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European regulators have agreed on a Digital Markets Act that would impose a variety of new requirements on Big Tech companies classified as "gatekeepers." Final votes on the legislation are still pending.
"The text provisionally agreed by Parliament and Council negotiators targets large companies providing so-called 'core platform services' most prone to unfair business practices, such as social networks or search engines, with a market capitalization of at least 75 billion euro or an annual turnover of 7.5 billion," a European Parliament announcement said yesterday. "To be designated as 'gatekeepers,' these companies must also provide certain services such as browsers, messengers, or social media, which have at least 45 million monthly end users in the EU and 10,000 annual business users."
Google, Apple, Amazon, Facebook owner Meta, and Microsoft would apparently have to comply with the new rules. "The Digital Markets Act puts an end to the ever-increasing dominance of Big Tech companies. From now on, they must show that they also allow for fair competition on the Internet," said Andreas Schwab, a member of the European Parliament from Germany and rapporteur for Parliament's Internal Market and Consumer Protection Committee.
EU lawmakers agreed that big messaging services such as Whatsapp, Facebook Messenger, and Apple's iMessage "will have to open up and interoperate with smaller messaging platforms, if they so request. Users of small or big platforms would then be able to exchange messages, send files, or make video calls across messaging apps, thus giving them more choice," the European Parliament's announcement said. The wording makes it unclear whether the biggest messaging apps would have to work with each other or just with smaller competitors.
Legislators agreed that specific interoperability requirements for social networks "will be assessed in the future." Another provision says that "combining personal data for targeted advertising will only be allowed with explicit consent to the gatekeeper."
"If a gatekeeper does not comply with the rules, the [European] Commission can impose fines of up to 10 percent of its total worldwide turnover in the preceding financial year, and 20 percent in case of repeated infringements. In case of systematic infringements, the Commission may ban them from acquiring other companies for a certain time," the announcement said.
App Store alternatives
The Hollywood Reporter described some of the practical impacts of the new rules. "Apple, for example, will have to allow alternatives to its App Store for downloading apps and allow payment methods for the App Store other than Apple's own," the article said. It continued:
Google and Meta, the parent company of Facebook and Instagram, will no longer be able to offer targeted ads across multiple platforms—using data gathered as users move between services owned by the same company, YouTube and Google Search, for example, without receiving explicit consent.
Amazon will be barred from using data collected from outside sellers on its services to offer competing products, a practice already the subject of a separate EU antitrust investigation.
The legislation text still needs to be "finalized at [the] technical level and checked by lawyer-linguists" and then approved by the European Parliament and Council, the Parliament announcement said. The Digital Markets Act would then "come into force 20 days after its publication in the EU Official Journal and the rules will apply six months after."
EU lists dos and don’ts for gatekeeper companies
In addition to the market cap criteria noted above, companies designated as gatekeepers would "control one or more core platform services in at least three member states," with those core services including "marketplaces and app stores, search engines, social networking, cloud services, advertising services, voice assistants, and web browsers," according to a European Council press release. Small and medium-sized companies "are exempt from being identified as gatekeepers, apart from in exceptional cases," the press release said. Companies that object to being designated as gatekeepers "can challenge the designation by means of a specific procedure that enables the Commission to check the validity of those arguments," the release said.
To comply, gatekeepers must give users "the right to unsubscribe from core platform services under similar conditions to subscription; ensure the interoperability of their instant messaging services' basic functionalities; allow app developers fair access to the supplementary functionalities of smartphones (e.g. NFC chip); give sellers access to their marketing or advertising performance data on the platform; [and] inform the European Commission of their acquisitions and mergers," the European Council said.
For important software such as web browsers, gatekeepers must "not require this software by default upon installation of the operating system." They also won't be allowed to "rank their own products or services higher than those of others (self-preferencing); reuse private data collected during a service for the purposes of another service; establish unfair conditions for business users; pre-install certain software applications; [or] require app developers to use certain services (e.g. payment systems or identity providers) in order to be listed in app stores," the press release said.
Apple and Google object
Apple told Reuters and other news organizations that it is "concerned that some provisions of the DMA will create unnecessary privacy and security vulnerabilities for our users while others will prohibit us from charging for intellectual property in which we invest a great deal."
Google said, "While we support many of the DMA's ambitions around consumer choice and interoperability, we're worried that some of these rules could reduce innovation and the choice available to Europeans. We'll now take some time to study the final text, talk with the regulator, and work out what we need to do to comply."
A tech-industry lobbying group, the Chamber of Progress, said, "The impact of the bill remains squarely focused on American tech companies, and the Biden Administration has warned that the DMA could expose the US tech sector to increased IP and cybersecurity threats."
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