The GAFAM giants will have marked their calendars today as the Digital Markets Act (DMA), the European Union’s plan to limit Big Tech’s market power, which is now technically being implemented, after it went into effect last November.
The next major milestone will be a few months later, in early fall, when the Commission will confirm which of the usual suspected tech giants will be subject to the block’s shiny new pre-competition regulation regime. But the tech giants are facing a busy summer preparing their regional compliance strategies.
Quick recap: DMA applies a fixed set of obligations to so-called Internet “gatekeepers” who meet certain cumulative criteria: first they must run at least one “core platform service” (which includes online search engines, social networking services, apps stores, some messaging services, and assistants virtual servers, web browsers, operating systems, and online brokerage services).
Second, it must be of sufficient size and well-established market position to be subject to the system. This means reporting annual revenues in the European Economic Area of or exceeding €7.5 billion in each of the past three financial years; or to have an average market capitalization (or equivalent fair market value) of at least €75 billion in the last financial year, in addition to providing a basic platform service in at least three EU member states.
Gatekeepers should also be “a significant gateway for business users to end consumers”, as the Commission puts it – which the DMA considers to be so if the company in question operates a core platform service with 45 million monthly active end users in the EU and more than 10,000 annual active users. of business users in the EU in the last fiscal year.
Finally, a firm and permanent position is assumed if the company has met the other criteria in each of the past three fiscal years. Although the commission may also apply a subset of DMA rules to companies, it suspects they will soon become gatekeepers.
Obviously, some of the big names will reach the direct market access (DMA) threshold (Apple, Amazon, Google, Meta, and Microsoft seem perfectly safe bets for being gatekeepers). But we’ll have to wait a few months to see if the full slate contains any surprises.
And on that front, European music streaming giant Spotify clearly doesn’t expect to be one of them…but, let’s see!
“Now that the DMA has been applied, potential custodians who meet the specified quantitative thresholds have until July 3 to report their platform services to the Commission. The Commission will then have 45 working days (until September 6, 2023) to decide whether The company meets the thresholds and appoints gatekeepers. Once appointed, the gatekeepers will have six months (that is, until March 6, 2024) to comply with the requirements in the DMA,” the commission wrote in a press release.
If you’re feeling a sense of déjà vu, it’s probably because EU lawmakers recently identified 19 very large online platforms (VLOPs) that are subject to DMA’s sister regulation, the Digital Services Act (DSA), which is rebooting the bloc’s e-commerce governance system.
It’s possible that some of the same companies already named VLOPs under the DSA will be the designated gatekeepers under the DMA – meaning that they will accrue additional “specific commitments”, in addition to the algorithmic transparency requirements that the DSA demands.
DMA’s operational “do’s and don’ts” are explicitly aimed at ensuring that digital markets remain “open and competitive” by imposing a consistent set of behavioral conditions on gatekeepers intended to rein in familiar anticompetitive measures.
Examples of DMA obligations include restrictions on how gatekeeper platforms can use third-party data along with requirements that provide third parties with data about the usage their apps generate; bans on self-preference and on apps or default settings that don’t erase consumers; interoperability requirements, including guard messaging services; requirements that app stores do not prohibit sideloading and do not require developers to use their own services (such as payment systems); and prohibit tracking users of targeted ads without consent, among other terms.
The bulk of the list speaks to the Commission’s experience with Big Tech’s past antitrust cases, such as the many EU enforcement actions against Google. However, there were some later additions, by participating legislators in Parliament and Council, such as interoperability of messages (which surprised many), as well as restrictions on ad tracking.
Some similar types of stipulations have already been imposed on some tech giants in some EU markets, using existing competition forces. Such as the Netherlands – which last year forced Apple to allow dating app developers to choose to use alternative payment systems.
While Germany was ahead of the curve domestically, having updated its competition regime again at the start of 2021 – it already has some enforcement on a number of tech giants it has identified as “paramount” to compete domestically (such as Google).
The enforcement of EU data protection law has also reduced Meta’s ability to enforce behavioral advertising on users. So we had a taste of the bigger things to come when DMA is fired on all cylinders.
The big change here is that conditions apply up front – so the idea is to proactively regulate digital giants who have the power to set rules on others who need access to their core platform services and force them to support competition and be sensitive to consumer needs (rather than favoring themselves only ); Instead of antitrust regulators having to spend years investigating and collecting evidence of violations to bring cases of misconduct before it can be stopped, usually long after the damage has been established, as was the case in most of Europe under the (later) classical system of competition rules.
Having said that, it will take some time for the EU regulation to be amended. There are ongoing concerns about the provision of resources and the Commission’s willingness to bring its courage to the point of discord and take on such a massive oversight role that relies on some of the most powerful platforms in the world.
Time will tell how much resistance DMA gets from tech giants who are (mostly) used to working the way they like and/or lobbying like the gods when lawmakers propose changes that could get in the way of their mint machines. It also remains to be seen how willing the Commission will be to stick to its guns and forcefully impose a new digital world order (especially since the looming EU elections will reshape the bloc’s political power structures next year, including by bringing in new leaders who may not be as committed to approaches as Those who coined the DMA).
We certainly won’t see any enforcement action on the gatekeepers until next spring—when those September appointees will have six months to put their house in order. But we may see some operational changes in preparation for the new rules. And perhaps entirely new business models will emerge in the future, for example, ad tracking without consent becoming less viable for the big social media giants. Much legal action to test the limits and significance of DMA also seems inevitable. So the next few years in Europe will be filled with new and interesting power struggles.
In the United Kingdom, which left the bloc after the Brexit referendum vote, the government also recently indicated that it would go ahead with its own pre-reboot to tackle anti-competitive tech giants. The approach suggested there is for (tailored) conditions, for each platform, for those of “strategic market importance”, rather than the firm commitments of all the giants in the range.