Explained: Targeting big tech, what EU’s landmark Digital Act aims to achieve

What is the News?

The European Union (EU) has finalized details of its Digital Markets Act(DMA).

What is the aim of the Digital Markets Act(DMA)?

The DMA defines clear rules for large online platforms. It aims to ensure that no large online platform that acts as a ‘gatekeeper’ for a large number of users abuses its position to the detriment of companies wishing to access such users.

Which platforms are considered gatekeepers?

To qualify as a gatekeeper:

Firstly, it must either have had an annual turnover of at least €7.5 billion within the European Union (EU) in the past three years or have a market valuation of at least €75 billion

Secondly, it must have at least 45 million monthly end-users and at least 10,000 business users established in the EU.

Thirdly, the platform must also control one or more core platform services in at least three member states. These core platform services include marketplaces and app stores, search engines, social networking, cloud services, advertising services, voice assistants and web browsers.

Note: Small and medium enterprises are exempt from being identified as gatekeepers.

What are the key provisions of the Digital Markets Act(DMA)?

According to the Act, 

Gatekeepers will have to:

– ensure that users have the right to unsubscribe from core platform services under similar conditions to subscription,

– Users will not be forced to use software by default when installing the OS and mentions web browsers,

– Interoperability between the basic functionalities of messaging services. This could mean that a user on WhatsApp and one on iMessage should be able to talk to each other,

– 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,

– inform the European Commission of their acquisitions and mergers.

But the Gatekeepers cannot: 1) Rank their own products or services higher than those of others (self-preferencing), 2) Reuse private data collected during a service for the purposes of another service, 3) Establish unfair conditions for business users, 4) Pre-install certain software applications require app developers to use certain services (e.g. payment systems or identity providers) in order to be listed in app stores.

What if a gatekeeper does not comply with the rules?

If a gatekeeper violates the rules laid down in the legislation, it risks a fine of up to 10% of its total worldwide turnover. For a repeat offence, a fine of up to 20% of its worldwide turnover may be imposed.

If a gatekeeper systematically fails to comply with the DMA, i.e. it violates the rules at least three times in eight years, the European Commission can open a market investigation and, if necessary, impose behavioural or structural remedies.

What is the significance of the DMA Act?

The Act could dramatically change the way big tech firms such as Apple, Google, Meta, and Amazon operate in Europe and have ramifications for the rest of the world as well.

Source: This post is based on the following articles:

– “Explained: Targeting big tech, what EU’s landmark Digital Act aims to achieve” published in Indian Express on 26th March 2022.

– “European Union agrees on new digital rules to rein in Big Tech dominance” published in Business Standard on 26th March 2022.