New EU law regulating Big Tech likely to set global standard
It may even spur tech giants to rethink their business models, strategy on long-term goals
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BRUSSELS • Landmark European Union rules targeting Alphabet unit Google, Amazon, Apple, Meta and Microsoft are likely to set a global benchmark and may even force changes in the tech giants' business models, lawyers and experts said.
Europe's anti-trust chief Margrethe Vestager last Thursday won backing from EU members and lawmakers for her proposal, the Digital Markets Act (DMA), to rein in the powers of the tech giants via legislation for the first time, rather than lengthy anti-trust investigations.
The DMA sets out a list of dos and don'ts targeting each tech giant's core business practices.
"DMA is here to stay and will be quickly mirrored in a number of countries. The flexibility that Big Tech had will be constrained, as the regulatory 'straitjacket' will get tighter globally," said competition law professor Ioannis Kokkoris from Queen Mary University in London.
Ms Vestager's switch to legislation came amid frustration over slow-moving anti-trust investigations that deliver remedies criticised by rivals as inadequate, with Google often cited as an example despite being hit with over €8 billion (S$12 billion) in fines.
The new rules may even spur tech giants to rethink their strategy on long-term goals and swop their business models for others.
"If it succeeds, the DMA will put pressure on monopoly rents of gatekeepers in tipped markets, thereby encouraging them to move towards more long-term innovation targets," said professor of competition law Nicolas Petit from the European University Institute in Florence. "I think the DMA indirectly places a premium on business models based on subscriptions or device-level monetisation. We might see more (increased) prices, and vertical integration into hardware in the future," he said.
Still, enforcing the DMA will require a bigger team than the small group planned by the European Commission, said Mr Thomas Vinje, a partner at law firm Clifford Chance in Brussels who has advised rivals in cases against Microsoft, Google and Apple.
"The commission suggested, upon proposing the DMA, that it would be enforced by a team of 80 people. This will not be enough to enable effective enforcement," he said.
"Another big question is who in the commission will enforce it. Only (competition officials) have the technical and industry knowledge and experience dealing with such companies to effectively enforce the DMA. If others in the commission, such as (digital officials), are to enforce the DMA, it will be a dead letter."
The DMA is just the first step towards making sure that tech giants play fair, said Mr Alec Burnside, a partner at law firm Dechert in Brussels.
"The DMA is not a perfectly formed panacea from the start, and without doubt gatekeepers will try to navigate around it. Rome was not built in a day, nor was the highway code perfect when first conceived," he said. "New rules of the road for the digital economy will be shaped over the period ahead, and the DMA is a crucially important first step."
About the Digital Markets Act
European Union lawmakers and officials have agreed on the main points of a landmark piece of legislation, known as the Digital Markets Act (DMA), that aims to loosen the grip held by Big Tech on life online. Here are five rules included that will force the likes of Google, Apple, Meta and Amazon to change their ways.
1. SAVE THE START-UPS
Big Tech companies make billions of dollars in profit every year and some of the windfall goes to scooping up start-ups and innovators.
This rankles the authorities, who accuse the giants of using their war chests to snuff out potential rivals before they become a threat. Under the new rules all buyouts, no matter how small, will have to be reported to the European Commission, the EU's executive arm based in Brussels.
2. MESSAGING UNITY
After multiple scandals that hit Meta-owned Facebook, many users chose to swop the giant's Messenger or WhatsApp messaging services for alternatives, such as Signal or Telegram.
Yet the market power of Meta's services remains strong, making it difficult for WhatsApp dissenters to keep messaging links with family and friends.
To solve this, the DMA imposes inter-operability between messaging apps, all while demanding that communications remain encrypted from user to user.
3. FAIR SHOPPING ON AMAZON
Amazon is a major shopping platform for thousands of companies to sell their wares online. But suspicions are rife that the online giant abuses its role as a marketplace to better position its own products as a retailer. The DMA will ban this conflict of interest, as well as demand that the gatekeepers share key information with business customers.
4. OPEN THE APP STORE
Around the world, Apple has strenuously defended the sanctity of its App Store, barring companies from using their own payment systems or being downloaded outside the Apple store.
Despite warnings that opening up iPhones would pose a security threat, the DMA will force Apple to allow software to be downloaded and for payments to be made outside its store.
Failure to comply could carry fines in the billions of dollars - big enough even for the world's biggest company by market value to pay attention.
Any gatekeeper platform that locks in customers to use pre-installed services - such as a Web browser, mapping or weather information - will also face fines.
5. AD TRANSPARENCY
Google's search engine and Meta's Facebook and Instagram are the world's biggest online advertisers, a status that critics say the companies abuse by accumulating valuable data about customers and keeping it to themselves.
The DMA will force the tech giants to reveal much more to advertisers and publishers on how their ads work and on an ad's actual effectiveness. This will make companies less beholden to Google or Facebook on understanding their customers and potentially encourage firms to get their message out in new ways.
AGENCE FRANCE-PRESSE
There may be some wiggle room for the tech giants to dodge the full impact of the DMA, said Prof Kokkoris.
"The degree of adverse impact on Big Tech will depend on the extent they can persuade the commission of the lack of any anti-competitive effect," he said.
REUTERS
