The EU has announced the greatest legislative effort in history to balance competition in the high-tech industry. The new Digital Markets Act (DMA) aims to curb the power of the largest technology companies and allow smaller companies to compete with primarily US-based companies. So far, the EU has tackled antitrust issues on a case-by-case basis, but DMA aims to introduce radical reforms to address systematic issues across the market.
Today’s announcement targets the interoperability of messaging apps such as WhatsApp, Facebook Messenger, and iMessage, and the EU says vendors “need to open and interoperate smaller messaging platforms on demand.” I am saying. The EU says this should give users more choices in how to send messages without worrying about which platform the recipient is using. There is also a requirement that the user have “free choice of browser, virtual assistant, or search engine”.
The goal of DMA is to make the technology open and competitive.
The bill has not yet been passed — the EU states that the language needs to be completed and checked, at which point it needs to be approved by Parliament and the Council. More details will be heard at a press conference broadcast from Brussels on Friday morning at 8:45 AM Central European Time (3:45 AM ET).
DMA may impose new obligations on companies that are considered “gatekeepers.” This is a category defined by law as a company with a market capitalization of at least € 75 billion ($ 82 billion). At least 45,000 active users. A “platform” like an app or social network. Companies in this category include well-known tech giants such as Google, Microsoft, Meta, Amazon, and Apple, as well as smaller entities such as Booking.com.
If the “gatekeeper” does not follow the rules, you may be fined. “The Commission can fine up to 10% of global sales in the previous fiscal year and 20% in the case of repeated infringement. In the case of systematic infringement, the Commission can impose them on others. It may ban the acquisition of a company for a period of time. “
As EU competition commissioner Margre the Vestager told The Verge last week, the goal is for DMA to make the technology sector “open and competitive.”
“So it depends on your ideas, your work ethic, and your ability to attract your capital, whether you succeed with your customers or not,” Vestagger said. “And unfortunately, because of the systematic nature of behavior, that is not always the case today.”
DMA is broad and aimed at enabling various antitrust measures in the future, but it also includes many specific requirements for technology companies. These include:
- Interoperability.. The gatekeeper needs to allow the platform to work with similar services from smaller third parties. It’s not yet clear how this will be interpreted, but it could mean allowing users of large messaging platforms such as WhatsApp to contact users of other platforms.
- Right to uninstall.. Especially on mobile operating systems such as iOS and Android, consumers should be given more choices than software and services. You need to be able to uninstall the preloaded software and be able to select the service to use for applications such as email and web browsing when setting up a new device.
- Data access.. Enterprises need access to the data they generate for larger platforms. This means, for example, giving companies that sell products on platforms like Amazon access to Amazon’s performance analysis.
- Advertising transparency.. For example, if a company buys an ad on Facebook, they need to provide a tool to independently validate the reach of the ad.
- The end of self-priority.. Companies cannot use their platform to prioritize their products. So, for example, Google can’t display a shopping service at the top of search results unless there is some competitive bidding on that spot.
If these requests sound familiar, it’s not surprising. DMA basically puts together the numerous antitrust battles that the EU has fought over the last decade, puts it into a single legislative act, and strengthens the power of lawmakers to enforce these conditions. So, for example, how DMA’s focus on data access is related to the EU’s past accusations that Amazon is using analytics to gain an edge over third-party sellers using that platform. You can see if.
According to a proposed proposal submitted in December 2020, if a company violates these rules, the EU will be fined up to 10% of its global annual revenue and regular up to 5% of its average daily revenue. Payment of fines and certain “behavioral and structural remedies” —that is, changes in the way a business or service works, including measures such as selling part of a company.
This is what some tech companies are worried about, as current European antitrust efforts are often criticized for imposing small fines on tech giants without forcing behavioral change. This is the last point. For example, Apple was found to be in breach of Dutch antitrust laws regarding third-party treatment in the App Store. Instead of making changes to the platform, Apple has opted to pay a fine of € 5 million ($ 5.5 million) each week.
“That’s why the Digital Markets Act has a complete toolbox with increasingly strict sanctions,” Vestager told The Verge last week. “If you don’t make the change, the fine will be increased. Ultimately, the toolbox also has a tool that can actually dissolve the company if the change hasn’t happened or if you’ve committed it repeatedly.” (Probably. , This applies only to some of these companies based in the EU itself.)
DMA has been working for years and has received a lot of criticism from major tech companies. They say this measure curbs innovation and causes undesired complications for the average consumer. Some U.S. lawmakers also criticized the law and wrote to President Joe Biden in February: “This law is deliberately discriminatory and based on subjective thresholds for certain U.S. technology companies. By considering him a “gatekeeper,” he unfairly targets US workers. ”
However, in the United States and the EU, politicians are generally strict about abuse of market power in the technology sector. President Biden nominates voice antitrust figures such as Lina Khan and Jonathan Kanter to key positions in the government and promotes laws such as new presidential orders in support of the “right to repair” movement. did. In such a political environment, supporters of DMA will find that they have strong clues to enforce these new regulations.