Since December 2020, when the European Commission revealed its proposal for a Digital Markets Act (DMA), Big Tech companies knew that this legislation could significantly affect the way they operate their platforms.
Despite intense lobbying efforts to water down the legislation, the proposed bill remains essentially the same, and the few changes added during the negotiations among the European institutions didn’t alter its scope.
This week, according to the Financial Times, the European Union could unveil its final text. One last-minute amendment to the law may increase the threshold for a company to be considered “gatekeeper” to 75-billion-euro market capitalization, which would still include Alphabet, Meta, Amazon, Apple, Microsoft, Alibaba and Booking.com just to name a few.
The DMA will likely be approved before the summer, and it may go into effect in early 2023. These are the eight takeaways for Big Tech firms.
- The DMA is an entity-based law that would regulate companies considered “gatekeepers” but no other companies engaging in the same activities as the gatekeepers. The DMA would target companies of a certain size that run one core online platform, such as a social media network or a web browser.
- One of the activities banned by this law is to engage in self-preferencing practices. For instance, Google wouldn’t be able to rank or display its own products or services in searches above other competitors or more preeminently unless that is the result of a competitive process. Amazon would need to observe similar restrictions on its marketplace, and it will have to give third-party products the same treatment as its own products.
- Apple and Google would need to allow the installation of third-party apps in their operating systems and be accessible by other means than their own platform services. Additionally, app developers would be able to use other payment methods than the in-app purchase system that Apple and Google are using and charging 30% of the purchase price. This is probably one of the most controversial provisions in the law.
- Meta and interoperability: The DMA would force messaging services to interact with competing services from rivals. This, in theory, would allow users to send messages directly from WhatsApp to Telegram.
- The DMA is open-ended and addresses structural competitive problems in the market caused by the gatekeepers. It is not limited to the activities described in the law. The DMA contains some provisions that would allow the European Commission to add new activities and practices that may occur in the future.
- EU regulators will be able to conduct shorter antitrust investigations, impose fines and recurrent penalties and impose remedies. The law establishes the possibility to impose structural remedies, including divestitures, in case of non-compliance with these new obligations. Yet, divestitures would only be used if there are no other remedies available that could accomplish the same result.
- The DMA is the first law of its kind. However, the U.S. is proposing similar laws that would achieve similar results, like opening the app stores to third-party providers or limiting self-preferencing practices. If Google, Apple and other gatekeepers need to change their business models to comply with EU law, this may weaken some of the arguments they are using to oppose similar laws elsewhere.
- Implementation wouldn’t be easy. Forcing companies to comply with the law would be easier said than done. The law doesn’t provide the details about how to comply with the new obligations. This would be likely to bring disagreements among companies and regulators on the interpretation of the law, and the only way to resolve these issues would be in the European courts.
See also: EU Council May Push for DMA, DSA Approval Before Summer