EU targets Big Tech with sweeping new antitrust legislation

Illustration by Alex Castro / The Verge

The EU has unveiled its biggest ever legislative effort to balance competition in the tech world. The Digital Markets Act is intended to allow smaller entities to compete with the large tech corporations. The EU has tackled antitrust issues on a case-by-case basis, but the DMA is intended to introduce sweeping reforms that will address systemic issues in the whole market.

The EU said that vendors will have to open up and interoperate with smaller messaging platforms if they request. Users should be able to choose their browser, virtual assistants or search engines.

The legislation hasn't passed yet and the EU says the language needs to be checked and approved by Parliament and Council. We expect to hear more about the details during a press conference broadcast from Brussels on Friday morning at 8:45AM Central European Time.

The legislation defines agatekeepers as firms with a market cap of at least $75 billion. Tech giants like Apple and Microsoft are covered by this classification, as are smaller entities like Booking.com.

The Commission can impose fines of up to 10 percent of its total worldwide turnover if thegatekeepers don't follow the rules. The Commission may ban them from acquiring other companies in the future if they are found guilty of systematic violations.

The aim is for the tech sector to be open and contestable, according to Margrethe Vestager, the EU's Commissioner for Competition.

It depends on your ideas, your work ethics, your ability to attract capital, whether you will be successful with your customers or not.

The DMA is broad in scope and intended to enable a range of future antitrust action, but also contains a number of specific demands for tech companies. These include:

• Interoperability. Gatekeepers should allow their platforms to work with similar services from smaller third-parties. Exactly how this will be interpreted isn’t yet clear, but it could mean letting users on large messaging platforms like WhatsApp contact users on other, platforms.
• The right to uninstall. Consumers are to be given more choice over software and services, particularly in mobile operating systems like iOS and Android. They should be able to uninstall any preloaded software, and be giving a choice when setting up a new device what service they want to use for applications like email and web browsing.
• Data access. Businesses should be able to access data they generate for larger platforms. This would mean, for example, letting companies who sell goods on platforms like Amazon access Amazon’s analytics about their performance.
• Advertising transparency. If a company buys adverts on Facebook, for example, they should be given the tools to independently verify the reach of their ads.
• An end to self-preferencing. Companies can’t use their platforms to put their products first. This means Google, for example, can’t put its shopping service at the top of its search results unless there is some sort of competitive tender for that spot.

It should be no surprise that these demands sound familiar. Over the past decade, the EU has waged a number of antitrust fights and the DMA gathers them into a single legislative act and strengthens the power of lawmakers to enforce these terms. For example, you can see how the EU's past accusations that Amazon uses its analytics to gain an advantage over third-party sellers is tied to the DMA's focus on data access.

The EU can impose fines of up to 10 percent of their worldwide annual revenue, periodic penalty payments of up to 5 percent of average daily turnover, and specific behavioral and structural remedies if companies break these rules.

The last point may worry some tech companies, as current European antitrust efforts are often criticized for only levying small fines on tech giants without forcing changes in behavior. In the Netherlands, Apple was found in violation of antitrust legislation regarding third-party treatment on the App Store. Rather than make any changes to its platform, Apple has chosen to pay weekly fines.

If you don't implement changes, the fines will increase. If no change is happening, or if you are a repeat offenders, there is a tool that you can use to break up a company.

Many big tech companies have criticized the DMA for being in the works for a long time. They say the measures will make it difficult for consumers. The act was criticized by some US lawmakers, who wrote a letter to President Joe Biden saying the legislation unfairly targets American workers by deeming certain U.S. technology companies asgatekeepers.

Politicians in the US and the EU are taking a tough stance on abuses of market power in the tech sector. President Biden pushed forward laws like a new executive order backing the right to repair and nominated vocal antitrust figures like Jonathan Kanter to key government positions. Proponents of the DMA should be able to enforce the new regulations because of the political environment.