What is the EU Digital Markets Act and what does it mean for tech companies and consumers?

• The European Union’s new Digital Markets Act (DMA) aims to regulate the power of big tech companies like Google, Facebook and Amazon, with significant fines for non-compliance.The DMA sets obligations for these digital ‘gatekeepers’ to ensure fair competition, including not favouring their own services, sharing data with third parties, and obtaining consent for tracking user data.It also addresses the issue of digital power concentration, which is one of the top 20 perceived risks over the next decade identified by the World Economic Forum’s Global Risks Report 2023.

The European Union (EU) has introduced a set of laws aimed at curbing the power of ‘big tech’ firms to make European digital markets more competitive. Known as the Digital Markets Act (DMA), the rules are to remove market barriers created by large “gatekeeper” platforms such as Google, Facebook and Amazon. In this way, the EU wants to level the playing field for digital companies of all sizes and enhance customer choice, The Guardian reports. It’s the second piece of legislation governing digital markets that came into force this summer. The other is the Digital Services Act (DSA), which governs online content and targets online hate, child sexual abuse and disinformation.

The DMA, which came into effect in August, features clear definitions of who counts among these gatekeepers and sets out a series of “dos and don’ts” they must abide by, the European Commission has said.Gatekeepers under the DMA are large digital companies that provide key services such as online search engines, operating systems, app stores and messenger services. The rules apply to companies with an annual turnover of more than $7.9 billion, a market value above $79 billion and services with an active user base of 45 million monthly in the EU. Companies including Apple, Microsoft, Amazon, Google and Meta – which owns Facebook, WhatsApp and Instagram – and China’s ByteDance, the owner of TikTok, will all have to comply with the act, according to the Financial Times. The paper also reported that Apple and Microsoft are seeking exemptions for some of their services, including iMessage and Bing. Samsung has already successfully argued against the inclusion of its phone web browser.

The DMA stipulates that those identified as digital gatekeepers must no longer favour their own services over those of rivals and enable competitors’ services to interoperate with theirs. They must also share data with third parties and enable them to trade with users away from the gatekeeper’s platform.Other provisions made by the DMA include allowing users to delete proprietary apps pre-installed on their devices and requiring consent to track user data outside of the gatekeeper’s platform.

The laws give the European Commission the authority to investigate and remedy any non-compliance. The companies affected will have six months to comply with the new rules, according to the Financial Times. After that, the European Commission can impose fines of up to 10% of the company’s total worldwide annual turnover, or up to 20% for repeated contraventions. It can also opt for period penalties of up to 5% of a gatekeeper’s daily turnover.

Users can no longer be forced to use only a specific platform, so the likes of Apple and Google will have to make room for third-party app stores on iOS and Android devices. This may lead to a boom in alternative app stores for consumers to buy from, Reuters quotes experts as saying. Messenger services will no longer be siloed but need to interoperate with each other.Tracking users beyond the boundaries of their own platforms will become much harder, with consent being required for the gatekeeper to do so. This could affect the big tech companies’ sources of advertising income, according to Investopedia. Online advertisers will have a right to data collected in the course of their campaigns, giving them greater transparency. Those buying and selling on marketplaces such as Amazon or searching using the likes of Google will benefit from a ban on gatekeepers ranking their own services over those of competitors, Reuters says. The EU itself has stressed the benefits for small businesses aiming to scale up and for a fairer business environment overall.

Digital power concentration as a risk factor

The implications of the DMA – which Investopedia has described as an antitrust law – will be wide-reaching, not least because of the sizeable fines the European Commission can impose for non-compliance. It is also likely to affect how we all use the internet. With its recent laws, the EU has not only reinforced its stance of regulation to protect its citizens. It has also addressed one of the biggest risks associated with technology that the World Economic Forum’s Global Risks Report 2023 has identified: digital power concentration. This is when critical digital assets, capabilities or knowledge rests with “a small number of individuals, businesses or states that can control access to digital technologies and demand discretionary pricing”. For risk professionals, it counts among the top 20 concerns over the next decade, along with the climate crisis, migration, geopolitical tension, cybercrime and other technology concerns.