New antitrust regulations which are expected to take effect as early as October of this year have been agreed upon by the European Union. These new regulations which are seemingly targeting top technology firms in the US could alter the business models of US tech companies such as Apple, Meta, Google, etc.
On Thursday, the European Parliament and members of the European Union came to an agreement on the Digital Markets Act; these set of rules are aimed at curbing the market dominance of companies who seem to be at the epicentre of the internet’s economy.
The Digital Markets Act (DMA) is a legislative proposal under consideration by the European Commission. The DMA intends to ensure a higher degree of competition in the European Digital Markets, by preventing large companies from abusing their market power and by allowing new players to enter the market. It establishes a list of obligations for designated Gatekeepers and in case of non-compliance, there will be enforced sanctions mechanisms, including fines of up to 10% of the worldwide turnover, according to Wikipedia.
The rule is only relevant to tech companies that have a market capitalization of at least 75 billion euros or yearly revenue within the EU region of nothing less than 7.5 billion euros in the past three years. Companies to which the rule also applies must have a minimum of 45 million monthly users or 10,000 business users in the EU.
The legislation is yet to be passed and a final version is yet to be officially adopted by members of the EU and the European Parliament. The European Union’s competition chief, Magarethe Vestager, mentioned that she expects the rules to come into effect “sometime in October” while also comparing the Digital Markets Act to other antitrust reforms that have been introduced in the past in sectors such as telecommunications, energy and banking.
Speaking at a press conference earlier today, she said that “What we have learned over these years is that we can correct in specific cases, we can punish illegal behaviour. But when things become systemic, then we need regulation as well because, if there is systemic misbehaviour, if there are entrenched positions, then we need regulation to come in.” adding that “For companies that play the role as gatekeepers, now the Digital Markets Act will set the rules of the game.”
The goal of the imminent antitrust regulations is to ensure that these tech giants dominating the market do not abuse their position and cause harm to smaller rivals and to ensure that there is an enabling environment for these smaller companies to thrive.
Under the reform, these tech titans will be forbidden from monopolizing their products and services. For example, Google will allow users to choose other browsers, if they choose to, as their default when setting up their device.
These big tech companies will also have to ensure that different apps can work with each other and do not just work independently.
These big tech companies have concerns of their own about the Digital Markets Act. App has raised concerns about privacy and security saying that it may lead to “unnecessary privacy and security vulnerabilities” for users and “prohibit us from charging for intellectual property.” The company, however, emphasized that “We believe deeply in competition and in creating thriving competitive markets around the world, and we will continue to work with stakeholders throughout Europe in the hopes of mitigating these vulnerabilities.”
Chief operating officer of encrypted messaging app Element said that “Big Tech is being forced to embrace interoperability, which will unleash a new era of innovation. Consumers and businesses will have more choice, better features and improved privacy.”
While Google is yet to issue a comment, Meta and Amazon have declined to issue comments on the new development.
For every rule comes a punishment when broken. Companies that refuse to adhere to the Digital Markets Act may face fines of up to 10 percent of their global revenue and for repeat offenders, up to 20 percent. Companies that break the rule at least three times in a period of eight years will risk facing market investigation and if deemed necessary, “behavioural” or ‘structural” remedies which may be as severe as breaking up these companies.