An EU rule aimed at reining in massive digital businesses has gone into effect, bringing significant changes to largely American tech behemoths.
The European Union’s significant Digital Markets Act went into effect on Thursday. That means the European Commission, the EU’s executive arm, can begin taking action against corporations that violate the laws.
The Digital Markets Act seeks to limit anti-competitive activities by internet companies while also requiring them to offer up some of their services to competitors. Smaller internet enterprises and other businesses have protested about the negative impact of these companies’ practices.
According to Bill Echikson, a non-resident senior follow at the Center for European Policy Analysis (CEPA), the EU changes indicate that IT behemoths will pass from “teenagers” to “grown-ups” today.
“There are many changes that may or could not occur. “A lot of it is uncertain,” Echikson explained. However, he noted that the new regulation might encourage reform in other nations, including as the United States and the United Kingdom, and eventually force digital companies to make global changes to their platforms.
CNBC examines how the regulation affects major US technology businesses as well as EU customers.
What does this signify for big tech?
The EU Digital Markets Act largely affects US tech companies such as Alphabet, Amazon, Apple, and Meta.
That’s because the rules place tight restrictions on so-called “gatekeepers” — companies with a strong position in their respective markets, a market valuation of at least 75 billion euros ($81.7 billion), and a platform with 45 million monthly active end users in the EU.
This makes U.S. tech behemoths a prime target. So far, six corporations have been named gatekeepers: Alphabet, Amazon, Apple, Meta, Microsoft, and China’s ByteDance, the only non-US firm on the list.
These companies must change their platoutlets to promote healthy competition within the bloc.
For example, they must ensure that their services are not prioritized over competitors on their own platforms. Google, for example, cannot force customers to choose its own search engine when they set up their Android phones and must include alternatives such as DuckDuckGo or Ecosia.
Some messaging apps, such as Facebook Messenger, must also make their services “interoperable” with third-party messaging services, allowing users to chat others using different products.
Companies with strong positions in app distribution must also allow competitive apps to exist on their platforms.
Apple was ordered by the DMA to enable alternative app shops on iPhones for the first time.
Following an inquiry into its App Store operations, the EU fined the Apple giant more than 1.8 billion euros ($1.96 billion) this week for violating competition laws.
The EU believes Apple violated the law by barring app developers from alerting iOS customers about alternative and less expensive music subscription services available outside of the app. Spotify hailed the Commission’s decision, but Apple maintained that the App Store violated the law.
The fine could foreshadow what’s to come as DMA enforcement officially begins. Companies who persistently violate the rule may face fines of up to 10% of their global yearly revenues.
How are EU citizens affected?
The laws have already resulted in significant changes in how tech firms service clients in the EU.
More changes are expected to follow, since competitors to Big Tech businesses are dissatisfied with the proposals put in place thus far.
Apple recently stated that it would allow third-party app shops to operate on the iPhone and iPad. Developers have long grumbled about Apple’s 30% tax for in-app purchases.
Still, software companies such as Microsoft, Spotify, and video game producer Epic Games are dissatisfied, as Apple’s implementation increases barriers to delivering an installation file for download on their website.
Meta also claims that Facebook Messenger and WhatsApp can now function with third-party chat services as long as they use the Signal end-to-end encryption protocol to preserve privacy.
Meanwhile, Google has included a choice screen that allows users to decide which search engine they want to use as their default on Android phones. This has already been implemented, allowing companies such as Microsoft, Ecosia, and DuckDuckGo to be listed among numerous search engine providers.
Google recently added extra choice screens. Rivals argue that this complicates things needlessly, as customers must click more than they would like to select their primary search provider.
“A lot of pop up screens are going to come because you’re going to get browser choices of other search engines in some ways,” CEPA’s Echikson said.
Google’s search engine will also alter. The corporation deleted flights from search results for EU users, and when searching for a hotel, a carousel of adverts from price comparison sites now appears.
Experts are concerned that the reforms may favor huge internet booking companies like Booking.com over small, local hotels.
“We’re going into new ground there’s a lot of uncertainties that could emerge,” Echikson said in a statement. “It might reinforce some of the gatekeepers as well as allow the small guys, the Davids, more room against the Goliaths.”
