The European Commission has confirmed which technology companies and which services will fall under the rules under the strict new Digital Markets Act (DMA). The companies included in the tentative list published at the beginning of July are mostly American tech giants. There is Alphabet, Amazon, Apple, Meta and Microsoft from the US, as well as ByteDance (TikTok) from China.Platform services covered by the Digital Markets Law must comply with the new EU rules until 6 March 2024.
What is the Digital Markets Law?
In general, DMA can be summarized as the EU’s attempt to rein in the market power of giant firms, making them competitive only on the basis of their products and services, by opening established platforms and preventing ecosystem lock-in and anti-competitive behavior. In other words, it is a set of rules that are completely focused on protecting the end consumer.
For example, major messaging apps have an obligation to make themselves interoperable with their competitors, while operating systems will need to be designed to offer third-party app stores and allow developers to offer alternative in-app payment options.DMA covers ten key platform services:
- Online brokerage services
- online search engines
- Online social networking services
- Video sharing platform services
- Number independent interpersonal communication services
- Operating systems
- cloud computing services
- Advertising services
- web browsers
- virtual assistants
Companies and platforms covered by DMA
- Social Networks: TikTok, Facebook, Instagram, LinkedIn
- Messaging Services: WhatsApp, Messenger
- Intermediary Platforms: Google Maps, Google Play, Google Shopping, Amazon Marketplace, Apple App Store, Meta Marketplace
- Video Sharing: YouTube
- Advertising Services: Google, Amazon, Meta
- Web Browsers: Chrome, Safari
- Search: Google Search
- Operating Systems: Android, iOS, Windows
Samsung’s web browser was also on the Commission’s previous list, but as a result of the investigations, it was concluded that it was not large enough.
Likewise, Microsoft’s Bing search engine, Edge browser and ad service are not on the list, but the Commission says it has opened market investigations to assess whether they meet the regulatory bar. The same goes for Apple’s iMessage service. The commission said these investigations won’t take more than five months, but could result in Apple being forced to make iMessage interoperable with competing services on demand. The commission will also determine whether iPadOS will be included in the rules as part of an investigation that will take no more than a year.
The exact rules that companies must follow vary depending on which regulation the commission places the services under. For example, Meta’s Instagram and Facebook platforms will be organized as online social networking services, Google Search will be organized as a search engine and Microsoft’s Windows will be organized as an operating system.
Who does the rules apply to?
To determine whether a company and its service should be covered, the DMA looks at whether the company has annual turnover in Europe of over €7.5 billion (about $8 billion) and a market capitalization of over €75 billion (about $80.5 billion). In addition, various criteria are used, such as whether the service has more than 45 million monthly active users in the EU.
Meanwhile, Google Search (and Bing if included) will have to offer its users a choice of other search engines, while OS providers will need to offer the ability to remove pre-installed apps and change system defaults like virtual assistants and web browsers. Firms will be prohibited from self-referencing their products and services compared to other companies on their platforms. The Commission has published a fairly comprehensive FAQ listing all obligations.
What happens if the rules are not followed?
The EU states that companies and platforms that do not comply with DMA rules will be subject to heavy penalties. If designated firms do not comply with the DMA’s rules, the Commission can impose fines of up to 10 percent of a company’s total worldwide turnover, or up to 20 percent for repeat offenders. Apple, for example, had revenue of almost $400 billion and net income of $100 billion in 2022. Therefore, we can say that a 10 percent penalty is quite harsh.
The EU Commission is not content with just imposing penalties. It also has the ability to implement structural solutions, such as forcing companies to sell the relevant business segment. While today’s announcement is an important step towards implementing DMA, the process is not over yet. The Financial Times previously challenged the EU for the commission’s definition of Amazon and German retailer Zalando as “huge online platforms” under the Digital Services Act (DSA), and we can see a similar legal process here.
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