Rachel Kosmos
Associate Editor
Loyola University Chicago School of Law, JD 2025
Big tech companies in the United States are largely subject to fewer and less restrictive regulations than those found in other parts of the world. The E.U., however, is rapidly becoming one of the most “assertive regulators” of big tech, which consequently affects American companies that participate in the global market, such as Amazon, Apple, and Google. In response to the growing need for stricter antitrust and data privacy laws, the E.U. adopted the Digital Markets Act (“DMA”) in September of 2022. The DMA’s obligations are set to be fully applicable in March of 2024.
How were consumers protected prior to the passage of the DMA?
Prior to the passage of the DMA, the E.U. adopted the General Data Protection Regulation (“GDPR”) in 2018, which allows people to request their online data and restricts how businesses store and use the data. Similarly to the DMA, U.S. businesses, as well as businesses worldwide who operate in the E.U. need to comply with the GDPR within a specified period of time or face large monetary penalties. The GDPR has received high praise from data privacy experts and authorities, labelling it as one of the “world’s toughest rules to protect people’s online data.” Building on the work set forth in the GDPR, the European Commission proposed the DMA in 2020, which purports to take aim at big tech companies.
The impact and enforcement of the DMA on U.S. tech giants
According to the European Commission, “The DMA is one of the first regulatory tools to comprehensively regulate the gatekeeper power of the largest digital companies.” The DMA first identifies “gatekeepers,” which are described as “large digital platforms providing so-called core platform services, such as online search engines, app stores, and messenger services.” Companies identified as “gatekeepers” will have until March 6th of this year to comply with certain obligations and prohibitions. The most notable companies affected by the DMA are tech giants, Apple, Google, and Amazon.
In response to the passage of the DMA, this month, Apple announced major changes that will affect E.U. users of their products. Users will now be able to download apps from alternative app stores, have the option to use internet browsers other than Safari, and competing payment methods will now be offered, just to name a few. On the other hand, Google and Amazon will face major changes in terms of how they store and sell people’s personal data.
Through its policies, the DMA aims to encourage competition and loosen the hold of major tech companies in the digital market. However, the consequences of non-compliance are vast. The European Commission is able to impose fines of up to 20 percent of a company’s annual turnover, periodic penalty payments of up to five percent of a company’s daily turnover, or additional non-financial remedies. For example, in using the 2023 data for Apple’s annual turnover, a 20 percent fine by the DMA would result in an enormous profit loss of about $76.60 billion. Certainly, these sorts of sanctions are a great incentive for companies to stay in compliance with the DMA.
The backlash and financial implications of the DMA
These regulation changes, however, have not come without backlash. Notably, Apple has openly expressed its dissatisfaction. Leader of the App Store, Phil Schiller, claimed the DMA would lead to “increased privacy and security threats.” Further, while many companies have criticized Apple for their tight control over the App Store, Apple claims their “gatekeeper” role “protects customers from malware, privacy breaches, and flawed apps.” While Apple will have limited control over the apps and marketplaces developed outside of the App Store, Apple maintains that “E.U. policies would give hackers and criminals a new path to distribute malware and defraud customers.” However, only time will reveal the credibility of this threat.
Additionally, due to the implementation of the DMA, big tech companies could see a sizable blow to their profit margins. Apple’s controversial App Store policy takes up to 30 percent of an app developer’s sales. The impending regulation imposes a new fee structure, which will reduce Apple’s commission fee by up to 17 percent. Certainly, this is of concern to Apple, whose European market comprises about 6 percent—or $24 billion—of annual App Store sales.
The DMA’s influence on U.S. policy
The impact of the DMA on American tech giants is undeniable, yet the broader question looms: how will it shape the landscape of U.S. policy and legislation? The U.S. laws that govern big tech are largely characterized as “inconsistent” and “unclear,” leaving these companies virtually unchecked by the U.S. government. Scholars, however, wonder how long this will persist since the passage of the DMA. Columbia University law professor, Anu Bradford, created the term “Brussels Effect,” after the phenomena that sees E.U. rules often becoming global standards as it is “easier for companies to apply them across their entire organization rather than one geography.”