The GAFAM giants will have marked their calendars today as the Digital Markets Law (DMA), the European Union’s plan to curb the market power of Big Tech, is now technically applied, after entering into force last November.
The next major milestone is in a few months, in early autumn, 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 the tech giants face a busy summer preparing their regional compliance strategies.
Quick summary: The DMA applies a fixed set of obligations to so-called “gatekeepers” of the Internet that meet specific cumulative criteria: First, they must operate at least one “core platform service” (these include online search engines, services of social networks, store applications, certain messaging services, virtual assistants, web browsers, operating systems and online intermediation services).
Second, they must be large enough in size and have an entrenched market position to be subject to the regime. This means reporting annual revenue in the European Economic Area that reached or exceeded €7.5 billion in each of the last three financial years; or have an average market capitalization “or equivalent fair market value” of at least €75 billion in the last financial year, as well as provide a central platform service in at least three EU Member States.
Gatekeepers must also be a “significant gateway for business users to end consumers”, as the Commission puts it, which the DMA considers to be the case if the company in question operates a core platform service with more than 45 million monthly active end users in the EU and more than 10,000 active business users in the EU per year in the last financial year.
Finally, an established and durable position is presumed if the company met the other criteria in each of the last three years. Although the Commission can also apply a subset of DMA rules to companies, it suspects that they will soon become gatekeepers.
Certain big names will obviously hit the DMA threshold (Apple, Amazon, Google, Meta, and Microsoft seem completely safe bets to be considered gatekeepers). But we’ll have to wait a few months to see if the full list contains any surprises.
And on that front, European music streaming giant Spotify clearly isn’t expecting to be one of them…but come on!
“Now that the DMA is applied, potential guardians who meet the established quantitative thresholds have until July 3 to notify their central platform services to the Commission. The Commission will then have 45 business days (until September 6, 2023) to decide whether the company meets the thresholds and appoint guardians. After their designation, the guardians will have six months (that is, until March 6, 2024) to comply with the requirements of 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 (VLOP) that are subject to the DMA’s sister regulation, the Digital Services Act (DSA), which reinitiates the bloc’s e-commerce governance regime.
It is likely that some of the same companies that have already been named VLOPs under the DSA will also be designated gatekeepers under the DMA, meaning they will accrue additional “specific obligations” on top of the algorithmic transparency requirements mandated by the DSA.
The DMA’s operational “do’s and don’ts” are clearly aimed at ensuring that digital markets remain “open and contestable” by enforcing a fixed set of behavioral conditions on gatekeepers that aim to curb familiar anti-competitive actions.
Examples of DMA obligations include limits on how monitoring platforms can use third party data along with requirements that they provide third parties with data about the usage their apps generate; prohibitions on self-preferences and indelible default applications or settings that are imposed on consumers; interoperability requirements, including access control messaging services; requirements that app stores not block sideloading or require developers to use their own services (eg payment systems); and a ban on tracking users for targeted ads without consent, among other conditions.
Most of the list talks about the Commission’s experience in past Big Tech antitrust cases, such as various EU applications against Google. However, there were some later additions, by co-legislators in Parliament and Council, such as messaging interoperability (which took many by surprise), as well as limits on ad tracking.
Some similar types of conditions have already been applied to some tech giants in certain EU markets, using existing competition powers. Like the Netherlands, which last year forced Apple to allow dating app developers to opt out of using alternative payment systems.
While Germany has been ahead of the curve ex ante at the national level, after it updated its own competition regime in early 2021, and already has. some executions in a number of tech giants that it has designated as being of “primary importance” to local competition (such as Google).
The application of the EU data protection law is also finally cutting off Meta’s ability to force behavioral ads on users. So we’ve had a taste of bigger things to come when the DMA is going full steam ahead.
The big change here is that the conditions are applied up front, so the idea is to proactively regulate digital giants who have the power to set rules on others who need to access their core platform services and force them to support. competition and being sensitive to consumer needs (rather than just favoring themselves); instead of antitrust regulators having to spend years investigating and amassing evidence of abuse to bring cases against misbehavior before it can be stopped, usually long after the damage has taken hold, as has been the case in most of Europe under classical (ex post) Competition rules.
That being said, pan-European regulation will take some time to kick in. And there are ongoing concerns about resourcing and how prepared the Commission is to stretch its value to the limit and take on such an important oversight role by relying on some of the most powerful platforms in the world.
Time will tell how much pushback the DMA gets from tech giants accustomed (for the most part) to operating how they like and/or lobbying like damned when lawmakers suggest making changes that could hamper their money-minting machines. It also remains to be seen how willing the Commission is to stick to its guns and firmly enforce a new digital world order (especially as the upcoming EU elections will reshape the bloc’s political power structures next year, even incorporating new leaders who may not be as committed to the approach as those who wrote the WFD).
We sure won’t see any control over the gatekeepers until next spring, as September appointees will have six months to put their house in order. But we may see some operational changes in preparation for the new rules. And possibly new business models will emerge in the future, as, for example, ad tracking without consent becomes less and less viable for major social media giants. Much legal action to test the limits and mettle of the DMA also seems inevitable. So the next few years in Europe will be full of new and interesting power struggles.
In the United Kingdom, which left the bloc after the Brexit referendum vote, the the government also recently noted it will move forward with an ex ante reset of its own to deal with anti-competitive tech giants. The approach suggested there is for bespoke (tailor-made) conditions, by platform, on those with “strategic market importance”, rather than fixed obligations for all in-scope giants.
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