Digital Markets Act: EU’s biggest-ever clampdown is inching closer. Is Big Tech ready?

• This week, antitrust regulators will announce a list of services targeted by the Digital Markets Act.
• The comanies chosen will be picked to prevent the most influential firms from wrecking new markets before it is too late to act.
• How the chosen companies will react to the regulations remains to be seen.

We are inching closer to the existence of the Digital Markets Act, a landmark law for the digital space, coming into effect early next year. The law, established by the European Commission, is currently the first regulatory tool adopted to regulate the gatekeeper power of the largest digital companies comprehensively. This week, tech giants with a presence in the European Union (EU) are bracing themselves for the announcement from the Commission to know the rules they will have to obey.

The European Commission is in its final stages before the Digital Markets Act (DMA) comes into force early next year. The Commission’s initial proposal was dated December 2020. The European Parliament and the Council eventually adopted the regulation on September 14, 2022. 

The Digital Markets Act entered into force on November 1, 2022, and became applicable on May 2, 2023. What followed was a group of companies that provided core platform services notifying the Commission whether or not they met the quantitative thresholds, and providing all relevant information if they did. 

By the deadline of July 3, 2023, the Commission announced that it had received notifications from the following companies: Alphabet, Amazon, Apple, ByteDance, Meta, Microsoft and Samsung. At this juncture, the ball is in the Commission’s court, with 45 working days to adopt a decision designating a specific gatekeeper. 

For context, gatekeepers are large digital platforms providing so-called core platform services, such as online search engines, app stores, and messenger services. Gatekeepers must comply with the do’s (i.e., obligations) and don’ts (i.e., prohibitions) listed in the Digital Markets Act. The 45 days are up on September 6.

According to a recent Bloomberg report, by September 6, antitrust regulators will announce a list of services likely to be covered by rules aimed at preventing the most influential firms from wrecking new markets before it is too late to act. Once announced, the designated gatekeepers will have a maximum of six months to ensure compliance with the obligations and prohibitions laid down in the Act. Then early next year, the DMA will go into full force.

A brief recap on the Digital Markets Act

The DMA uses quantitative thresholds to determine gatekeeper status. Platforms that meet the thresholds of a yearly EU turnover above €7.5 billion, a market capitalization over €75 billion, 45 million active monthly end-users and 10,000 yearly business users in the EU will be subject to the provisions of the DMA. Gatekeeper status is re-evaluated every three years.

Gatekeepers are subject to several important requirements under the Digital Markets Act, including;

Side-loading:

• Gatekeepers must allow electronic devices using their operating systems to uninstall pre-installed software and allow for the installation of third-party equivalents. Gatekeepers must ensure operating system, hardware, and software interoperability.

Self-preferencing:

• When displaying goods and services to consumers, gatekeepers must apply transparent, fair, and non-discriminatory ranking conditions. They can no longer treat their goods and services more favorably than third-parties using the gatekeeper platform to connect with consumers.

Advertising transparency:

Gatekeepers are required to provide transparency on pricing and performance of advertising services. They must provide business users using the gatekeeper’s advertising services with information concerning the price, fees, and performance of the advertisements paid for by the business user.

New rules on data:

Gatekeepers are prohibited from combining personal data from end-users collected through their core platform with data acquired from other services offered by them or third parties unless the user has given specific consent. They will also be required to facilitate effective data portability for data generated through their core platforms.

How has Big Tech been dealing with the DMA?

During a meeting between Apple and members of EU competition chief Margrethe Vestager’s cabinet on June 27, the company had warned of compliance challenges with the rules, according to a copy of the meeting’s minutes obtained by the South China Morning Post (SCMP) via a freedom of information request.

The firm noted concerns over the scope of its services to be covered and how users’ experience could be safeguarded. “In a separate email chain, Apple’s lawyers call for more ‘substantive discussions’ regarding their DMA compliance from September onwards,” the SCMP wrote. 

As for the meeting between Amazon Chief Executive Officer Andy Jassy and Vestager on June 21, the company expressed concern about “overlapping and conflicting regulation coming from national competition authorities.” 

Amazon has also challenged its designation under Germany’s own digital competition rules. The meeting between Meta chief Mark Zuckerberg and Vestager to discuss the company’s compliance occurred in mid-June, but little was disclosed in its wake. On the other hand, Microsoft has been arguing that its Bing search engine is too small a competitor to Google to come under the scope of the rules – at least this time. 

Interestingly, the one company that seems most prepared for the DMA is ByteDance’s TikTok.

What happens next will be an object leson in how enormously rich and powerful tech companies deal with international laws and standards being enforced around the ways in which they make money.

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