The EU is once again leading the charge against technology giants, armed with powerful legislation set to shake up the digital world far beyond Europe’s shores. The new Digital Markets Act (DMA) has the noble aim of making the digital economy fairer and more contestable by reining in the big tech giants with a new rulebook, and it has teeth (big ones).
Shaping the EU’s digital future
Big Tech catches a lot of flak these days, but the complaints certainly aren’t lacking in merit, especially with regard to anti-competitive behaviour, content regulation and the historically problematic attitude to data privacy (anyone remember Cambridge Analytica?), which led to the creation of the game-changing General Data Protection Regulation (GDPR) act. This new piece of legislation goes further than GDPR to protect users and complements existing anti-trust laws in an effort to end unfair practices. It was proposed in December 2020 and signed in September 2022 by the European Parliament as part of their Digital Services Package – a set of rules aimed at creating a safer digital space where the fundamental rights of users are better protected and businesses can compete on a level playing field. “A Europe Fit for the Digital Age” is the name given to the broader regulatory programme under which these new laws fall, created with the stated aim of guiding Europe into an age of unprecedented technological innovation and advancement.
The DMA was written in conjunction with the Digital Services Act (DSA), which serves to modernise existing rules around illegal content, advertising transparency and disinformation. The DSA’s primary purpose is to harmonise existing national laws around content moderation within the EU and specifically targets the likes of Facebook, YouTube and TikTok. It could see these platforms having their algorithms subjected to outside scrutiny.
But for the purpose of this blog, let's focus on the DMA and the far-reaching impact it's sure to have.
Taking on “The Gatekeepers”
Wired describes the DMA as “rewriting the rules of the Internet” and “breaking open the walled gardens” that Big Tech companies have worked hard to build. It imposes obligations on a small number of large online platforms that effectively serve as “gatekeepers”, those core platforms that consumers and businesses rely on every day, including search engines, marketplaces, and social networks.
A gatekeeper is defined through scale, so unless your organisation has a market capitalisation of over €75 billion or 45 million active monthly end-users in the EU, then you don’t need to worry. But until now, entities of this size have been able to write the rules themselves as they grow ever more powerful. For them, the DMA means “many new rules that sometimes require systemic, technical and procedural changes”, as Deloitte put it.
To be more exact, the DMA compels gatekeepers to…
- Allow users to uninstall pre-installed software on devices and allow third-party equivalents.
- Apply transparent and fair conditions for ranking when it comes to goods and services without preferential treatment for the company’s own goods and services.
- Provide transparency for advertisers in terms of price, fees and performance.
- Avoid combining personal user data collected directly with that collected by third parties without users’ explicit consent, and facilitate data portability for data generated through the core platform.
The DMA’s intended impact
“If you have an iPhone, you should be able to download apps not just from the App Store but from other app stores or from the internet,” EU official Gerard de Graaf told Wired. Dominant platforms will be required to let smaller competitors in, and down the line, it could even see WhatsApp users exchanging messages with users on Telegram, for instance.
It should put businesses in a better position through equality and greater transparency and give users more freedom of choice, better data protection and more interoperability. And it should ultimately prevent dominant market players from abusing their power while providing opportunities for small, innovative companies in a more competitive European market.
And if the gatekeepers don’t comply, you ask? Well, that’s where the teeth come in. Under the DMA, the European Commission can impose fines of up to 10% of global annual turnover and up to 20% of global annual turnover for repeated infringements – vast sums indeed, given the size of these companies. And in the case of systematic infringements, the Commission can take further action.
For now, Big Tech has some time to prepare since these laws will be implemented in stages. But as with the introduction of the EU’s GDPR law in 2016, the DMA is expected to have knock-on benefits for businesses and ordinary users globally and pave the way for other nations to enact similar laws to “rebalance” their own digital markets.