The EU has presented its largest-ever legislative push to level the playing field in the tech industry. The new Digital Markets Act, or DMA, aims to limit the influence of the major computer companies while allowing smaller businesses to compete with largely US-based companies. Until far, the EU has dealt with antitrust concerns on a case-by-case basis, but the DMA aims to implement broad reforms that will address systemic flaws throughout the whole market.
The EU says that suppliers must “open up and interoperate with smaller messaging systems, if they so desire,” in today’s declaration aimed at interoperability of messaging applications like WhatsApp, Facebook Messenger, and iMessage. According to the EU, this will provide users more options in terms of how they transmit communications, without having to worry about the recipient’s platform. Users must also be able to “freely pick their browser, virtual assistants, or search engines,” according to the guidelines.
The legislation hasn’t been passed yet; according to the EU, the text must be finished and examined before being accepted by Parliament and the Council. More information are expected to be revealed during a news conference aired from Brussels on Friday morning at 8:45 a.m. CET (3:45 a.m. ET).
Companies judged to be “gatekeepers,” as defined by the Act, might face additional requirements if they have a market value of at least €75 billion ($82 billion), at least 45,000 active users, and a “platform,” such as an app or social network. This division includes well-known tech titans like as Google, Microsoft, Meta, Amazon, and Apple, as well as smaller companies such as Booking.com.
If the “gatekeepers” break the laws, the financial penalties might be severe: “the Commission can impose fines of up to 10% of its total global revenue in the prior financial year, and 20% in the case of repeated infringements,” according to the Commission. The Commission may prohibit them from purchasing new firms for a period of time if they commit repeated violations.”
The goal of the DMA, according to EU Competition Commissioner Margrethe Vestager, is to make the IT sector “open and contestable,” as she told The Verge last week.
“So it depends on your ideas, your work ethic, your capacity to attract financing, and whether or not you’ll be successful with your clients,” Vestager explained. “Unfortunately, however, due to the systemic structure of conduct, that isn’t always the case.”
It’s no surprise if these requests seem familiar. The DMA basically combines a number of antitrust battles waged by the EU over the last decade, consolidating them into a single legislative act and enhancing parliamentarians’ ability to enforce these provisions. So, for example, the DMA’s focus on data access can be linked to the EU’s previous charges that Amazon utilizes its analytics to gain an edge over third-party merchants that use its platform.
If companies break these rules, the EU can impose fines of up to 10% of their global annual revenue, periodic penalty payments of up to 5% of average daily turnover, and specific “behavioral and structural remedies” — that is, changes to how their business or service operates, which could include measures like divesting parts of the company.
This latter argument may scare some Internet businesses, as existing European antitrust measures are frequently chastised for just levying minor penalties on digital behemoths without pushing them to modify their ways. In the Netherlands, for example, Apple was found in violation of antitrust laws governing third-party treatment on the App Store. Rather of making any adjustments to its platform, Apple has decided to pay €5 million ($5.5 million) in weekly fines.
“This is why the Digital Markets Act has a comprehensive toolbox with more harsh fines,” Vestager told The Verge last week. “If you do not make modifications, the penalty will rise. If no change is occurring, or if you are a serial offender, you can eventually break up a firm using the tool in your arsenal.” (This, of course, would only apply to the sections of these corporations that are headquartered in the EU.)
The DMA has been in the works for years, and as a result, it has received a lot of backlash from large internet firms. They argue that the measures would hinder innovation and cause unnecessary hurdles for consumers. Some US politicians have also attacked the bill, writing to President Joe Biden in February to argue that it “unfairly targets American employees by designating select U.S. technology businesses as ‘gatekeepers’ based on purposely discriminatory and subjective requirements.”
Politicians in the United States and the European Union, on the other hand, are adopting a harsh position against market power abuses in the tech industry. President Biden has appointed antitrust activists Lina Khan and Jonathan Kanter to prominent government posts, as well as pushed through legislation such as a new executive order supporting the “right to repair” campaign. Proponents of the DMA should find that they have a strong hand in enforcing these new restrictions in such a political context.