EU agrees new Act to curb the power of Big Tech
EU lawmakers have finalised the structure of the Digital Markets Act, which threatens the power of Big Tech firms like AWS, Google and Meta.
The European Commission has moved quickly to push the Digital Markets Act (DMA) through the approvals process; it was first introduced in December 2020.
The Act aims to limit the ability of large tech firms like Apple and Google to dominate markets, forcing them to open up their services and platforms to other businesses.
These enterprise-scale companies are known as 'gatekeepers'. There has been much back-and-forth between the European Council (EC) and European Parliament (EP) about the definition of what constitutes a gatekeeper firm. The ruling now states that these are firms worth more than €75 billion (£63 billion), with at least €7.5 billion (£6.3 billion) annual sales and 45 million monthly users.
Christian Ahlborn, partner and co-head of the technology sector at law firm Linklaters said:
"The faster than expected conclusion of a political agreement seems to result from mutual concessions from each of the two EU co-legislators. The inclusion of virtual assistants and web browsers in the legislation is a major win for the EP. The Council has, in turn, kept the threshold for qualifying as a 'gatekeeper' lower than the EP had wanted, ensuring a larger number of platforms will fall within the DMA's scope. This is expected to assuage some of the US criticism of the DMA, with some European players set to fall within the DMA's scope too."
The USA had previously criticised the DMA as unfairly targetting American firms.
The EU's antritrust chief, Margarethe Vestager, said gatekeepers prevent businesses and consumers from seeing the benefit of competitive digital markets - for example, the ability to find and contact many different suppliers. Search giant Google has long been accused of abusing its position to favour its own services in search results. It has been one of the most vocal opponents of the incoming legislation.
Under the DMA, tech firms will no longer be able to force people to use their own services. For example, Apple will have to allow third-party payment options on the App Store and allow alternatives to its own apps, like Safari, on the iPhone. Google will have to take a similar route for Android users, allowing them to use alternatives to its own search engine, Maps app and Chrome browser.
Companies that breach the rules could pay a high price: up to 10 per cent of their annual worldwide turnover, or as much as 20 per cent for repeated offences. However, fines could be as low as one per cent of turnover, rather than the initial proposal of a minimum of four per cent.
The DMA now faces its final votes in the European Parliament, and it is expected to become law within a year. Bernd Meyring, partner at Linklaters, said:
"Eyes will now turn to how the Commission implements what is in a gargantuan new rule book for the digital sector, while gatekeepers and other market participants will need to start to start grappling with how the rules will be applied in practice."