New rules in Europe to curb the market power of Big Tech will apply

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By Webdesk

GAFAM giants will have marked on their calendars today as the Digital Markets Act (DMA), the European Union’s plan to curb Big Tech’s market power, is now technically in effect, having gone into effect last November.

The next major milestone is a few months from now, in early fall, when the Commission will confirm which of the usual suspect tech giants will be subject to the bloc’s shiny new ex-ante competition regulation regime. But tech giants face a busy summer preparing their regional compliance strategies.

In short, the DMA imposes a set set of obligations on so-called Internet “gatekeepers” that meet specific, cumulative criteria: First, they must operate at least one “core platform service” (which includes online search engines, social networking services, app stores, certain messaging services, virtual assistants, web browsers, operating systems and online intermediation services).

Second, they must be large enough and have a well-established market position to be covered by the regime. This means reporting annual revenues in the European Economic Area that reached or exceeded €7.5 billion in each of the last three fiscal years; or else have an average market capitalization “or equivalent fair market value” of at least €75 billion in the last financial year, and provide a core platform service in at least three EU Member States.

Gatekeepers should also be a “key gateway for business users to end-consumers”, as the Commission states – which the DMA says is the case if the company in question operates a core platform service with more than 45 million active end-users per month in the EU and more than 10,000 annual active business users in the EU in the last financial year.

Finally, a well-established and sustainable position is assumed if the company met the other criteria in each of the last three financial years. Although the Commission may also apply some of the DMA rules to companies it suspects will soon become gatekeepers.

Certain big names will very clearly hit the DMA threshold (Apple, Amazon, Google, Meta, and Microsoft seem perfectly safe bets to be considered gatekeepers). But we’ll have to wait a few months to see if the full list holds any surprises.

And on that note, European music streaming giant Spotify clearly doesn’t expect to be one of them… but, um, let’s see!

“With the DMA now in effect, potential gatekeepers who meet the established quantitative thresholds have until July 3 to notify their core 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 to appoint gatekeepers. After their appointment, gatekeepers have six months (ie until March 6, 2024) to comply with the requirements in the DMA,” the Commission writes in a press release.

If you’re feeling a sense of déjà vu, it’s probably because EU lawmakers recently designated 19 very large online platforms (VLOPs) subject to the DMA’s sister regulation, the Digital Services Act (DSA), which regulates e-commerce governance regime of the block restarts. .

It is likely that some of the same companies that have already been named VLOPs under the DSA will also be designated as gatekeepers under the DMA – meaning they will build additional “specific obligations” on top of the algorithmic transparency requirements set by the DSA are demanded.

The DMA’s operational “do’s and don’ts” are clearly aimed at ensuring that digital markets remain “open and contestable” by imposing a set set of behavioral conditions on gatekeepers designed to curb known anti-competitive actions.

Examples of DMA obligations include restrictions on how gatekeeping platforms can use third-party data, along with requirements that they provide third parties with data about the usage their apps generate; prohibition of self-preference and indelible default apps or settings forced on consumers; interoperability requirements, including for gatekeeping messenger services; requirements that app stores neither block sideloading nor require developers to use their own services (e.g. payment systems); and a ban on unauthorized tracking of users for targeted advertising, among other conditions.

Most of the list speaks to the Commission’s experience in previous Big Tech antitrust cases, such as several EU enforcement actions against Google. However, there were some later additions, by co-legislators in the Parliament and Council, such as message interoperability (which surprised many), as well as restrictions on advertising tracking.

Some similar conditions have already been imposed on some technology giants in certain EU markets, using existing competition powers. Like the Netherlands – which last year forced Apple to let developers of dating apps choose alternative payment systems.

While Germany has been ahead of the ex ante curve domestically, having updated its own competition regime in early 2021 – and has already imposed some enforcement measures on a number of tech giants it has designated as “of paramount importance” to local competition (such as Google).

Enforcement of EU data protection law is also finally hampering Meta’s ability to force behaviorally targeted ads on users. So we’ve had a taste of bigger things to come when the DMA is firing on all cylinders.

The big change here is that the terms apply upfront – so the idea is to proactively regulate digital giants who have the power to impose regulations on others who need to access their core platform services and force them to support competition and be sensitive to be for consumer needs (rather than just benefiting themselves); instead of antitrust regulators having to spend years investigating and gathering evidence of abuse to denounce bad behavior before it can be stopped, usually long after the damage has sunk in, as was the case in most of Europe under classic ( ex post) contest rules.

That said, pan-EU regulation will take some time to get going. And there are lingering concerns about resources and how willing the Commission is to test its mettle and take on such a hefty oversight role, leaning on some of the most powerful platforms in the world.

Time will tell how much backlash the DMA gets from tech giants accustomed to (usually) operating as they please and/or lobbying like the damned when legislators propose changes that could get in the way of their cash machines. It also remains to be seen how willing the Commission is to stand its ground and vigorously enforce a new digital world order (especially as the approaching EU elections next year will see the bloc’s political power structures reshaped, including by new leaders who may not be as committed to the approach as those who drafted the DMA).

We certainly won’t see any gatekeeper enforcement until next spring – as those appointed in September have six months to get their house in order. But we may see some operational changes in preparation for the new rules. And entirely new business models may emerge over time, as, say, ad tracking without consent becomes less and less viable for major social media giants. Many legal action to test the limits and courage of the DMA also seem inevitable. So the coming years in Europe will be filled with interesting new power struggles.

In the UK, which left the bloc after the Brexit referendum vote, the government also recently signaled that it will move forward with its own reboot to tackle anti-competitive tech giants. The approach proposed there is for tailored (bespoke) terms, per platform, for those with “strategic market interest”, rather than firm commitments for all giants within the scope.

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