Week Ahead (2 May)

Tuesday, 2 May – Digital Markets Act (DMA) becomes applicable with full enforcement scheduled for March 2024

Following its publication in the EU Official Journal last October, the Digital Markets Act (DMA) becomes applicable under EU law from today. The DMA, together with the Digital Services Act (DSA), is part of the European Commission’s landmark Digital Services Package.

From today, digital platforms have two months (until 3 July 2023) to designate their services as coming under the scope of the rules, and the Commission has 45 working days (until 6 September 2023) to verify the designations. Designated gatekeeping platforms will then have six months to get their services into compliance, until 6 March 2024, when enforcement of the obligations begins.

As part of this process, digital platforms will have to provide the Commission with detailed information on the core platform services they provide as well as their last three years of annual turnover, market value and the EU member countries they operate in. This will also include the number of users and businesses operations on their platforms.

The purpose of the DMA is to regulate the digital market by preventing Big Tech companies, referred to as ‘gatekeepers’, from abusing their dominant market positions, and opening competition to smaller competitors. The DMA regime would place obligations on gatekeepers to avoid anti-competitive behaviour and would give power to the European Commission to regulate the actions of Big Tech companies. The European Commission would have the power to investigate the actions of gatekeepers and fine them up to 10% of their global turnover from the preceding year if they are found to be in breach of the DMA. While EU competition law allows the Commission to intervene when companies abuse their dominant market positions, the DMA would allow the Commission to impose prescriptive rules on companies simply due to their market strength. It is likely that the ability of gatekeepers to ‘self-preference’ and ban competitors from accessing their marketplaces, such as app stores, will be curtailed.

More specifically, if a gatekeeper violates the rules laid down in the DMA, it risks a fine of up to 10% of its total worldwide turnover. For a repeat offence, a fine of up to 20% of its worldwide turnover may be imposed. Furthermore, if a gatekeeper systematically fails to comply with the DMA, i.e. it violates the rules at least three times in eight years, the European Commission can open a market investigation and, if necessary, impose behavioural or structural remedies. The Commission will hold its latest workshop on the legislation on Friday 5 May, this time covering data-related obligations.

Wednesday, 3 May – European Commission to table proposal to scale up production of ammunition to assist Ukraine

Tomorrow, the European Commission is expected to adopt a proposal which would ramp up the European Union’s ammunition capacity in the next 12 months.

France had held up the proposal by insisting that the entire supply chain would have to be located in the EU or Norway to benefit from EU and Norwegian funds. It is understood that there is now an agreement that supplies from outside the Union would be allowed although there is still disagreement over how far such exemptions should go.

In preparation for the initiative, the responsible Commissioner Thierry Breton has met with 10 EU defence minsters and toured defence production sites across the bloc. Greece, Spain and Germany are the next three countries on his agenda.

Breton has also indicated that increased defence spending will be compatible with EU debt reduction rules since certain exemptions are allowed for spending on key projects of European interest. His intention is that this ammunition initiative will fall under this exemption and next week’s proposal is likely to give further detail on this aspect.

Thursday, 4 May – ECB Governing Council to hold monetary policy meeting in Frankfurt

On Thursday, the ECB Governing Council meets (GC) to decide where next for Eurozone interest rates. The meeting comes two days after Eurostat released its April flash inflation estimate, with inflation in the euro area at 7%, up from 6.9% in March, even though core inflation witnessed a slight dip to 5.6% from 5.7%.

While the minutes of the February meeting showed a hawkish sentiment among ECB Governing Council members, with a clear intention from the GC to continue hiking rates beyond the March meeting, the minutes of the March meeting showed more disagreement among GC members.

As anticipated in our preview report, the upheaval in the banking sector encouraged dovish GC members to urge caution and call for a pause in the rate hike cycle. Anonymous briefing in the aftermath of the meeting suggests that hawkish members of the GC feel “vindicated” in pushing for 50bp in March as the Eurozone economy has been able to withstand the financial turmoil. Nevertheless, after six consecutive 50bp rate hikes, which have yet to work their way through the economy, the GC is likely to be more cautious at the 4 May meeting with a 25bp hike more likely on this occasion, especially after core inflation unexpectedly eased in April, according to Eurostat’s flash estimates.