Six Tech Giants Are Targetted By The EU’s New Pro-Competition Rules For Digital Spaces

PRESS ROOM

12 Sept

Written By Debbie Mckeegan

Six big tech companies are to have their power curbed under a set of “revolutionary” laws designed to allow consumers to decide what apps they want on their phone and to delete pre-loaded software such as Google or Apple’s maps apps.

The package of laws will also pave the way for more competition in some of the areas most closely guarded by the tech firms, including Apple Wallet and Google Pay.

As a result, Microsoft Corp. and Apple Inc. face fresh investigations from European Union regulators as part of the bloc’s landmark digital markets clampdown, which could end up forcing significant changes in how the firms do business in the region.

The likes of Alphabet Inc.’s Google Search, Apple’s App Store and Amazon.com Inc.’s marketplace are among a list of 22 services that fall under the EU’s Digital Markets Act, revealed on Wednesday.

Now companies including Bytedance Ltd.’s TikTok and Meta Platforms Inc.’s Facebook have six months to fall in line with the regulations

It has become increasingly obvious in recent years that some tech giants have used their market power to give their own products and services an unfair advantage and hold back competitors from doing business and creating added value and jobs.

These practices distort competition, undermine free consumer choice and hold back SMEs' innovation potential notably arising from Web 4.0 and virtual worlds.

It was therefore high time that Europe sets its rules of the game upfront, providing a clear enforceable legal framework to foster innovation, competitiveness and the resilience of the Single Market, rather than having to rely on lengthy and not always effective antitrust investigations.

Six Gatekeepers

The EU has officially designated six companies that provide an important gateway between businesses and consumers. And the EU intends to rein in their market power.

They will have to adapt their technologies and business models to give more choice to consumers and stop creating obstacles to smaller innovative tech companies (interoperability, sideloading, no self-preferencing, enhanced protection for user data, etc)

Six “gatekeepers” – Alphabet, Amazon, Apple, ByteDance, Meta, Microsoft – have been designated as ‘gatekeepers’ under the Digital Markets Act (DMA).

The market dominance of these six tech giants will be regulated by applying a new set of pro-competition rules on how these gatekeepers can operate designated “core platform services”.

With the Digital Services Act and the Digital Markets Act the EU are bringing fairness, choice and safety into the digital environment.

The DSA is already legally binding on 19 Very Large Online Platforms and Search Engines, like X/Twitter, Facebook, TikTok and Instagram, which have to comply with new obligations: on transparency, privacy, removing illegal content and products, protecting vulnerable users, tackling disinformation and so on.

The DMA is one of the centrepieces of the European strategy for enforcing competitive digital spaces and enshrining consumer protections.

The EU Digital Markets Act

The Digital Markets Act is the EU’s law to make the markets in the digital sector fairer and more contestable. In order to do so, the Digital Markets Act (“DMA”) establishes a set of clearly defined objective criteria to identify “gatekeepers”.

Gatekeepers are large digital platforms providing so called core platform services, such as online search engines, app stores, messenger services.

Gatekeepers will have to comply with the do’s (i.e. obligations) and don’ts (i.e. prohibitions) listed in the DMA.

The DMA is one of the first regulatory tools to comprehensively regulate the gatekeeper power of the largest digital companies. The DMA complements, but does not change EU competition rules, which continue to apply fully.

Legislative History Of The DMA

Following the initial proposal of the European Commission in December 2020, the Regulation was adopted by the European Parliament and the Council on 14 September 2022. It was published in the Official Journal on 12 October 2022.

The DMA entered into force on 1 November 2022 and become applicable on 2 May 2023.

Within two months of that date, companies providing core platform services will have to notify the Commission if they meet the quantitative thresholds and provide all relevant information.

The Commission will then have 45 working days to adopt a decision designating a specific gatekeeper. The designated gatekeepers will have a maximum of six months after the Commission decision to ensure compliance with the obligations and prohibitions laid down in the DMA..

What Does This Mean For Gatekeepers?

The new rules will establish obligations for gatekeepers, “do’s” and “don’ts” they must comply with in their daily operations.

Examples Of The “Do’s”: Gatekeepers Will For Example Have To:

allow third parties to inter-operate with the gatekeeper’s own services in certain specific situations;
allow their business users to access the data that they generate in their use of the gatekeeper’s platform;
provide companies advertising on their platform with the tools and information necessary for advertisers and publishers to carry out their own independent verification of their advertisements hosted by the gatekeeper;
allow their business users to promote their offer and conclude contracts with their customers outside the gatekeeper’s platform.

Example Of The “Don'ts”: Gatekeepers Will For Example No Longer:

treat services and products offered by the gatekeeper itself more favourably in ranking than similar services or products offered by third parties on the gatekeeper's platform;
prevent consumers from linking up to businesses outside their platforms;
prevent users from un-installing any pre-installed software or app if they wish so;
track end users outside of the gatekeepers' core platform service for the purpose of targeted advertising, without effective consent having been granted.

How Will The Commission Ensure That The Tool Keeps Up With The Fast Evolving Digital Sector?

To ensure that the new gatekeeper rules keep up with the fast pace of digital markets, the Commission will carry out market investigations.
These will allow the Commission to:

qualify companies as gatekeepers;
update dynamically the obligations for gatekeepers when necessary;
design remedies to tackle systematic infringements of the Digital Markets Act rules.

What Will Be The Consequences Of Non-Compliance?

Fines: of up to 10% of the company’s total worldwide annual turnover, or up to 20% in the event of repeated infringements

Periodic penalty payments: of up to 5% of the average daily turnover

Remedies: In case of systematic infringements of the DMA obligations by gatekeepers, additional remedies may be imposed on the gatekeepers after a market investigation. Such remedies will need to be proportionate to the offence committed. If necessary and as a last resort option, non-financial remedies can be imposed. These can include behavioural and structural remedies, e.g. the divestiture of (parts of) a business.