In late Thursday, the European Union agreed on the details of a sweeping competition reform that would subject the most powerful, intermediary technology platforms to a series of preliminary rules on how they can and cannot operate – with the threat of fines of up to 10% of global annual sales if they violate the requirements (or even 20% for repeated violations).
In three talks between the European Council, Parliament and the Commission, which lasted approximately eight hours today, it was finally agreed that the Digital Markets Act (DMA) will apply to large companies that provide “core platform services”, such as social networks or search engines — with a market capitalization of at least €75 billion or an annual turnover of €7.5 billion.
To qualify as so-called “gatekeepers” and thus fall under the DMA, companies must also have a minimum of 45 million monthly end users in the EU and 10,000+ business users per year.
This puts US tech giants including Apple, Google and Meta (Facebook) clearly in range. While some less gigantic but still big homegrown European tech platforms – like the music streaming platform Spotify – seem to avoid being subjected to the current regime. (Although other European platforms may already have – or get – the scale to fall within range.)
SMEs are generally excluded from designated gatekeepers as the DMA is intended to target big tech.
The regulation has been years in the making – and will usher in a radically different ex-ante regime for the most powerful technology platforms as opposed to the antitrust enforcement after the fact that certain behemoths have largely been able to shake off thus far, with no discernible impact on market share.
Frustration over leading EU competition investigations and enforcements against tech giants like Google – and widespread concern over the need to reboot tipped digital markets and restore the possibility of lively competition – have been key drivers for the bloc’s lawmakers.
Andreas Schwab, the European Parliament’s rapporteur for the dossier, said in a statement: “The agreement heralds a new era of technical regulation worldwide. The Digital Markets Act puts an end to the ever-increasing dominance of Big Tech companies. From now on they must show that they also enable fair competition on the internet. The new rules help to maintain that basic principle. In this way, Europe ensures more competition, more innovation and more choice for users.”
In another supporting statement, Cédric O, France’s minister of state with responsibility for digital, added: “The European Union has had to impose record fines over the past 10 years for certain harmful business practices by very large digital players. The DMA will directly ban these practices and create a fairer and more competitive economic space for new entrants and European companies. These rules are essential for stimulating and opening up digital markets, increasing consumer choice, enabling better value sharing in the digital economy and stimulating innovation. The European Union is the first to take such decisive action in this regard and I hope others will join us soon.”
Key requirements agreed by EU co-legislators include interoperability for messaging platforms, meaning that smaller platforms can request dominant gatekeepers to open on demand and allow their users to exchange messages, send files or make video calls. through messaging apps, expanding choice and counteracting the typical network effects of social platforms that create innovation-horrifying service lock-in.
That could be hugely important in enabling consumers who object to the policies of a giant like Meta, which owns Facebook Messenger and WhatsApp, to switch to a rival because their social chart is being held by the gatekeeper to actually leave without having to give them the option to message their friends.
There had been some debate as to whether interoperability of messages would survive the trilogues. It has – although the interoperability of group messaging will be introduced over a longer period of time than one-to-one messaging.
Speaking to thenewsupdate ahead of today’s fourth and final trialogue, Schwab emphasized the importance of messaging interoperability capabilities.
“Parliament has always been clear that messaging interoperability has to come,” he told us. “It will come – at the same time it must also be safe. If the telecom regulators say that it will not be possible to deliver end-to-end encrypted group chats within nine months, then it will come as soon as it is possible, there is no doubt about it.
According to Schwab, messenger services subject to the interoperability requirement will have to open up their APIs to competitors to provide interoperable messaging for core functions – with the requirement being intentionally asymmetric, meaning smaller messaging services not falling within the scope of the DMA will have to not open up to gatekeepers, but can connect to Big Tech themselves.
“The first basic messaging features are user-to-user messaging, video and voice calls, as well as basic file transfers (photos, videos), and more features will come over time, such as group chats,” Schwab noted, adding: “ Everything must be end-to-end encrypted.”
Interoperability for social media services has been put on ice for now – EU co-legislators agree that such provisions will be reviewed in the future.
In another key decision that could have major implications for dominant digital business models, the parliament managed to keep a change to an earlier version of the proposal – meaning a gatekeeper needs explicit user consent to combine personal data for targeted advertising.
“Data combination and cross-use is only possible with explicit permission,” said Schwab. “This applies in particular for advertising purposes and also applies to combination with data from third parties (e.g. Facebook with third parties). This means more control for users as to whether they want to be tracked across different devices/services, even outside of Big Tech’s networks (hence the third-party data), and whether they want to receive tracking ads.”
“Finally, to avoid consent fatigue, Parliament will limit the number of times Gatekeepers can request consent again if you refuse or withdraw consent to these practices: once a year. This has been very important to me – otherwise permission would be meaningless if the gatekeeper can just spam users until they give in,” he added.
Another parliamentary requirement that survived the trilogue negotiations is a provision that users should be able to freely choose their browser, virtual assistants or search engines when such a service is operated by a gatekeeper. are the new norm in those areas for reachable platforms.
While email — another oft-bundled choice that European end-to-end encrypted email service ProtonMail had claimed should also get a choice screen — doesn’t appear to be included, with lawmakers limiting it to “core software”, as the Council said.
Other obligations of gatekeepers in the agreed text include requirements to:
ensure that users have the right to opt-out of core platform services on similar terms to subscriptions giving app developers fair access to the additional functionalities of smartphones (e.g. NFC chip) giving sellers access to their marketing or advertising performance data on the platform inform the European Commission of their acquisitions and mergers
And the restrictions include provisions that gatekeepers are not allowed:
rank their own products or services above those of others (also known as a ban on self-preference) reuse private information collected during one service for the purposes of another service create unfair conditions for business users preinstall certain software applications have to use app developers certain services (e.g. payment systems or identity providers) to be listed in app stores
The Commission will be solely responsible for enforcing the DMA – and it will have some leeway to act, whether or not immediately, against tech giants who breach duties, with the text providing the opportunity to engage in regulatory dialogue to making sure gatekeepers have a clear understanding of the rules (i.e. rather than grabbing straight at a hefty penalty).
Today’s agreement on a preliminary text of the DMA almost marks the latest milestone on a multi-year journey towards the law of the DMA proposal. But there are still a few hoops that European lawmakers need to jump through.
It is still waiting for the final legislative text to be approved by the Parliament and Council (but it is usually much more difficult to reach consensus in the first place). Then, after that final vote, the text will be published in the EU’s official journey and the regulation will enter into force 20 days later — with six months for member states to transpose it into national law.
EU Commissioners will be holding a series of – no doubt very cheering – briefings tomorrow to work out the details of what has been agreed, so stay tuned for more analysis…