personalised advertising, greater interoperability of services, and greater data portability. Moreover, the Digital Markets Act will also help those companies which rely on gatekeepers. Hotels, for example, will no longer be prevented by gatekeepers from offering their services at a cheaper price on their own websites.”

To date, it has not been uncommon for competition proceedings involving digital companies to drag on for years. Until a legally binding decision was reached, competitors and consumers had often suffered irreversible damage. Now, the DMA provides for faster and more effective interventions by the European Commission.

The Federal Government deems the outcome of the negotiations a major success. The cornerstone of the regulation is a set of around twenty specific conduct requirements which are to be proactively implemented by all gatekeepers. For example, gatekeepers’ messenger services will be subject to an interoperability requirement which will soon comprise group functions as well. This means that users will no longer have to choose any particular messenger service simply because most of their family and friends are using it. Rather, qualitative criteria such as a high level of data privacy will be a decisive competitive factor. At the same time, small messenger services and users will continue to have freedom of choice. In other words, they will be able to decide for themselves whether they want to offer or use the function. The obligation will only apply to services offered by gatekeepers such as WhatsApp.

Stricter rules will also be introduced for personalised advertising. Gatekeepers will no longer be allowed to place such advertisements without the consent of the end user. At the same time, it will be ensured that users cannot be pushed into giving their consent through so-called “dark patterns”, i.e. a user interface design intended to make users take actions which conflict with their own interests. In this way, the rule can help to further the enforcement of the General Data Protection Regulation and to curb the frenzy with which large digital companies are collecting personal data.

Consumer choice will be strengthened by requiring gatekeepers to make it easier for users to change between default services. As of now, between 90 and 95 per cent of users are using pre-installed default services such as the web browser.

The Coalition Agreement provides for the strengthening of the interoperability of messaging services. This is also to be the basis for an evaluation of the Act against Restraints of Competition (ARC). The Federal Ministry for Economic Affairs and Climate Action has outlined a set of conceptual steps for this in its Ten Point Agenda and is going to prepare a revision of the ARC in the coming months.