EU tech giants face stricter rules to avoid forced breakups

EU tech

The European Commission has announced a new set of regulations that will apply to six major tech companies that it considers as “gatekeepers” of the digital market. The aim is to prevent anti-competitive practices and ensure fair competition and consumer choice.

EU tech

What are the new rules?

The new rules are part of the Digital Markets Act (DMA), a landmark legislation that was adopted by the European Parliament and the Council of the EU in July 2023. The DMA defines a series of obligations that gatekeepers need to comply with, such as:

  • Not preventing users from uninstalling any pre-installed software or apps
  • Not treating their own services more favorably than those of competitors
  • Not using data collected from multiple apps or services to target users with personalized ads
  • Not restricting the interoperability of their services with those of rivals
  • Not imposing unfair terms or conditions on business users or customers

The DMA also gives the European Commission the power to conduct market investigations and impose remedies if the tech companies fail to comply with the rules. The remedies could include fines of up to 10% of their global revenue, or even structural measures such as divestitures or breakups.

Which companies are affected?

The European Commission has identified six tech companies as gatekeepers under the DMA, based on criteria such as their annual turnover, number of users, and market position. They are:

  • Amazon
  • Alphabet (the parent company of Google)
  • Apple
  • Microsoft
  • Meta (the new name of Facebook)
  • ByteDance (the owner of TikTok)

These companies have six months to bring their core platform services into compliance with the DMA obligations, starting from September 6, 2023. The commission will monitor their compliance and review their status every two years.

However, some of these companies have challenged the commission’s decision and argued that some of their services should not be subject to the DMA. For example, Microsoft and Apple have disputed that their services Bing, Edge, Microsoft Advertising, and iMessage are gatekeepers. The commission has opened five market investigations to examine their arguments and will decide within five months whether they are valid or not.

Why is the EU doing this?

The EU has been at the forefront of regulating Big Tech in recent years, often accusing them of abusing their dominant position and harming competition and innovation. The bloc has imposed several antitrust fines and investigations on these companies, covering issues such as tax avoidance, data privacy, online advertising, e-commerce, app store policies, and digital content.

The DMA is seen as a proactive and preventive approach to address the structural problems of the digital market and ensure a level playing field for smaller players and new entrants. The commission hopes that the DMA will foster more innovation, diversity, and consumer choice in the digital sector.

“This is revolutionary,” said Thierry Breton, the EU commissioner for internal market, who spoke exclusively with CNBC1. “I enjoy being able to offer to successful companies, European or non-European, to have the ability to enter into our digital market, which is bigger than the one in the United States. So it’s very attractive, we are happy that big non-European companies could benefit from it.”

How are the tech companies reacting?

The tech companies have expressed different levels of concern and criticism about the DMA. Some have warned that the new rules could harm their business models, user experience, privacy, and security.

Apple said it remains “very concerned” about the privacy and data security risks that the DMA poses for its users1. The company has said that the DMA could lead to weakened security for its iMessage platform — the EU wants Apple to make it easier for iMessage to work with rival messaging services1.

Meta said it welcomes “clear rules that apply across Europe” but also urged the commission to “avoid unintended consequences that would hurt Europe’s economy and innovation”1. The company has said that some of the DMA obligations could undermine its ability to protect its platforms from harmful content and behavior1.

Amazon said it supports “the creation of a set of harmonized rules across Europe” but also called for “a balanced approach that fosters competition”1. The company has said that some of the DMA obligations could limit its ability to offer low prices and free shipping to its customers1.

Google said it will “continue to engage constructively” with the commission and other stakeholders on the DMA1. The company has said that it is committed to “creating helpful products and supporting a competitive ecosystem” in Europe1.

Microsoft and ByteDance have not issued any official statements on the DMA yet.

What are the implications for the future?

The DMA is expected to have significant implications for the future of the digital market and the role of Big Tech in Europe and beyond. The DMA could lead to some big changes for the platforms of these companies, such as:

  • More options and control for users over their devices, apps, and data
  • More opportunities and access for competitors and innovators to offer their services
  • More transparency and accountability for the practices and policies of the gatekeepers
  • More enforcement and sanctions for the violations and breaches of the rules

The DMA could also set a precedent and an example for other regions and countries that are considering similar regulations for Big Tech. The EU has said that it wants to cooperate and coordinate with its international partners on the DMA, especially with the U.S., which is also pursuing antitrust actions against some of these companies.

The DMA could also spark more resistance and legal challenges from the tech companies, who may argue that the rules are unfair, disproportionate, or inconsistent. The DMA could face several years of litigation before it is fully implemented and enforced.

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