Monday, May 16, 2022

EU targets Big Tech with sweeping new antitrust law

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The European Union unveiled its greatest legislative effort ever to balance the competition in the tech world. The new Digital Markets Act, or DMA, aims to curb the power of the largest tech companies and allow smaller entities to compete with the primarily US-based companies. So far, the EU has tackled antitrust issues on a case-by-case basis, but the DMA aims to implement sweeping reforms that will address systemic problems across the market.

Today’s announcement focuses on the interoperability of messaging apps such as WhatsApp, Facebook Messenger and iMessage, with the EU saying vendors should “open up to and partner with smaller messaging platforms, if they ask.” The EU says this should give users more choice in how they send messages, without having to worry about which platform the recipient is on. There is also a requirement that users “must be able to freely choose their browser, virtual assistants or search engines”.

The legislation has not yet been adopted – the EU says the language will have to be finalized and checked, after which it will have to be approved by the Parliament and the Council. We expect to hear more about the details at a press conference broadcast from Brussels on Friday morning at 8:45 AM Central European Time (that’s 3:45 AM ET).

The DMA could impose new obligations on companies considered “gatekeepers” – a category defined by legislation as companies with a market capitalization of at least €75 billion ($82 billion); at least 45,000 active users; and a “platform” such as an app or social network. Companies that fall under this classification include well-known tech giants such as Google, Microsoft, Meta, Amazon, and Apple, as well as smaller entities such as Booking.com.

As the EU Competition Commissioner, Margrethe Vestager, said: The edge last week, the goal is for the DMA to make the technology sector “open and disputable”.

“So it depends on your ideas, your work ethic, your ability to raise capital, whether you will be successful with your clients or not,” Vestager said. “And unfortunately, due to the systemic nature of behavior, that’s not necessarily the case these days.”

The DMA is broad in scope and intended to facilitate a range of future antitrust actions, but also includes some specific requirements for technology companies. Among which:

  • interoperability† Gatekeepers should run their platforms with similar services from smaller third parties. Exactly how this will be interpreted is not yet clear, but it could mean that users on major messaging platforms such as WhatsApp will need to contact users on other platforms.
  • The right to delete† Consumers should be given more choice about software and services, especially in mobile operating systems such as iOS and Android. They should be able to uninstall any preloaded software and give them a choice when setting up a new device which service they want to use for applications such as email and web browsing.
  • Access to the data† Businesses must have access to data they generate for larger platforms. This would mean, for example, that companies selling goods on platforms such as Amazon would have access to Amazon’s analytics on their performance.
  • Ad transparency† For example, if a business buys ads on Facebook, they should be given the tools to independently verify the reach of their ads.
  • An end to self-preference† Companies cannot use their platforms to put their products first. This means that, for example, Google cannot place its shopping service at the top of search results unless there is some kind of competitive tender for that place.

If these requirements sound familiar to you, it should come as no surprise. The DMA essentially gathers together some of the antitrust battles the EU has waged over the past decade into a single legislative act and strengthens the power of lawmakers to enforce these terms. For example, you can see how the DMA’s focus on data access links with the EU’s past allegations that Amazon is using its analytics to gain an advantage over third-party sellers using its platform.

If companies violate these rules, the EU can impose fines of up to 10 percent of their global annual turnover, periodic penalty payments of up to 5 percent of the average daily turnover and specific “behavioural and structural remedies” – i.e. changes in the way their business or service activities run. , which may include measures such as divesting parts of the business.

It is this last point that is of concern to some tech companies, as current European antitrust efforts are often criticized for imposing only small fines on tech giants without enforcing behavioral changes. For example, Apple was caught being treated by third parties in the App Store in violation of antitrust law in the Netherlands. Rather than make changes to its platform, Apple has chosen to: pay weekly fines of €5 million ($5.5 million).

“This is why in the Digital Markets Act there is a full toolbox where sanctions are getting tougher,” Vestager told me. The edge last week. “The fines add up if you don’t make changes. Ultimately, the toolbox also contains the tool with which you can actually break up a company if nothing changes, or if you are a repeat offender.” (Presumably this would only apply to the parts of these companies that are located in the EU itself.)

The DMA has been in the works for years and has therefore received a lot of criticism from major tech companies. They say the measures will stifle innovation and create unwanted complications for the average consumer. Some US lawmakers have also criticized the law, write a letter to President Joe Biden in February said the legislation “incorrectly targets American workers by viewing certain American tech companies as ‘gatekeepers’ based on deliberately discriminatory and subjective thresholds.”

But in both the US and the EU, politicians generally take a tough stance against abuse of market power in the technology sector. President Biden has nominated vocal antitrust figures such as Lina Khan and Jonathan Kanter to key government positions and has put forward laws as a new executive order to support the “right to repair” movement. In such a political environment, proponents of the DMA would find they have a strong hand in enforcing these new regulations.

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