22 Jul '22

The Digital Markets Act: What does this mean for businesses and users?

The European Parliament, in conjunction with the European Union and Commission, has recently launched the Digital Markets Act (DMA) in an effort to help balance competition in the technology sector and share the power currently held by large global firms, or ‘gatekeepers’, that are mainly based in the USA.

The DMA will also bring significant reforms to address systemic issues in the market as a whole, including the interoperability of mobile first messaging applications such as WhatsApp and iMessage. 

The key aim of the legislation is to make the online platform environment more ‘open and contestable’, giving innovators and start-ups a better chance to compete without having to comply with unfair terms or conditions.

In theory, this should offer users more choice and flexibility in how they send and receive messages regardless of platform. There is also a requirement that users should be freely able to choose their browser, virtual assistants, or search engines.

On the 25th of March 2022, the legislation was passed and will be enforceable from October 2022. The owners of messaging platforms will have a staggered period from 3 months to 4 years to meet their obligations based on the complexities of their various applications and integrations.  

This will effectively force obligations on companies that are deemed to be gatekeepers, defined as those that:

  • Have significant impact on the internal (EU) market (i.e. a market capitalisation above 75 billion EUR in the last financial year)

AND

  • Serve an important gateway for business users to reach end users (i.e. operating a core platform service with more than 45 million monthly active users)

AND

  • Enjoy an entrenched and durable position in their operations (this is presumed to be the case if the company has met the previous two criteria in each of the last three financial years)

Core platform services include, but are not limited to, the examples shown below:

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Examples of companies affected include Airbnb, Booking.com, Alphabet (Google), Amazon, Apple, Meta (Facebook, Instagram, WhatsApp), and Microsoft (LinkedIn). Notable exceptions to this currently are Spotify and SAP which are excluded at present. 

The broad scope of the DMA contains a number of specific demands for these big technology companies that also enables a range of future anti-trust actions. 

The main demands are: 

  • Interoperability – The gatekeepers should allow their platforms to work with similar services from third parties. This potentially means allowing users on large messaging platforms such as WhatsApp be able to contact users on other products such as iMessage, Signal, or Telegram.
  • The right to uninstall – Consumers are to be given more choice over software and services used, especially in mobile operating systems such as Google’s Android and Apple iOS. They should be able to uninstall certain preloaded software and be offered a choice when setting up new devices on what services they want to use for core applications such as email, web browsing, and mapping. (In principle, this is similar to the directive from the 1990’s where Microsoft would have to remove its default Internet Explorer browser from a desktop screen and allow competitors such as Netscape to be easily used as an alternative.)
  • Data access – Here, businesses should be able to access data they generate for larger platforms. For example, allowing companies who sell goods via Amazon to have access to analytics about their performance. 
  • Advertising transparency – If a company buys advertisements on social media platforms such as Facebook, then they should be offered the appropriate tools to verify the reach of their ads independently. 
  • End of self-preferencing – Companies will be prohibited from displaying their products and services first ahead of others. This means that major players such as Amazon and Google can no longer place their shopping services at the top of search results unless there is a competitive tender for this. 
  • Opening up ‘App stores’ – Platform owners can no longer require app developers to “use certain services (e.g. payment systems or identify providers) in order to be listed in app stores.”

Financial Penalties

As with all major regulations and legislation, there are significant financial penalties that can be imposed by the European Commission for breaches. This is up to 10% of total global turnover in the preceding financial year and up to 20% for repeated infringements. Furthermore, if there are systematic infringements, then the commission can also impose a ban on any acquisitions for a limited time. 

For businesses, this means there are major changes in how big technology titans will handle messaging services that have better functionality than SMS – with features like file sharing and video – but cannot do what SMS does in terms of transmitting messages to any device based on a phone number.

Conclusion

The DMA is a major regulation that has far reaching consequences for many businesses and organisations, with a focus on more interoperability and expanding consumer choice. 

This places a burden on companies that are classified as ‘gatekeepers’, which are primarily Big Tech organisations but may also include others such as data companies. To comply, companies must act now to ensure they have the relevant people, processes, and technology resources in place to be able make the changes required under the legislation. This requires planning and budgeting to ensure business and technology alignment to cater for these changes and improvements. DTSQUARED and ProjectiveGroup are perfectly positioned to offer their expertise in Data Management and Business Transformation to help navigate through the complexities of new legislation and achieve the desired business benefits. Contact us here to find out more – we would love to hear from you.

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