The European Union agreed on landmark new antitrust regulations that could change the business models of U.S. technology giants. The rules are expected to take effect in October.
The European Parliament and EU member states reached an historic deal on Thursday on the Digital Markets Act, a sweeping set of rules intended to curb the market power of firms with a tight grip on the internet economy.
Tech companies with a market cap of at least 75 billion euros or 7.5 billion euros in the past three years will be subject to the rules. They must have at least 45 million monthly users or 10,000 business users in the EU.
The legislation did not pass. The European Parliament and the 27 countries that make up the EU have yet to adopt a finalized version.
Margrethe Vestager, the EU's competition chief, said she expects the rules to come into force in October.
Over the years, we have learned that we can correct specific cases of illegal behavior.
When things become systemic, then we need regulation as well because if there are entrenched positions, then we need regulation to come in.
The Digital Markets Act will set the rules of the game for companies that play the role of gatekeepers.
The reforms aim to prevent tech giants from abusing their market position to harm smaller rivals. Large internet companies are often criticized for having closed systems that make it harder for users to switch providers.
Firms that qualify as gatekeepers will be required to avoid setting their most important software as the default option when a user sets up their device. They will not be allowed to give preference to their own services.
Interoperability, or the ability for different apps to work with each other, between instant messaging services, must be ensured. That could mean that Apple has to exchange data with other companies.
Big Tech is being forced to embrace interoperability, which will unleash a new era of innovation.
Apple is concerned that some elements of the DMA will lead to unnecessary privacy and security vulnerabilities for users, and that they will prohibit us from charging for intellectual property.
We believe deeply in competition and in creating thriving competitive markets around the world, and we will continue to work with stakeholders throughout Europe in the hopes of mitigate these vulnerabilities.
The EU agreement was not commented on by Meta or Amazon. When contacted by CNBC, Google was not available for comment.
The consequences for breaking the rules could be very serious. Gatekeepers can be fined up to 10% of their global revenues if they violate the DMA. This will increase to 20% for repeat offenders. It would be as much as $23 billion for a company like Meta.
Gatekeepers that break the rules at least three times in eight years are at risk of being investigated or even being broken up.
Europe is keen to take a leading role in digital enforcement, according to a partner at Linklaters.
Eyes will now turn to how the Commission implements what is a gargantuan new rule book for the digital sector, while gatekeepers and other market participants will need to start grappling with how the rules will be applied in practice.
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