The European Union (EU) is renowned for enacting and rigorously enforcing some of the strictest regulations, including the EU GDPR and Competition Law rules, targeting the business practices of major tech firms and digital platforms.
Significantly, the EU consistently applies these regulations to big tech companies and dual-sided digital platforms.
On November 1, 2022, the EU introduced the Digital Markets Act (DMA), a legislation aimed at governing essential digital platform services like online search engines, web browsers, advertising services, social networking services, and video sharing platforms.
Digital platforms like Google Search, Apple's App Store, and Facebook facilitate connections between businesses and consumers throughout the EU. However, there's a concern that these platforms may exploit their dominant positions and engage in unfair practices.
The main objective of the Digital Markets Act is to promote competition within key digital platforms and ensure equitable interactions among digital platform providers, businesses, and consumers. To realize these aims, the DMA sets forth several requirements for digital platform services, including the necessity for user consent before utilizing personal data for advertising. Non-compliance with the DMA can lead to penalties amounting to 10% of a company's annual revenue.
According to Margrethe Vestager, Executive Vice President of the European Commission-
“Mobile payments are vital in the digital economy, requiring a competitive, innovative landscape for consumer benefit. Preliminary findings suggest Apple may have illegally stifled competition by limiting access to essential technology for developing competing mobile wallets, favoring Apple Pay.”
The main objective of the Digital Markets Act is to guarantee fairness and competitiveness in digital platforms like search engines, social networks, advertising services, and app stores for both consumers and businesses.
Articles 5, 6, and 7 of the DMA outline the duties and restrictions for gatekeepers. For example, Article 5(3) mandates that gatekeepers cannot stop business users from selling the same products or services at different prices or conditions through third-party services or their channels compared to the gatekeeper's platform.
Regarding personal data usage prohibitions, the DMA emphasizes the importance of personal data in platform business models, banning its misuse in Article 5(2). It forbids gatekeepers from processing personal data for online advertising from third-party services, combining personal data across services, or forcing user sign-in across services for data combination.
Additionally, the DMA imposes other requirements on gatekeepers, including not hindering complaints to authorities, mandating the use of specific platform services, or forcing registration to other services as a prerequisite for using any core platform services.
Companies recognized as gatekeepers are required to adhere to the DMA's comprehensive regulations, which entail:
E-commerce businesses in Europe not currently classified as gatekeepers should nonetheless prepare for the DMA's implications.
The European Commission advises entities on the cusp of becoming gatekeepers to proactively adopt these practices now to facilitate a smoother transition later.
Additionally, European companies’ dependent on gatekeeper platforms can expect modifications in user interfaces, functionalities, and settings due to the DMA.
Europe has recently introduced the Digital Services Act (DSA) alongside the Digital Markets Act (DMA) to foster a more secure online environment for its citizens.
The DMA outlines permissible digital marketing practices for major tech companies, while the DSA focuses on ensuring data transparency and fairness, benefiting:
The DSA aims to simplify the process of:
Furthermore, it seeks to offer digital service providers legal clarity, facilitating their initiation and growth in Europe. It grants access to EU-wide markets for platforms and ensures fair competition with providers of illegal content for digital service business users.
The DSA also aims for greater democratic regulation and supervision of systemic platforms to address societal risks such as misinformation or manipulation.
In essence, the DSA sets forth regulations for online intermediaries, hosting services, and platforms, especially those used by millions across Europe, ensuring obligations are tailored to their influence and size within the online ecosystem.
Through its latest legislation, the EU has not only strengthened its regulatory approach to safeguard its citizens but has also tackled a significant technological risk highlighted by the World Economic Forum's Global Risks Report 2023: the concentration of digital power. This issue arises when essential digital resources, skills, or knowledge are held by a limited number of entities—individuals, companies, or states—enabling them to dominate access to digital technologies and impose arbitrary pricing.
