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Higher Prices, Less Choice: How Abuse of the DMA’s ‘Gatekeeper’ Concept Risks Hurting Consumers

Main takeaways

  1. Using a company’s gatekeeper status under the Digital Markets Act (DMA) as an excuse to exclude it from unrelated markets goes against the DMA’s principles.
  2. The EU Commission set a dangerous precedent with the Data Act, which now risks spilling over into other regulations – such as new rules on financial data access (FiDA).
  3. Blocking a company from entering a new market will simply lead to higher prices, fewer options, and consumers missing out on new technology.

The EU Digital Markets Act (DMA) only started to fully apply in March, meaning that companies designated as so-called ‘gatekeepers’ had to roll out all kinds of changes to their services and products in order to comply with what is prescribed by the DMA. 

As a reminder, the aim of the DMA is to introduce more ‘contestability’ in digital markets for rivals and ‘fairness’ for business users of gatekeeper services. This is done by imposing a list of obligations and prohibitions on a limited number of companies in relation to specific designated services. For example, a company designated as a gatekeeper in relation to its advertising services and video-sharing platform is prohibited from combining personal data from those two services. 

The DMA’s goal is not to impose restrictions on designated companies as a whole, nor to prevent them from bringing innovation to new sectors. Instead, the DMA seeks to address specific concerns and only in relation to designated services. While this is what the DMA says on paper, is it also what is happening in reality? Unfortunately not.

1. Is ‘big’ automatically the same as ‘bad’?

Recently, we have seen an emerging trend of EU policymakers trying to hijack the ‘gatekeeper’ designations in order to impose additional prohibitions – which don’t have anything to do with the DMA’s actual objectives – on the same companies in totally different markets. 

Using the fact that a company has been designated a gatekeeper under the DMA as a reason to impose other rules on that company marks a clear departure from DMA’s philosophy. It risks creating unintended consequences for consumers and industry alike – and ultimately also for Europe’s digital ambitions. It basically comes down to a punishment for companies being deemed ‘big’ in other, unrelated sectors without any reasonable justification. Very often, a company considered to be ‘big’ in one particular sector is in fact the new challenger in another market, competing with well-established incumbent players.

2. Dangerous precedent

The Data Act set the first dangerous precedent in this respect, as a new EU regulation entirely unrelated to the DMA that uses the ‘gatekeeper’ concept to impose new prohibitions on the very same designated companies. 

The aim of the Act is to facilitate access to data from connected devices for start-ups, SMEs and enterprises from traditional sectors with less-developed digital capabilities. In its initial proposal for a Data Act, the European Commission already decided to prohibit gatekeeper-designated companies from accessing data under this specific framework. 

This prohibition goes well beyond the DMA, as the term ‘gatekeeper’ was broadly expanded by the Commission to “all legal entities of a group of companies where one legal entity provides a core platform service”. All of a company’s services now suddenly fall within scope of the prohibition, even if a given service is entirely new, poses no contestability risk, and is genuinely intended to compete with established incumbents in a given market. 

It goes without saying that this new prohibition considerably limits consumer choice. In fact, it even directly conflicts with users’ right to data portability under the General Data Protection Regulation (GDPR). Consumers cannot transfer any data to their preferred digital service provider simply because it is a ‘gatekeeper’, even if they explicitly wish to do so.

3. Undesirable spill-over

The Data Act introduced a slippery slope and had a negative impact on other proposals ever since. In June 2023, for example, the Commission presented its proposal for a Financial Data Access Regulation (FiDA). The main objective of which is to improve economic outcomes for consumers of financial services by promoting digital transformation and speeding up the adoption of data-driven business models in financial services. 

Rightfully, this time the Commission decided not to exclude gatekeepers. Because it would defeat the core purpose of the FiDA regulation – namely to make financial services more innovative and create competition in a sector dominated by large banks and insurance companies. Afterall, those tech companies deemed ‘gatekeepers’ under the DMA actually are new entrants that could drive competition and innovation in the financial services sector.

Despite widely-held concerns that the Data Act had set a risky precedent, the European Parliament nevertheless opted to add ‘gatekeeper’ restrictions to its FiDA amendments. Needless to say, big banks and insurance companies have a clear interest in excluding innovative tech companies, and were happy to see that Parliament wants to preemptively reduce competition in ‘their’ sector. All of this to the detriment of consumers of course. 

The legislative debate on FiDA is still ongoing. So, we have to reiterate that rules to preemptively exclude companies from an entire market or sector should only be introduced in exceptional circumstances, when no other measure can reasonably be implemented. That’s hardly ever the case, and definitely not for FiDA. The Commission and co-legislators must therefore firmly oppose such sweeping bans, which could only distort competition and harm consumers.

4. Negative consequences for Europe, industry, and consumers

As mentioned, the introduction of discriminatory blanket prohibitions on gatekeepers outside the DMA framework is bound to have negative consequences for everyone. If a company is prohibited from introducing products to a market it has not been present on before, those who will suffer most are consumers, who are left with limited choice of products and hardly any innovation. 

It is important to remember that innovation drives competition, which ultimately leads to better products and services, as well as lower prices. If we preemptively start to block companies from entering an entire market, the market itself might not evolve, and customers could lose out on new technology.

Conclusion 

Taking all this into account, the idea of recycling the DMA’s ‘gatekeeper’ concept to define the scope of other EU legislation should be outright rejected before it is too late and its proliferation can no longer be stopped. Not only does this kind of flawed thinking create regulatory inconsistencies, it’s also fundamentally wrong to cherry-pick concepts from one law to achieve the opposite of what that very law intends to achieve.

European Union

DisCo is dedicated to examining technology and policy at a global scale.  Developments in the European Union play a considerable role in shaping both European and global technology markets.  EU regulations related to copyright, competition, privacy, innovation, and trade all affect the international development of technology and tech markets.