Since December 2020, the European Commission has been working on a regulation for digital markets – called DMA, or the Digital Markets Act. The aim of this regulation is to contribute to an open and fairer platform economy and to prevent behavior that is harmful to competition and consumers. It is especially the largest companies, referred to as “gatekeepers”, that will have to meet new requirements when the regulation enters into force.
According to The Wall Street Journal (subscription required), this is imminent – the legislation may be finalized between now and May and could take effect as early as spring 2023.
Who are the gatekeepers? By “gatekeepers”, the EU means large companies that connect end users with other companies. More specifically, companies that operate in at least three EU countries, and that are valued above a certain threshold, that have a turnover above a certain threshold and that have a minimum of associated users and companies.
The initial proposal involved a company value of over 65 billion euros, an annual turnover of at least 6.5 billion euros, at least 45 million active users within a month, and at least 10,000 affiliated companies, but the amount thresholds have later been adjusted to 80 and 8 billion euros.
Companies that meet these criteria are automatically considered gatekeepers. In addition, the Commission may designate other providers of key platform services as gatekeepers if they meet certain qualitative requirements.
This will mainly involve large, international players, such as Apple, Facebook, Google and so on, but also the largest players in areas such as marketplaces, video sharing services, operating systems, cloud services, e-mail services, ad networks, browsers, virtual assistants and TVs.
For Apple, it is especially the App Store that is in the spotlight. If DMA is introduced, it will have great significance for Apple’s app store:
– Apple will be forced to allow app downloads outside the App Store, such as through third-party app stores or directly from the creators’ websites.
– Apple will be forced to allow developers to charge for their services outside the App Store.
These are aspects that have been the subject of much debate in recent years. Fortnite creator Epic, for example, sued Apple because the company did not allow Epic to create its own payment solution for content outside the App Store. Apple takes a 15-30 percent commission for everything sold through the App Store.
Spotify has highlighted Apple’s policies multiple times, due to what they believe are unreasonable and anti-competitive practices. Most recently they did so when Apple launched the Apple One subscription, which included Apple Music and several other services in a joint subscription with a discount, but also earlier as Spotify believes that Apple’s “30 percent tax” makes it difficult to run a competing service.
Apple, for its part, is strongly critical of the EU’s DMA plans and argues that it will weaken the security of their platform if one is to allow the installation of apps that have not been trusted by their moderators. And that introducing other payment services will also make the platform more insecure.
“European policymakers have often been ahead of the curve, but requiring sideloading on iPhone would be a step backward” said Apple’s senior vice-president Craig Federighi at an event in Lisbon this fall, according to Euractive. He went on to call sideloading “a cybercriminal’s best friend“.
He also feared that some platforms, such as social networks, whose business model is largely based on data collection from users, may choose to withdraw their app from the App Store and instead force users to download it from another location to bypass Apple’s privacy policy.
When Apple introduced the option of not being tracked with iOS 14.5, only five percent of users said yes.
Discussions about the market dominance of the largest companies are also highly topical in the United States at present.
“Apple is playing 5D chess right now. It will struggle to explain why government changes will radically change the iPhone when Google already does it and it will struggle to explain why it can’t do it in the United States when it may soon do it in Europe”, Paul Gallant, Cowen & Co’s policy analyst, told the Wall Street Journal.
Additionally, there are requirements that the gatekeepers should not favor their own products (for example in search results, or that they have their own permissions others can not get), that it should be possible to uninstall included apps/services, and the like.
Also interesting is Article 5, which prohibits gatekeepers from using personal information obtained from one service in another – for example, Meta will not be allowed to customize ads on Instagram based on user data collected from Facebook. The bill also contains rules related to the acquisition of other services – so-called “killer acquisitions” – where the giants do not want as much leeway as before.
Violation of the DMA rules will be costly, as the EU aims to be able to fine companies with between 4–20 percent of the annual, global turnover if they do not comply with the new rules. This was also changed from the original proposal, which said ten percent of sales.
In any case, there will be huge sums to pay if you do not comply with the proposed rules.
