The EU has unveiled its largest legislative effort to date to level the competition in the tech world. The new Digital Markets Act, or DMA, aims to rein in the power of the biggest tech giants and allow smaller companies to compete with the mostly US-based companies. So far, the EU has tackled antitrust issues on a case-by-case basis, but the DMA is set to introduce sweeping reforms that address systemic issues across the market.
Today’s announcement aims for interoperability of messaging apps such as WhatsApp, Facebook Messenger and iMessage, with the EU stating that providers “need to open up and work with smaller messaging platforms if they wish”. The EU says this should give users more choices in how they send messages without having to worry about what platform the recipient is on. In addition, the user should “be able to freely choose the browser, the virtual assistants or the search engine”.
Legislation is yet to pass – the EU says the language needs to be finalized and reviewed, then approved by Parliament and Council. We expect to hear more about the details during a press conference to be broadcast from Brussels on Friday morning at 8:45 a.m. Central European Time (that’s 3:45 a.m. ET).
The DMA could impose new obligations on companies considered “gatekeepers” – a category defined by the legislation as companies with a market capitalization of at least €75 billion ($82 billion); at least 45,000 active users; and a “platform” such as an app or social network. Companies in this classification include well-known technology giants such as Google, Microsoft, Meta, Amazon and Apple, but also smaller companies such as Booking.com.
If the “gatekeepers” do not comply with the rules, there is a risk of heavy fines: “The Commission can impose fines of up to 10 percent of their total worldwide turnover in the previous financial year, and up to 20 percent in the case of repeated violations. In the case of systematic violations, the Commission can prohibit them from acquiring other companies for a certain period of time.”
As EU Competition Commissioner Margrethe Vestager told The edge last weekthe goal of the DMA is to make the tech sector “open and contestable”.
“So it depends on your ideas, your work ethic and your ability to attract capital whether or not you’re going to be successful with your clients,” Vestager said. “And unfortunately, due to the systemic nature of behavior, that’s not necessarily the case today.”
The DMA is broad in scope and intended to enable a number of future antitrust measures, but it also contains a number of specific requirements for technology companies. These include:
- interoperability. Gatekeepers should allow their platforms to work with similar services from smaller third-party providers. Exactly how this will be interpreted isn’t clear yet, but it could mean that users on major messaging platforms like WhatsApp can contact users on other platforms.
- The right to uninstall. Consumers should have more choices when it comes to software and services, especially when it comes to mobile operating systems such as iOS and Android. They should be able to uninstall preinstalled software and choose which service to use for applications like email and web browsing when setting up a new device.
- data access. Businesses should be able to access data they generate for larger platforms. That would mean, for example, giving companies that sell goods on platforms like Amazon access to Amazon’s analytics about their performance.
- advertising transparency. For example, if a business buys ads on Facebook, they should be given the tools to independently verify the reach of their ads.
- No more selfishness. Companies cannot use their platforms to put their products first. This means, for example, that Google can’t rank its shopping service at the top of search results unless there’s some kind of competitive bidding for that spot.
If these requirements sound familiar to you, it shouldn’t come as a surprise. The DMA essentially pulls together a series of antitrust battles fought by the EU over the past decade, consolidating them into a single piece of legislation and strengthening lawmakers’ powers to enforce those terms. For example, you can see how the DMA’s focus on data access relates to previous EU allegations that Amazon is using its analytics gain advantage to third parties using its platform.
After on the draft application submitted in December 2020if companies break these rules, the EU can impose fines of up to 10 percent of their worldwide annual turnover, penalty payments of up to 5 percent of the average daily turnover and specific “conduct and structural measures” – i.e. changes in how their business or service activities, which may include measures such as the sale of parts of the company.
It’s that last point that might worry some tech companies, as current European antitrust efforts are often criticized for only levying small fines on tech giants without enforcing behavioral changes. For example, Apple was found to have violated antitrust laws in the Netherlands in relation to third-party treatment in the App Store. Instead of making any changes to its platform, Apple has instead opted for it pay weekly penalties of 5 million euros ($5.5 million).
“That’s why there’s a full toolbox in the Digital Markets Act, where the sanctions are getting tougher,” Vestager said The edge last week. “The fines will go up if you don’t make changes. Finally, in the toolbox, there is also the tool to actually wind up a company if nothing changes or if you are a repeat offender.” (Presumably this would only apply to the EU-based parts of these companies themselves.)
The DMA has been in the works for years and as a result has drawn a lot of criticism from big tech companies. They say the measures will stifle innovation and create unwanted complications for the average consumer. Some US lawmakers have also criticized the law, Writing a letter to President Joe Biden In February it said the legislation “unfairly targets American workers by designating certain US technology companies as ‘gatekeepers’ based on intentionally discriminatory and subjective thresholds.”
However, in both the US and the EU, politicians generally take a tough stance on the abuse of market power in the technology sector. President Biden has nominated vocal antitrust advocates like Lina Khan and Jonathan Kanter in key government positions and advanced legislation such as a new executive order Supporting the Right to Repair movement. In such a political environment, proponents of the DMA should find they have a strong hand in enforcing these new regulations.
https://www.theverge.com/2022/3/24/22994234/eu-antitrust-legislation-dma-digital-markets-act-details The EU is targeting big tech with sweeping new antitrust laws