The “Digital Markets Law” has come into force in Europe: how high-tech giants will be regulated

On Wednesday, March 6, the EU introduced its Digital Markets Act, the world’s most sweeping anti-competitive rules governing six tech giants. Many experts believe that, following the EU, similar rules will begin to spread in other countries. At the same time, according to many, regulation turned out to be late and insufficient.

How the EU approached new rules

Tech giants have been the focus of EU authorities’ attention for years. The European Commission is especially concerned about the monopoly power of these companies, which have the opportunity to influence the market as a whole, their smaller European competitors, and the capabilities of specific users. It is in the fight against technology corporations made a name for herself Vice-President of the European Commission for Digital Policy and European Commissioner for Competition Margrethe Vestager.

EU authorities regularly fine technology companies huge sums: rules allow fines to be imposed, the size of which depends on the corporation’s total revenue. So, in 2016 The European Commission fined Apple by a record €13 billion for obtaining tax privileges in Ireland. In 2018 Google was fined by €4.3 billion for violation of antitrust laws. The last major fine to date was imposed this week: European Commission fined Apple by €1.8 billion for abuse of the music streaming services market.

However, now we are not just talking about individual measures against individual companies. The Digital Markets Act DMA deals with what the EU considers “gatekeepers” of the digital market.

• We are talking about companies with a capitalization of €75 billion or with an annual turnover in the EU of €7.5 billion.
• Another condition for inclusion in the list is at least 45 million monthly active users and at least 10 thousand business users from EU countries.
• In addition, the company must have at least one large Internet platform with significant influence in the EU and activities in several countries of the bloc.
• As a result, the list included five American companies – Alphabet, Amazon, Apple, Meta (recognized as extremist and banned in the Russian Federation), Microsoft, and the Chinese ByteDance.

The “Digital Markets Law” was proposed by the European Commission in December 2020 – and since then there has been a long and multi-level harmonization of its norms in the EU. Council of Europe and the European Parliament, as well as EU member states approved it in 2022. Last year he began to act – but then only partially. Now, from March 6, the DMA will be in full force.

In February, another important law in this area, developed in parallel with the DMA, came into full effect— “Law on the Digital Services Market” (Digital Services Act). It sets new, clearer rules to hold major digital platforms accountable for failing to adequately combat illegal or harmful content, and protects users’ fundamental rights to free speech and protection of their personal data.

What does DMA regulate?

Among other things, corporations will now have to give the ability for users to unsubscribe from key platform services so that in all other respects they have the same conditions as those who subscribe to such services. Another provision of the law is that companies will not be able to require that by default, when installing an operating system, installation of important software (for example, browsers) from the same platform.

Within the mobile OS, companies will have to give the ability for users to download applications from third-party applications, use third-party payment systems, etc. Another requirement – ensure compatibility between different messaging services.

Tech giants, among other things, now forbidden:

• make preferences for goods and services provided by the Internet platform itself;
• use user data collected by one of the platform services by another of its services;
• impose unfair conditions on business users; preinstall some applications.

The DMA provides for huge fines for violators: up to 10% of global turnover for the first violation and up to 20% for a repeat violation. In extreme cases, the European Commission may require structural changes, including business division.

The overall message of the law is that tech giants must revise their practices so that smaller companies can compete with them. The European Commission selected 22 key services provided by giants and having a great influence on the market. These include, among other things, the YouTube and TikTok video services, the Google Search search engine, Windows, Android and iOS operating systems, Safari and Chrome browsers, and the Amazon marketplace. The list also includes the social networks Facebook and Instagram and the WhatsApp messenger, owned by Meta Corporation (recognized as extremist and banned in the Russian Federation).

Okay, now Apple should give European iPhone and iPad owners access to competing app stores and payment systems. Microsoft you will have to give up actively promoting your Bing search engine to Windows OS users.

Google will have to provide Android users with a so-called selection screen where they can choose between different search engine and browser options. Another change is that Google should stop showing the widget for its own flight search service at the top of search results in Europe and make flight and hotel search offers from competitors more visible.

Most of the companies on the list will have to implement many changes. For example, refuse to exchange data between different services belonging to the same corporation.

Turning point or regulation of yesterday

“This is a turning point. Self-regulation is over,” Ms. Vestager said on the DMA’s entry into force, pointing out that in the past technology companies largely determined their own practices of this kind.

European Commissioner for the Internal Market Thierry Breton, who has been actively consulting with high-tech companies in recent years, notes that the US authorities, over many years of attempts to introduce stricter rules for such companies, have failed to do this – unlike the EU.

According to the European Commissioner, just a few years ago such corporations believed that the EU authorities would not be able to introduce strict regulation.

According to sources close to the European Commission, quoted by BloombergWhile Ms Vestager wants to bring tech companies into some kind of framework first of all, Mr Breton is seeking a more active EU policy in this field, with support for European companies against corporations from both China and the US.

As observers note, the new European rules, along with laws introduced by other countries regarding high-tech companies, will lead to the fact that technologies will differ from country to country.

According to Greg Taylor, an associate professor at Oxford University who specializes in technology competition, this reflects the maturity of the technology industry. After all, it is now becoming similar to more traditional sectors, such as banking, healthcare or automobile manufacturing, where companies have to adapt to local legislation in different countries.

“If the EU starts introducing digital protectionism, there is a risk that technoprotectionism will become the global norm. Ultimately, EU regulators should be mindful of the “Brussels effect”—the EU’s ability to create rules that will eventually apply beyond its borders, which is an effective mechanism for exporting both good and bad rules,” said Anu Bradford, professor of law School at Columbia University and the author of Digital Empires, in which she examines the work of tech giants.

At the same time, it is still difficult to say whether the new law will help other companies compete more effectively with the giants.

Many in the European tech industry question the effectiveness of the law, pointing out that tech giants will seek workarounds and loopholes, changing products so as to remain technically within the DMA.

“The main question is: will (Brussels.— F.T.) monitor compliance? Companies have virtually unlimited resources (to fight regulation.— F.T.),” says Paul Gallant, technology regulatory analyst at the American company TD Cowen.

The Financial Times quotes a technology investor who wished to remain anonymous as saying “this is yet another case of regulators and politicians trying to regulate the industry in ways they don’t understand.”

The founder of the German startup Ecosia, which developed its own search engine, Christian Kroll also doubts that the new rules will improve the situation in terms of competition. He gives an example in his industry: Google will now have to show users a screen where they can select a search engine. However, Mr. Kroll notes, “it’s impossible to imagine that a person who has used Google for 20 years will choose something else.”

Critics of the DMA note that there are opportunities to circumvent the law without formally violating it on most counts. For example, Apple has already made it possible for users to download applications not only from its AppStore – but at the same time introduced a fee of €0.5 for each such download. This makes this option inconvenient for developers of many applications, especially free ones.

Critics also point out that the European Commission regulates yesterday’s technologies – of course, search engines or downloading applications are still important today, but the development of artificial intelligence has become a new challenge. Moreover, work on by lawThe European Commission began regulating this area only last year, and it will begin to operate no earlier than 2025.

Yana Rozhdestvenskaya