Big Tech Firms Have 6 Months Before New EU Competition Rules Kick In

The Council and the European Parliament on March 24 reached a provisional political agreement on the Digital Markets Act (DMA). Final technical work will be finalized in the coming days, but this agreement marks the beginning of the countdown for the implementation of this new legislation.

“Never underestimate the power of the European Parliament, it has taken 7 years but here we are, we start a new era of tech regulation,” said Andreas Schwab, Parliament’s rapporteur, at a press conference.

The DMA defines clear rules for large online platforms, called gatekeepers, and it will change the way Google, Meta, Amazon, Apple, Microsoft and others conduct business in Europe.

The definition of “gatekeeper” was debated for long time, but the EU institutions agreed that to qualify, companies firstly  must either have had an annual turnover of at least €7.5 billion within the European Union (EU) in the past three years or have a market valuation of at least €75 billion, and secondly must have at least 45 million monthly end users and at least 10,000 business users established in the EU. The platforms must also control one or more core platform services in at least three member states.

There is also a new category, “emerging gatekeeper,” that will enable the Commission to impose certain obligations on companies whose competitive position is proven but not yet sustainable.

Under the new DMA rules, for example 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. Meta may need to allow its messaging services to interact with competing services from rivals. This, in theory, would allow users to send messages directly from WhatsApp to Telegram. 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.

There are additional obligations regarding the use of private data, interoperability and access to data.

If a gatekeeper fails to comply with these rules, the sanctions are severe. The first offense may be punishable with a fine up to 10% of its total turnover, but for a repeat offence, the fine may increase up to 20% of the worldwide turnover. One change with respect to the original draft is the possibility for the regulator to impose structural remedies, like a divestiture for companies that systematically fail to comply with the DMA. The previous draft contemplated this possibility if a gatekeeper violated the rules at least three times in five years. The final agreement raises the timeframe to eight years.

“We can correct specific cases, we can punish individual behavior — but when things become systemic, then we need regulation because if there is a systemic misbehavior then we need regulation to come in, and the DMA will now set the rules of the game,” said Commissioner for Competition Margrethe Vestager in a press conference.

The agreement reached by the institutions still needs formal approval by the Council and the European Parliament, but this is expected to happen in the next weeks. Once the institutions approve the regulation, it will be implemented in six months. Therefore, companies probably have until October 2022 to get ready before these new rules kick in.

Read More: 8 Things Tech Firms Should Know About EU’s Digital Markets Act