EU says “EW” to Big Tech

Puja Valera

Associate Editor

Loyola University Chicago School of Law, JD 2023

With new antitrust bills aimed against Big Tech stuck in Congress, across the pond, European Union (EU) lawmakers are close to an agreement on a new and sweeping digital-competition law. This large piece of legislation, known as the Digital Markets Act (DMA), is aimed at Big Tech companies and its stated purpose is to ensure fair competition and open digital markets. DMA, along with its sister act, the Digital Services Act (DSA), are flagship pieces of EU legislation that are currently in the final stages of EU lawmaking procedure.

Digital Markets Act: the basics

The Digital Markets Act is part of the biggest expansion global technology regulation in the last few years. The Act seeks to impose new obligations and prohibitions on digital giants, defined as gatekeepers by the European Union. To be a gatekeeper, the firm must provide a CPS or ‘core platform service’ and also have specific qualitative and quantitative qualities. Online intermediation services, search engines, social networking services are all considered to be core platform services.

A company must meet three qualitative requirements to be considered a gatekeeper including having a significant impact on the internal market, operating a core platform service which serves as an important gateway for business users to reach end users, and enjoying, or foreseeably will enjoy in the near future, an entrenched and durable position in its operations. A gatekeeper’s quantitative requirements include having a core platform service in three European Union member states, have either an annual turnover of 8 billion euros in the last three financial years or a market capitalization of at least 80 billion euros in the last financial year, and have at least 45 million active monthly end users and 10,000 yearly active business users in the European Union.

Any companies that meet these requirements must report themselves as gatekeepers within two months, however, the European Commission also has the discretion to decide whether a company is a gatekeeper whenever it sees fit once it performs a market investigation.

If named a gatekeeper, companies have certain obligations to fulfill which were written into the Act. For example, a gatekeeper cannot use personal data mined from one of their services to benefit another service they own. Another obligation includes a prohibition on requiring users to subscribe to a gatekeeper’s service. If a gatekeeper violates any of the obligations or provision in the DMA, then it can be subject to fines or sanctions. In these cases of noncompliance, the European Commission can impose fines of between four and twenty percent of the gatekeeper’s worldwide turnover. In cases of repeat noncompliance, the commission can restrict gatekeeper’s attempts to acquire other companies.

How the DMA will affect Big Tech

The DMA will limit Big Tech, or those most likely to be named gatekeepers, from taking advantage of their behemoth size and presence in the tech markets. This new act will likely affect different companies’ app ecosystem, online services, and online advertising. For instance, the DMA would allow app developers to make their apps available to people without going through Apple’s App Store. Additionally, the DMA will limit how search engines like Google rank the results in their favor. The DMA will likely also have a global reach as other European countries have created restrictions on tech companies through legislation and the changes warranted by the restrictions have been implemented worldwide by big tech companies.

Industry Reactions

Many tech industry experts say that the new law is discriminatory and explicitly aimed at United States Big Tech companies and that the new legislation will hamper new technological innovation. Many Big Tech companies have responded with criticisms saying that the new law will undermine consumer choice and protections. For example, Apple has issued a statement saying that the provisions in the new act “will create unnecessary privacy and security vulnerabilities for our users, while others will prohibit us from charging for intellectual property in which we invest in a great deal.” Google also has raised the concern that the new act will reduce innovation and choice for Europeans but supports most of the provisions. Moreover, some private sector stakeholders have concerns that the DMA will reduce competition in the market and have harmful economic side effects stemming from the limits placed on the gatekeepers. Although an agreement has been reached and adopting the text into law is easy, industry experts warn that the DMA could be implemented in a number of ways and that how it is enforced could vary. To combat this uncertainty, tech companies should keep apprised of the developments.