Today’s technological and digital market sees some companies as being far too much in the limelight. A new regulation issued by the European Union has just come into force to manage the market and, perhaps, limit the power of Big Tech. Here is when it will really start and what it will entail.
The Internet has changed radically from its beginnings. Indeed, we could say that it has been turned inside out like a digital sock. The birth of a more or less free and shared network has been followed by the onslaught of a few big companies that have taken the biggest slice of the cake, running the whole Internet almost like a traditional market.
Is this slice too big, leaving only crumbs for everyone else? Perhaps the European Union thinks so, as it is intervening in digital market regulations. And after long periods of study, it has brought into force something new, which promises a positive revolution.
The Digital Market Act comes into force: what is it and what are its goals
It is called the Digital Market Act (DMA) and it wants to give more justice to the digital market. Thus, by fighting unfair or excessive competition from so-called Big Tech. Will it work? Only time will tell. But in the meantime, let us see what it will consist of and when its real effects will begin to be seen.
Big words are the order of the day in the political and legislative arena, but let’s try to really understand what it is all about, in simple terms. As its name suggests, the Digital Market Act is an Act. It is specifically a new regulation imposed on the digital market.
However, it is not a mere guideline. But a real piece of legislation: on 14 September, the DMA was converted into an EU Act.
The Digital Market Act has the concrete aim of making the digital single market fairer, for everyone. It includes:
- end-consumers, who will have more freedom of choice among more competitors who are themselves free and soundly competitive (also in terms of prices, then);
- new companies and start-ups, which will be able to innovate and at the same time compete in an environment that does not impose unfair conditions on them, for example by penalising them because they are small or just starting out;
- business users directly dependent on global Big Tech to operate their services, who will be freer and less constrained by unfair regulations.
How to achieve all this? Simple: by giving much more responsibility to Big Tech, the ones that have always taken the biggest slice.
Big Tech, beware: here is how the DMA will regulate the market
The main foundation of this law is to identify some very large companies with a huge impact on the market. They are what we commonly call Big Tech. They are incredibly decisive because they control access to technologies, portals, users, advertisements and more.
The DMA selects them on the basis of a number of objective criteria. Namely, very strong economic position, impact on the digital market, operation in several countries, number of users and companies connected to them, and lasting and/or stable position in the market. We can already imagine companies such as Google, Apple, Meta, Amazon, Microsoft entering this.
The EU calls them Gatekeepers; it sounds like a glorious definition, but to every honour there is a burden. Gatekeepers will have a new set of obligations and prohibitions, on pain of enormous penalties. For instance, they will have to:
- ensure interoperability to third parties when necessary;
- provide external advertisers with the necessary information for independent verification of advertisements;
- allow users to access their own data and, if they wish, to contact others, make transactions, and conclude contracts even outside the site, software or portal;
- giving equal importance to the services of others and to their own, without self-favouring unfairly as often happens, e.g. in the case of Apple in 2021;
- allow the uninstallation of pre-installed software that the user does not want;
- only process and store user data for truly necessary purposes, certainly not as Meta did in 2021 by unjustifiably exchanging data between Facebook and Whatsapp.
There will be hefty fines for those who ignore the new rules. Up to 10 per cent of the total annual worldwide turnover of the entire company for first violations, and even up to 20 per cent for repeated violations.
The stages of the Digital Market Act: when will it start for real
It is understood that the EU will define the gatekeepers and oblige them to compete fairly and without unfair techniques. Indeed, it is also promised that the terms will be updated from time to time to cope with loopholes or technological novelties. The Union explains this in detail on its website. But it does not start immediately.
Although it already became law on 14 September 2022, and although it entered into force on 1 November 2022, the DMA still provides for a long time. The next 6 months will be needed for the gatekeeper analyses. So the act will only become operational on 2 May 2023.
From that point on, the designated service providers will have two months to draft a response. And a back-and-forth with the European Commission will begin. The still presumed gatekeepers may object, in fact, by replying that they are not. If they send objections that are deemed reasonable, a phase of further analysis will begin.
When the EU’s list of gatekeepers is official, they will have six months to comply with the new rules. After that time, the Act will become operational for them and obligations, prohibitions and sanctions will be triggered as described. Adding up all the dates, in short, it is expected that the DMA will start to operate in about March 2024.