The European Commission, Council and Parliament say that the Digital Markets Act will allow them to fine global tech giants – to the tune of 10% of global profits, doubling to 20% for repeat offenders
On Thursday (24 March), the three EU bodies agreed on the core text of the Digital Markets Act (DMA).
As the digital world continues to evolve, countries with big tech investments will figure out how to balance a new regulatory framework with the continued economic output of those to-be-regulated companies. Social media platforms and online marketplaces are a relatively new feat of social, technological and economic engineering – which the majority of countries were not ready to regulate.
The agreed-upon DMA will be published after multiple checks, then come into force 20 days after that ambiguous moment of publication. Six months after this implementation, the rules will begin to apply to global tech giants operating in the EU.
What will the provisional Digital Markets Act do?
The DMA will allow the EU to fine companies 10% of their global profit, from the last recorded year, with that doubling to 20% for further violations of competition regulation.
The provisional text also suggests that companies which repeat their offences will be banned from acquiring other companies, in an attempt to block the ability of global tech giants to control the market.
In addition, EU lawmakers agreed on a novel measure. The largest messaging services, – Whatsapp, Facebook, Messenger or iMessage – must create interoperability with smaller messaging platforms, if those smaller platforms ask. This would allow people to send files and make video calls between platforms, giving them a significantly improved level of choice.
Currently, there is no suggestion that social media platforms will necessarily have to open up for interoperability. However, this suggestion “will be assessed in the future”, according to EU Parliament.
In an overlap with some of the Digital Services Act (DSA), users will also be given the right to avoid targeted advertising. The provisional DMA suggests that people should give “explicit consent” to the tech company, specifically when it comes to data collection that is later used to sell them products.
One key feature of the DMA is the creation of “gatekeeper” status
The DMA will label large companies providing “core platform services” as “gatekeepers”. To get this label, they have to hold a market capitalisation of atleast 75 billion euros or make 7.5 billion euros annually, while providing services such as browsers, messengers or social media. These services must be seen to have 45 million monthly end users in the EU, for the company to be described as a “gatekeeper”.
Describing the need for gatekeepers in a statement, European Commissioner for Competition Margrethe Vestager said: “For companies that play a role as gatekeepers, now the Digital Markets Act will set the rules of the game. This is similar to what has been done a long time ago in sectors such as banking, telecoms, energy, transport where regulation and competition rules work hand in hand.
“At long last, we establish the same reality here.”
Currently, the EU has opened atleast 12 competition related complaints against companies like Google, Amazon, Apple and Facebook. In the past, these complaints – especially in relation to Amazon – have found the platforms in violation of competition law, distorting the global market to promote their own products, above small businesses which pay for advertising.
The Digital Services Act passed parliamentary scrutiny earlier in 2022
The draft of the Digital Services Act, a twin piece of legislation, passed in Parliament in January, 2022. The DSA is intended to regulate social media platforms, placing the onus of online harms control onto the companies themselves.
Currently, targeted advertisements and harmful content (often racist, encouraging of self-harm or likely to encourage radicalisation) are not legally considered to be the duty of the platform owner.
Christel Schaldemose, lead EU lawmaker on the DSA, said: “Big tech nations like the U.S. or China are watching closely to see what we’re now going to agree.”
Speaking on 25 March, Commissioner Vestager further said: “We have the Digital Services Act ahead of us and it has been complicated but successful to find the division of work between the two, when it comes to targeted advertisement and minors, but there is also democracy in this proposal, because a fair market place is part of the democracy.”
Both the DMA and DSA could serve as the global legislative template for how to regulate tech giants.