Digital Markets Act: Europe's looming crackdown on Big Tech
For years regulators have struggled to keep with the pace of changing technology. From the Facebook-Cambridge Analytica data scandal in 2018[1] to LinkedIn’s data breach which impacted 700 million users (92% of the total 756 million LinkedIn users) in 2021,[2] it is clear that there is an imperative need to regulate tech giants. In response, regulators have steadily expanded well beyond the traditional mandate of assessing the impact of a deal on market power and consumer benefit, and towards concerns such as data privacy, national interest, and the impact on future competition.[3]
The European Union, in particular, is a step closer to imposing fresh regulations on digital giants, after the proposed rule changes on the Digital Markets Act (DMA) were approved in November 2021. The DMA, drafted by the European Commission in December 2020, sets out restrictions on large tech firms (known as ‘gatekeepers’ in the DMA), with the aim of creating fairer business environments and encouraging competition.[4] The DMA is intended to apply to eight ‘core platform services’, including online search engines, social networking services, cloud computing services and advertising services.
The current draft of the DMA provides that a core platforms service provider will be presumed to be a gatekeeper if:[5]
(i) it has a significant impact on the internal market: it has at least €8 billion in turnover or €80 billion market capitalisation threshold, and provides services in at least 3 Member States;
(ii) it operates a core platform service which serves as an important gateway for business users to reach end users: this is determined by the number of active EU end users and business users the provider has; and,
(iii) it enjoys an entrenched and durable position in its operations.
Some of the key restrictions imposed on gatekeepers by the DMA include disallowing gatekeepers to use private data generated through their business users' activities in competition with those business users, and prohibiting gatekeepers from requiring businesses/end users to sign up to other platforms as a condition of access to the gatekeeper’s services. Failure to comply with the DMA may result in a maximum fine of 20% of the gatekeeper’s total annual worldwide turnover.
The DMA is scheduled for adoption in the first half of 2022,[6] with its proposals expected to be voted on by the EU Parliament in December 2021. Whilst the scope of the DMA is, in a sense, relatively narrow as it is designed to capture only the largest digital players in the market, it is an important first step to tackling the dominance and intrusiveness of big tech firms. With the General Court recently dismissing Google’s appeal against the Commission’s €2.4bn shopping fine[7] (this ruling marks the first time a European court has ruled on an antitrust case against Google), and national countries ramping up their scrutiny over big tech companies,[8] it seems that a new wave of regulatory crackdown in Europe has begun.
[1] Personal data from over 87 million Facebook users had been improperly obtained by the political data-analytics firm – Cambridge Analytica. Facebook paid a £500,000 fine imposed by the UK’s Information Commissioner’s Office for failing to do enough to protect users’ information and £4bn to the Federal Trade Commission (the US consumer regulator) for violation of consumers’ privacy.
[2] https://9to5mac.com/2021/06/29/linkedin-breach/
[3] https://www.bain.com/insights/2020-year-in-review-the-surprising-resilience-m-and-a-report-2021/
[4] https://www.pinsentmasons.com/out-law/news/eu-parliament-prepares-vote-digital-markets-act
[5] https://www.fieldfisher.com/en/services/competition-and-consumer/competition-connect-blog/the-eu-s-proposed-digital-markets-act
[6] https://www.cms-lawnow.com/ealerts/2021/09/friends-of-an-effective-digital-markets-act-part-2-france-germany-and-netherlands#:~:text=The%20concrete%20proposals%20underline%20their,the%20first%20half%20of%202022.
[7] In 2017, the Commission fined Google on the grounds that Google was abusing its dominance in search by giving “illegal advantage” to its own shopping service.
[8] E.g., on 26 November 2021, Italy’s Competition and Market Authority fined Apple and Google €10 million apiece for ‘aggressive’ data practices.
