EU Takes Aim at Tech Titans with New Competition Rule

In a bold move to reshape the digital landscape, the European Union has identified and targeted six tech giants, affectionately termed "gatekeepers," in a bid to curb their market dominance. These industry behemoths, including Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft, are set to face a new set of proactive competition rules. Under the Digital Markets Act (DMA), the EU has designated a total of 22 core platform services operated by these gatekeepers. This groundbreaking regulation aims to ensure a level playing field and fair competition in the digital sphere. In this article, we delve into the details of the DMA, its implications, and how it sets the stage for a more equitable tech landscape in Europe.

The DMA takes a proactive approach to competition concerns once certain market power thresholds are crossed, encompassing giants with over 45 million active local users. Additional gatekeeper criteria include a turnover exceeding €7.5 billion over the last three financial years and a market capitalization surpassing €75 billion. These designations aim to target platforms poised to establish a "durable and entrenched" presence in the near future.

As of May, the DMA began its enforcement after receiving approval from EU lawmakers earlier this year, following extensive negotiations between the European Parliament and Council. Seven tech giants, including Alphabet/Google, Apple, Amazon, ByteDance/TikTok, Meta/Facebook, Microsoft, and Samsung, had anticipated being subject to the regulation. Notably, Samsung did not make the official list, leaving ByteDance, the parent company of TikTok, as the sole non-U.S. tech giant to be designated.

The DMA imposes a range of key provisions on core platform services, including the prohibition of self-preferencing and the requirement for gatekeepers to allow business users to utilize alternatives. App stores operated by gatekeepers must also permit the installation of rival stores, ensuring fair competition. Furthermore, gatekeepers are forbidden from restricting business users from promoting competing services and must share information generated by their platforms with these users.

The DMA introduces data portability and service interoperability requirements, with specific obligations for messaging platforms and choice screens for operating systems, browsers, search engines, and virtual assistants. It also prohibits gatekeepers from tracking and profiling users for ad targeting without their consent, bans the prevention of users from uninstalling gatekeeper preloads, and mandates the application of fair and non-discriminatory terms for general access in dealings with business users.

During a digital conference in Estonia, Thierry Breton, the EU's internal market commissioner, emphasized the regulation's goals. He highlighted how tech giants have wielded their market power to hinder competition, distort consumer choice, and stifle innovation, affecting SMEs' potential for innovation. The DMA aims to provide a clear and enforceable legal framework to promote innovation, competitiveness, and a resilient single market, reducing reliance on lengthy antitrust investigations.

Penalties for violating the DMA can range from up to 10% of global annual turnover to 20% for severe repeat offenses. Additionally, the Commission can impose remedies such as requiring a gatekeeper to sell parts of its business or banning gatekeepers from acquiring additional services related to "systemic non-compliance." In a remarkable move, the EU's competition division has hinted at the possibility of breaking up Google if its concerns about Google's adtech business are substantiated.

The DMA is expected to create opportunities for competition on major platforms, including independent app stores, alternative payment services, and emerging search engines, while simultaneously cracking down on abusive behavior by gatekeepers. However, the effectiveness of the DMA in rebalancing the digital landscape, where Big Tech currently dominates, remains to be seen. Despite potential challenges, startups can anticipate better prospects for challenging the tech giants' grip on users.

The bulk of the DMA compliance deadline is set for early March 2024, providing gatekeepers with six months to meet all legal requirements. However, certain obligations apply immediately upon designation, including the requirement to notify the EU of any "intended concentration" or mergers and acquisitions.

As the EU takes bold steps to rein in tech giants, the Digital Markets Act signals a transformative era for the digital landscape. By designating gatekeepers and imposing proactive competition rules, the EU aims to foster innovation, competition, and consumer choice while holding dominant players accountable. With penalties for non-compliance and potential remedies that include divestiture, the DMA places significant pressure on tech giants to adhere to fair practices. Although challenges and legal battles may arise, the DMA sets the stage for a more equitable and competitive digital ecosystem in Europe, offering new opportunities for startups and entrepreneurs to challenge the status quo.