Digital markets law: EU wants to regulate tech giants

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With the Digital Markets Act, the European Union is making another attempt to regulate tech giants like Amazon, Google, and Apple. The primary concern here is their questionable role as digital gatekeepers and the associated danger of potential abuse of their market power.

The planned law is intended to prevent the established online giants from acting as “gatekeepers” and thus not giving users or competitors equal access to their platforms. In addition, self-preferencing, i.e., the prevailing preference for one’s own products (e.g., in search engine rankings), is to be prevented.

The common practice of installing one’s own software on end devices without the option of uninstalling it is also to be prohibited in the future with the help of the Digital Markets Act.

In addition, commercial users of gatekeeper platforms are to be given full access to the data they generate. Last but not least, the disclosure of the recommendation algorithm mechanism will be mandatory, which should ensure more transparency.

When is a digital platform considered a gatekeeper?

The planned law includes precisely defined characteristics that can be used to classify individual online platforms in terms of their gatekeeper position.

Accordingly, platforms can be designated as gatekeepers if they exhibit the following characteristics, among others:

  • The mediation of users to companies is part of the business model.
  • The annual turnover exceeds 6.5 billion euros
  • Annual market capitalization exceeds 65 billion euros
  • A dominant and long-term market position in the digital areas of search, social media, digital marketplaces or advertising in at least three of the 27 EU member states
  • What penalties do tech giants face if they do not comply with the Digital Markets Act?

If a digital gatekeeper fails to comply with the proposed law, severe penalties are possible. Fines of up to 10% of the gatekeeper’s annual global revenue or up to 5% of its average revenue per day are envisioned.

Who will enforce the proposed law?

The Digital Markets Act is scheduled to be adopted by EU economic ministers on November 25, 2021. From that date, the Act will then apply to all companies that act as digital gatekeepers according to the defined criteria.

Enforcement of the Digital Markets Act is the responsibility of the EU Commission to ensure uniform application across all member states.

All previous efforts by Amazon, Google, and Apple to prevent or delay the Act have failed. The EU member states seem to be united behind the bill and will not be swayed by the lobbying of the tech giants in this case.

Implications for companies

It seems that the EU’s long overdue draft legislation has got to the heart of the problem.

If the Digital Market Act has the desired effect, companies will have much fairer access to the digital platforms of the tech giants. Disclosure of the recommendation algorithm will enable targeted optimization of one’s own content to increase the likelihood of a recommendation.

The planned law opens up new opportunities for digital start-ups in particular, as they will be able to compete with the tech giants in the future without being at the mercy of unfair conditions such as the indelible pre-installation of software.

Commercial users inside can expect unprecedented transparency regarding their data generated by gatekeepers. These can be viewed in full on the basis of the new law.

In addition to all the opportunities, however, a certain skepticism about the planned law does not seem unfounded. The previous EU competition law also had only marginal effects on the monopoly position of the tech giants.

Ultimately, it will be up to the will and resources of the European Union to implement the planned law.

More information on the planned Digital Markets Act can be found on the official website of the European Union.

 

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