Sunday, September 10, 2023

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EU Cracks Down On Big Tech Giants With Digital Markets Act

The European Union is ramping up efforts to rein in big technology companies, targeting six major players with the newly implemented Digital Markets Act (DMA).

The legislation aims to create a fairer and more competitive digital economy by setting strict rules that so-called “gatekeepers” must follow.

On Wednesday, the Commission designated Alphabet (Google’s parent company), Amazon, Apple, Meta, Microsoft and ByteDance (TikTok’s parent company) as gatekeepers under the DMA, meaning they will now face tougher regulations from Brussels.

The designation comes after the companies self-declared meeting certain thresholds, such as having over 45 million monthly EU users and a market cap exceeding €75 billion.

So what exactly does being labeled a gatekeeper mean? Essentially, it identifies companies the EU believes have the power to unfairly dominate markets by controlling access between businesses and customers.

Gatekeepers provide core platform services – such as social media, search engines, operating systems and online advertising services – that are very difficult for businesses and consumers to avoid using.

One company can be designated as gatekeeper for several core platform services. So far, 22 such services have been identified by the Commission.

The list of services includes Facebook, Instagram, WhatsApp, Google Search, YouTube, Amazon Marketplace, TikTok, among others, while Microsoft’s LinkedIn, Gmail and Samsung’s browsers avoided designation. But additional companies and services could be added down the line if they meet the criteria.

While the companies have seen incoming EU regulations on the horizon for some time, inclusion on the official gatekeeper list cements their legal obligations to comply with the new rules within six months or face hefty fines of up to 10% of the company’s total worldwide turnover, which can go up to 20% in case of repeated infringement.

Some of the most consequential obligations aim to loosen the grip of gatekeepers over core platforms like mobile operating systems and app stores. For example, Apple and Alphabet may soon need to enable iPhone and Android users to easily uninstall pre-installed apps if desired.

Data collection and targeted advertising practices also face scrutiny. Facebook and others may need to refrain from harnessing data collected from third-party sites and apps for ad targeting without explicit consent. And platforms like Amazon Marketplace will better be very careful not to give preferential treatment to their own products compared to competitors.

Messaging interoperability is also a priority, meaning that users of WhatsApp and Telegram, for example, may soon be able to seamlessly migrate from one app to the other.

For now, the Commission also has excluded Bing and iMessage from the list, based on some arguments put forward by Microsoft and Apple.

As the Financial Times recently reported, both companies are maintaining these two services are too small in the EU to be targeted. Apple said iMessage does not meet the threshold of 45 million active monthly users, while Microsoft noted Bing should be excluded as it only holds a small fraction of the search engine market compared to Google.

However, further investigations are underway to determine if these exclusions should stick.

While Big Tech giants have pushed back for some time against the incoming constraints, European officials have been careful to frame the regulations as being about creating fair competition – not an attack on successful American companies.

According to EU Commissioner Didier Reynders, “The Digital Markets Act will help creating a level-playing field for all companies competing in the European digital market, as it will bring about more contestability and openness in markets.”

That’s the intention, anyway. It remains to be seen how exactly the gatekeepers will modify their tightly controlled ecosystems to adhere to the long list of DMA dos and don’ts.

It will be an interesting process to follow.

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