The Digital Markets Act (DMA) came into force this week in the European Union, aiming to regulate the behavior of large technology companies, known as gatekeepers, in the digital market. It was proposed as part of the European Commission’s package of measures to promote fairness and competition in the digital sector.
The DMA was designed to address concerns about market domination by some technology companies, such as Google, Apple, Amazon, Meta (formerly Facebook), and others. These companies often have significant dominance over digital platforms and services, which can result in anticompetitive practices, such as unfair advantages for their own products and services over smaller competitors, as well as privacy and user data security issues.
The main aspects and objectives of the DMA include:
- Definition of Gatekeepers: The DMA establishes specific criteria for identifying companies that will be considered gatekeepers. This includes financial criteria, such as annual revenue and market value, as well as criteria related to the size of the user base.
- Obligations for Gatekeepers: Once identified as gatekeepers, companies are subject to a series of obligations and restrictions aimed at promoting fair competition and consumer protection. This may include measures such as data sharing with competitors, interoperability between platforms, restrictions on anticompetitive practices, and transparency in commercial relationships.
- Prohibition of Anticompetitive Practices: The DMA explicitly prohibits a series of anticompetitive practices, such as unfair preference for own products or services over competitors, as well as blocking or limiting interoperability with other platforms and services.
- Monitoring and Enforcement: The implementation and enforcement of the DMA will be monitored by EU competition authorities, which will have powers to impose fines and other sanctions on companies that violate the provisions of the legislation.
- Promotion of Innovation and Competition: One of the main objectives of the DMA is to promote a more dynamic and competitive digital environment, encouraging innovation and facilitating access for new competitors to the market.
The DMA is seen as a significant response to the challenges faced in the digital market, especially regarding the dominance of large technology companies. Its goal is to balance power and promote healthier and fairer competition in the digital ecosystem, benefiting both consumers and smaller, more innovative companies.
With this new legislation, EU authorities seek to level the playing field for digital platforms, making them more open and fair for businesses of all sizes. The regulatory process took several years to develop and was the reason Apple decided to open iOS to apps outside the App Store in Europe.
When approved in the economic bloc, it was stipulated that all gatekeeper companies would have to recognize and document the necessary changes to comply with the standards by March 6, 2023.
The DMA mainly affects companies categorized as gatekeepers. To be included in this category, technology companies need to meet two specific criteria:
- Record annual earnings in Europe above €7.5 billion in the last three fiscal years, or have an average market value of €75 billion in the last fiscal year, operating in at least three EU countries.
- Have at least 45 million monthly active users on the main platform in the EU and more than 10 million annual active users in the last three fiscal years.
European authorities themselves identified some of the companies that meet these criteria, thus defining some of the current gatekeepers, which include:
Alphabet: an American multinational created in 2015 as a restructuring of Google. The main goal behind the formation of Alphabet was to separate Google’s various projects and subsidiaries into different divisions, each with its own management and structure. This allowed Google to focus on its core products and services, such as internet search, online advertising, Android, YouTube, and others, while other companies within Alphabet could focus on more ambitious and long-term projects, such as autonomous vehicles, healthcare, artificial intelligence, among others.
- Apple: one of the most well-known and influential technology companies in the world. Founded in 1976 by Steve Jobs, Steve Wozniak, and Ronald Wayne, the company started with the manufacturing of personal computers. Since then, it has expanded to become one of the global leaders in innovation and design of consumer electronics, software, and online services.
- Meta: formerly known as Facebook, is one of the largest technology companies in the world. Founded by Mark Zuckerberg in 2004, the company is known for its leading social networks, including Facebook, Instagram, WhatsApp, and Messenger.In addition to its main platforms, Meta also develops and acquires a variety of other technology-related products and services, such as Oculus VR, a virtual reality company, and Workplace, a communication and collaboration platform for businesses.
- Amazon: one of the largest and most well-known e-commerce companies in the world. Founded by Jeff Bezos in 1994, the company started as an online bookstore and over the years expanded to become a global retail giant, offering a wide range of products, from electronics to clothing and food.Amazon’s primary goal since its inception has been to provide consumers with a convenient and efficient shopping experience. The company is known for its vast selection of products, competitive prices, and fast delivery options, including the Amazon Prime service, which offers free shipping on millions of items, video streaming, and other benefits for a monthly or annual subscription.
- Microsoft: one of the largest technology companies in the world, known primarily for its software, including the Windows operating system, the Office productivity suite, and the Azure cloud computing platform. Founded by Bill Gates and Paul Allen in 1975, the company has had a profound impact on the technology industry and how people use computers.In addition to its core products, Microsoft is also involved in a variety of other business areas, including hardware, research and development, artificial intelligence, augmented and virtual reality, among others.
- ByteDance: a Chinese technology company known for creating innovative social media and entertainment apps. Founded in 2012 by Zhang Yiming, the company quickly became one of the most successful startups in China and the world, achieving global fame with its popular apps.ByteDance’s most well-known app is TikTok, a short-form video sharing platform that has become a cultural phenomenon worldwide. Launched in 2016, TikTok quickly gained millions of users and became one of the most popular social networks, especially among young people.
Each of these companies needs to adapt to DMA standards in a specific way, given the variety of products and services they offer.
Alphabet has had several of its services affected by the DMA, including Google Play, Google Maps, YouTube, Android, and Google Chrome. Apple had to relinquish App Store exclusivity to comply with European legislation, among other changes in its ecosystem, while Meta had services like Facebook, Instagram, and WhatsApp categorized as gatekeepers. Amazon was also considered a gatekeeper by the DMA, Microsoft needs to adjust its strategy to promote compliant apps with the DMA, Byte Dance is making changes to the social network to comply with European regulations.
It is important to note that all these changes are specific to the European audience and do not apply globally. For example, the App Store will continue to be the sole source of apps outside Europe, and WhatsApp will not support chats with other apps in other regions of the world.
