Explaining the Basics of the EU's Digital Markets Act (DMA): What is its Impact on Japan?

The “Digital Markets Act (DMA)” is a law enacted by the European Union (EU) in 2023 with the aim of ensuring fairness in the EU’s digital markets. Japanese companies looking to expand their business within the EU may have many questions about what kind of measures are necessary and what they should be aware of under this new legislation.

What is the Digital Markets Act (DMA)?

The Digital Markets Act (DMA) is a regulation of the European Union (EU) that was enacted on November 1, 2022 (2022年11月1日), and came into force on May 2, 2023 (2023年5月2日). It aims to curb the market dominance of large corporations and create a more accessible environment for new platformers to enter, thereby enhancing the competitiveness of the EU’s digital market.

The DMA can also be seen as antitrust legislation primarily targeting the five major American internet service companies—known as Big Tech—which include Google LLC, Apple Inc., Meta Platforms, Inc., Amazon.com, Inc., and Microsoft Corporation—that hold dominant positions in the market. Consequently, the regulation focuses on ‘gatekeepers,’ which are platformers of a certain scale.

Reference: European Union Official Website “About the DMA”[ja]

Differences Between DMA and GDPR

The GDPR is a legislative act concerning the protection of personal data within the European Union (EU). The following figure compares the differences between the DMA and the GDPR.

The DMA targets Big Tech and gatekeepers for regulation, protecting other companies. In contrast, the GDPR regulates all business operators and protects all individuals residing within the EU.

On the other hand, the GDPR is a law that regulates all IT business operators and protects all individuals residing within the EU.

Since the enactment of the ‘Directive on Electronic Commerce’ in 2000, there have been no revisions to regulations concerning consumer protection or the prevention of unfair practices in services offered by Big Tech. Therefore, it is conceivable that the DMA was proposed to address the negative impacts on companies other than gatekeepers.

Related article: What is GDPR? A Comparison with Personal Information Protection Law and Key Points for Japanese Companies to Be Aware Of[ja]

Key Points in Understanding the DMA

In this section, we will introduce the key points for understanding the DMA. There are two main points:

• Businesses subject to the Gatekeeper designation
• Regulations applicable to Gatekeepers

Entities Subject to Gatekeeper Regulation

Under the DMA (Digital Markets Act), the entities that are regulated as gatekeepers are as follows:

Reference: The Digital Markets Act: ensuring fair and open digital markets[ja] | Europa Commission

The European Commission states that the DMA is a form of ex post regulation that applies after the exercise of constitutional rights, complementing European competition law (a legal framework that regulates market pressures by economic entities such as large corporations and states). Therefore, it does not restrict the enforcement of European competition law or the competition laws of individual EU member states.

Regulations for Gatekeepers

Under the DMA, regulations for gatekeepers are defined as the following two categories:

• Actions that must be taken (Do’s)
• Actions that must not be taken (Don’ts)

First, the table below summarizes the actions that gatekeepers are required to take.

The Do’s focus on prohibiting market monopolization by big tech and gatekeepers. Conversely, the table below lists the actions that gatekeepers are prohibited from taking.

This also prohibits market monopolization by big tech and gatekeepers, as well as intentional manipulation of information.

Reference: The Digital Markets Act: ensuring fair and open digital markets[ja] | Europa Commission

Penalties for Violating the DMA

In the event of a violation of the DMA, the company in question may be subject to a fine of up to 10% of its total worldwide sales. Should the violations continue, the fine could increase to as much as 20% of the company’s global sales.

The Impact of the DMA on Japan

While the EU’s digital market is undergoing significant changes, the direct impact on Japan is expected to be minimal. However, as the services offered by Big Tech are anticipated to undergo substantial changes, the effects could be considerable.

On the other hand, changes in Big Tech services could also present new business opportunities. With the implementation of the DMA, third parties will be able to interoperate with gatekeeper services, enabling this potential.

For example, where service A could previously only interact within its own platform, it may now be possible to communicate across to service B. Depending on the nature of the business, this could lead to significant expansion of sales channels and opportunities.

Three Other EU Regulations You Should Know Besides the DMA

In this chapter, we introduce three EU regulations that are essential to know when expanding into the EU, in addition to the Digital Markets Act (DMA).

Data Act (DA)

The European Data Act (DA) is a legislative proposal announced by the European Commission in March 2022 (Gregorian calendar year), as part of the European Data Strategy proposed in 2020 with the strategic objective of creating a system that allows companies within the EU to share data. It was created with the aim of changing the current situation where 80% of industrial data is not being effectively utilized, by enabling more data to be used across society.

By providing an environment where data can be reused, the Data Act aims to reduce the digital divide, and strengthen the relationships between consumers, businesses, and governments. The enactment of the Data Act is expected to boost the GDP by 270 billion euros by 2028.

Reference: Data Act[ja]｜European Commission

Digital Services Act (DSA)

The Digital Services Act (DSA) is an EU regulation based on the principle that “what is illegal offline should also be illegal online,” designed to protect users from illegal goods, services, and content online.

The DSA applies to companies that provide large online platforms, search engines, hosting services, etc., and requires them to publish information about their monthly active users in the EU every six months.

The objectives of the DSA include enhancing democratic governance and oversight of system platforms and reducing systemic risks such as manipulation and misinformation.

Reference: The Digital Services Act[ja]｜European Commission

Digital Governance Act (DGA)

The Digital Governance Act (DGA) is a law aimed at eliminating data monopolies by specific companies and promoting data sharing across all EU member states. Like the Data Act (DA), it is legislation enacted in conjunction with the “European Data Strategy.” Sharing data such as health, traffic, and environmental data enables the provision of high-quality healthcare, alleviation of traffic congestion, reduction of CO2 emissions, and rapid response to emergencies such as floods and wildfires.

For businesses, the DGA will reduce the costs associated with acquiring, integrating, and processing data, lower barriers to market entry, and shorten the time to market for new services. The goal is to foster innovation and create new employment opportunities within the EU.

Reference: European Data Governance Act[ja]｜European Commission

Summary: Understanding EU Regulations is Essential for Business Expansion into the EU

The Digital Markets Act (DMA) is an EU law that prohibits the monopolization of services on platforms by the Big Tech 5 companies and gatekeepers. While the impact of the DMA on Japan may not be significant, changes in regulations and discipline among global Big Tech companies could not leave Japan unaffected.

In addition to the DMA, there are many other legal regulations in the EU’s digital market, and it is crucial for companies planning to enter the EU market to pay close attention to the trends in EU regulations. For advice on digital market regulations in the EU, we recommend consulting with attorneys who are knowledgeable in international legal affairs and the digital market.

Guidance on Measures by Our Firm

Monolith Law Office is a legal practice with extensive experience in IT, particularly in both the internet and legal fields. In recent years, global business has been expanding increasingly, and the need for legal checks by specialists is growing more than ever. Our firm provides solutions related to international legal affairs.

Areas of practice at Monolith Law Office: International Legal Affairs & Overseas Business[ja]