How Will the New Digital Markets Act Affect Big Tech?
The EU has adopted new rules that will limit the market power of big online platforms like Apple and Google and the effects of those rules will be felt worldwide.
The Digital Markets Act will ban “gatekeeping” practices currently used by some large platforms that limit smaller platforms from reaching the public directly with their products and services. Once the DMA comes into effect the Commission will be able to sanction non-compliant behavior.
The EU parliament and Council agreed that the unfair business practices of large companies providing so-called “Core platform services will be targeted.
These include social networks and search engines with an annual turnover of at least 75 billion euro that have at least 45 million monthly end users in the EU and offer services such as social media, messengering and/or browsing (Whatsapp, iMessage, Facebook Messenger) will be required to inter-operate with smaller messaging platforms that request access.
That will give users of all platforms the opportunity to exchange messages, make video calls across messaging apps and send files, thus giving users more choice.
In addition, users of our very own Thunderbolt online casino and other services will be able to choose their browser search engines and virtual assistance freely. Explicit consent to the gatekeeper will be required to combine personal data for targeted advertising. Fines of up to 10% of the gatekeeper’s total worldwide turnover can be imposed for first-time offenses and up to 20% for repeated infringements.
Andreas Schwab, German representative of Parliament’s Internal Market and Consumer Protection Committee said "The agreement ushers in a new era of tech regulation worldwide. The Digital Markets Act puts an end to the ever-increasing dominance of Big Tech companies. From now on, they must show that they also allow for fair competition on the internet. The new rules will help enforce that basic principle. Europe is thus ensuring more competition, more innovation and more choice for users.”
Future of the Digital Economy
The DMA is one of the first efforts to set standards for how the world’s future digital economy will function. Schwab noted that “
With the Digital Markets Act (DMA), Europe is setting standards for how the digital economy of the future will function”……the EU has ensured “that the DMA will deliver tangible results immediately: consumers will get the choice to use the core services of Big Tech companies such as browsers, search engines or messaging, and all that without losing control over their data.”
A big focus of the law involved avoiding any type of over-regulation for small businesses. EU Parliament was focused on helping small businesses to get more access to business-relevant data, making the online advertising market fairer and securing new opportunities for app developers.
The DMA must first be approved, in its final form, by both the Council and the EU Parliament and be published in the EU Official Journal and rules. It will come into effect 6 months after publication.
As expected, Big Tech is upset over a huge potential loss of income and it is phrasing its dismay as concern that the new competition rules will make their services more fragmented and less secure worldwide. They say that their products work because of their current business plans and compliance will create chaos.
For one thing, they say that the requirement that changes be made six months after the final version is passed (probably this summer) is unrealistic. Matt Schruers, president of the Computer & Communications Industry Association which represents major tech companies told Axios "Whether companies are going to receive enough guidance from regulators that they can implement in a way that minimizes disruption to their users, is an open question".
In addition, it seems that there will be different experiences in different countries which means that platforms could pull a service or a product in EU countries if they aren’t successful in implementing the changes in a timely manner. "I suspect that rather than hamstring products in the U.S., companies designated as a gatekeeper will either exit the EU marketplace or offer different products in different regions Schruers said.
There are also security concerns with the DMA's messaging interoperability requirement raising alarms. Bryan Varndran of the FBI Cyber Division spoke on Capitol Hill last week. He said that aspects of the DMA could weaken encryption and create other security vulnerabilities. “Interoperability can have benefits, but if it's not done carefully, this could cause a tragic weakening of security and privacy in Europe,” tweeted Will Cathcart, chief of Meta-owned messaging system Whatsapp. And Eric Schmitt, former CEO of Google, told Axios, "What I worry about with European regulation, rather than saying what they're trying to do — increase competition and keep prices under control — they're micro-regulating."
In effect, said one tech insider, "What the commission has written sounds like a good idea on paper, and it's hard to disagree with on a principle level. But how do you make it real? It's anybody's game to guess."
EU parliamentarians and other officials who have been pushing the DMA say that making fair access a core principle will put the EU in line with other countries that are also looking for ways to reign in the big tech platforms.
In the United States the Federal Trade Commission and the U.S. Justice Department are also uniting in focusing on this goal. Daniel Francis, former deputy director of the FTC competition bureau, commented "The DMA aims to bring seismic change to digital markets.
But it’s going to take years, maybe decades, for courts and businesses to figure out, one case at a time, what that change will look like."