Today, 6 March 2024, the European Union (EU) Digital Markets Act (DMA) reaches a major milestone, requiring digital platforms defined as “gatekeepers” to report on their compliance with the provisions of the Act. there is. This action is a road test of Big Tech regulation that foreshadows the establishment of the European Union as the European Union. de facto International regulatory authorities. But the process isn't over yet.
What is DMA?
Enacted by the European Parliament in July 2022, the DMA establishes Europe-wide oversight of dominant digital platforms. The stated purpose of the DMA is to promote competition, fairness and innovation.1
In May 2023, key elements of the DMA came into force. The following day, on September 6, the European Commission (EC), the EU's administrative agency, designated six companies as “gatekeepers” to control the market necessary to comply with the provisions of the law, and the law was implemented. started. Gatekeepers had six months, by March 6, 2024, to bring their operations into compliance.
The DMA is the beginning, but not the end, of Europe's surveillance process. Gatekeeper companies are now required to submit detailed compliance reports. Next steps are expected to include a regulatory assessment of the appropriateness of these measures, including the DMA's new 'market investigation' powers. Beyond these targeted investigations, the DMA has instructed the EC to launch an 18-month investigation into the resulting digital market trends. The European Commission has until 3 May 2026 to report to Parliament on the effectiveness of the measures initiated by the DMA and recommend whether changes are needed.
Who is the gatekeeper?
In response to concerns about the potential negative effects of regulation on small businesses, the DMA focused on large businesses with “gatekeeper” powers. To make this decision, DMA he established three criteria.
- Whether the company “has a strong economic position, has significant influence on the internal market and is active in more than one EU country.”
- Whether it has a “strong intermediary position, i.e., connecting a large user base to a large number of companies.”and
- “Whether the company has (or will have) a strong and durable position in the market; that is, if the company has met the two criteria above in each of the last three financial years, It means there is.”
Six digital platform companies and 22 of their services were deemed to have gatekeeper power.
As a result of such designation, companies must, among other things, meet the following requirements:
- Facilitate interoperability with third parties,
- Enable businesses to access the data generated when using Gatekeeper's platform.
- Allow advertisers to access data generated by ads
- Allow third parties to provide their own billing for services advertised in the app store.
- Instead of prioritizing your own products and services on your own platform,
- Does not prohibit consumers from linking from an off-platform app to another app.
- Does not prohibit consumers from uninstalling default apps.
- Do not track user activity for advertising purposes outside of specific services without consent.
On March 6, gatekeepers will be required to report on compliance with such rules. Failure to comply may result in fines of up to 10% of global revenue (20% for repeated violations). There is no doubt that March 7th will begin regulatory (and ultimately judicial) back-and-forth over what constitutes compliance. Both outcomes would have ramifications for the United States.
Inadequacy of litigation
EU member states were ahead of the US in seeking to address abuses on digital platforms through existing laws. For example, in 2017, the EC fined Google 2.42 billion euros ($2.7 billion) for prioritizing its shopping services over those of other companies. The following year, it fined the company again, this time for 4.34 billion euros ($5.1 billion) for anti-competitive conduct related to its Android mobile operating system. And in 2019, Google was fined 1.49 billion euros ($1.69 billion) for restricting advertising on other websites in its AdSense ad sales agreement.
The EU's passage of the DMA can be interpreted as a recognition that it is inappropriate to use such approaches alone to address new digital challenges. For a while, elected members of the European Parliament, like members of parliament, seemed to expect prosecutors and courts to solve difficult policy problems. That experience led us to the conclusion that old industrial-era laws and regulations are inadequate for the new digital economy. The DMA introduces legal specificity as to what constitutes reasonable behavior in digital markets.
The European experience has demonstrated the difficulty of delivering broad results with a case-by-case approach. Reliance on such focused enforcement is slow (especially compared to the speed of technological innovation) and backward-looking (at a time of rapid redefinition of technology and markets). Furthermore, while the absolute amount of the fine is large, it ends up being a gnat bite compared to the huge revenues and profits of the dominant digital platforms. These are lessons still being learned in the United States, as allegedly abusive practices continue, new technologies facilitate new practices, and antitrust cases creep through the courts while Congress stands idle. .
Sector-specific regulations
The DMA represents a regulatory watershed in digital markets, as it adopts specific policies for specific sectors of the economy. Instead of applying broader surveillance concepts rooted in competition law, the DMA has focused on the rationality of digital platforms' practices. This is a shift in policy from protecting competition in the hope that consumers will benefit, to specifically protecting against identifiable practices.
Rather than passing judgment on past actions, the DMA aims to establish digital markets that are continuously competitive and fair. Establish industry-wide expectations rather than focusing on specific actions by individual companies. The DMA focuses on the reasonableness of conduct, rather than requiring a finding of specific harm. In the process, it transformed the EC, which had previously been a general administrative body, into a regulatory body with sectoral expertise.
New legal provisions were created because the previous targeted litigation strategy was deemed insufficient. In the belief that establishing a definition of reasonable behavior protects both competition and consumers, the DMA established what a competitive and fair market should look like for entire sectors of the digital economy.
Let's start the game
Regulatory volleyball is expected to begin on March 7, the day after the DMA's effective date. Many gatekeeper companies have already begun their compliance plans. It will now be up to the EC to decide whether such plans are appropriate, possibly including new market research powers.
For example, Apple's compliance plan is the opening code for the upcoming ballet. To comply with DMA, Apple ended its ban on third-party billing platforms. As anyone who has ever tried to buy Kindle books, Spotify music, and other third-party content via iPhone knows, it's not possible. That's because these companies refuse to pay up to 30% of the total revenue Apple assesses on the total revenue generated by apps in the App Store. Her DMA requirement to allow apps to link to third-party billing services outside of the distribution platform forced Apple to change its behavior.
The App Store's old policy has been replaced with a new program that offers three billing options for app developers. The first alternative is current situation Continue to pay Apple up to 30% of the revenue generated by the App Store. The second option is to pay Apple 17% of such revenue, plus 50 euro cents per year for every transaction over 1 million. A third option is to use a competitive billing system while paying Apple 50 euro cents per year per download.
Many app developers see Apple's new plan as violating the intent of the DMA. The CEO of Epic Games, which has sought to use antitrust litigation to expose Apple's practices, described the new policy as follows:bad compliance” Meta CEO Mark Zuckerberg said the measures were “onerous” and “at odds” with the DMA. The day after DMA compliance comes into effect, European regulators will be grappling with whether the new policy is actually a reasonable course of action.
Apple is not unique in this situation. Platform companies have been lobbying against the DMA in recent years. That effort will now be geared towards debate (and possibly litigation) about the adequacy of compliance.
American influence?
The fact that Apple's new policy does not apply to the US indicates that the US is still in the litigation stage, rather than the legislative stage, of developing digital policy. A U.S. district court ruled in Apple's favor in 2021 when game developer Epic sued Apple for anti-competitive App Store practices. However, the court ruled that Apple cannot prevent app developers from using third-party billing platforms. In response, Apple allowed such connections, but you still had to pay Apple a 27% fee (combined with the externally billed service fee, which for many app developers meant that Apple charged (can cost more than 30%). The U.S. Supreme Court declined to hear the appeal. Epic will likely sue Apple again in local court over its actions. However, unlike in the EU, there are no standards for what constitutes reasonable behavior and no ongoing monitoring of such behavior.
This experience shows that DMA decisions do not necessarily affect the United States. However, in some cases, U.S. consumers could be the beneficiaries of European measures. Changes made to comply with the DMA may benefit U.S. consumers, as gatekeepers must choose between common business practices and the more costly balkanization of online markets. There is a gender.
The DMA also rewritten how discussions about U.S. digital policy will move forward. After March 6, the starting point for any investigation into U.S. legislation or regulations regarding the practices of dominant digital platforms will be to identify the policies that these companies must already comply with in Europe. The DMA is therefore likely to become an issue in the US digital policy debate.
Where is American policy heading?
For the past two decades, digital platforms, a sector dominated by American companies, have fought back against regulatory scrutiny of their activities. Although these companies' strategies were successful domestically, their lobbying efforts failed in Europe.
March 6thth It's a new day for doing digital business in the world's second-largest economy. With European consumer rights extending from “just do it over there” to the simple internet economy to Americans, the DMA could change the environment in which digital platform companies are valued in the United States. It means that it is hidden.
