After a period of relative quiet while the European Commission considered the companies and services that would fall under the reach of its Digital Markets Act (DMA), the legislation and its consequences for those deemed to be “gatekeepers” is now in full focus.
As a reminder, the DMA is a landmark piece of legislation that came into force in November 2022 and aims to ensure greater accountability, a level playing field for competition and a catalyst for greater consumer choice in the digital sector. The emphasis is on large digital platforms defined as “gatekeepers” — companies with revenue over €7.5 billion, market capitalization above €75 billion, more than 45 million monthly active users and 10,000 yearly business users located or established in the EU. Failure to comply with the legislation will result in steep penalties of up to 10% of global revenue.
On 6 September 2023, the commission announced that six gatekeepers (Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft) had been designated across a total of 22 “core platform services”. The companies have six months to ensure compliance with DMA obligations on each of their core platforms. Although Gmail, Outlook.com and Samsung Internet Browser met the DMA’s gatekeeper thresholds, the commission stated that Alphabet, Microsoft and Samsung had provided sufficient evidence to determine that these services would not qualify as gateways to services.
The process to this point has appeared relatively smooth, but in the coming months we’re likely to see very public opposition to the inclusion of key services under the terms of the DMA. Notably, the commission has opened four market investigations to further assess submissions that platform services don’t qualify as gateways. This should be completed within five months.
For Microsoft, this means Bing search, the Edge browser and Microsoft advertising. Apple is claiming that iMessage does not constitute a gateway. Separately, the commission is investigating whether iPadOS should be designated as a gatekeeper despite not meeting the thresholds.
Resistance to the inclusion of certain key services is likely to be substantial. Apple has stated that “we remain very concerned about the privacy and data security risks the DMA poses for our users”. It went on to say that “our focus will be on how we mitigate these impacts and continue to deliver the very best products and services to our European customers”. ByteDance, TikTok’s parent, commented that it was “extremely disappointed”. By contrast, Amazon and Microsoft struck more pragmatic tones underlining the need to cooperate and work constructively.
This reaction underlines the challenge that regulators globally face in delivering legislative change. The technology industry at large and parties across the political spectrum in several jurisdictions are agreed on the need for regulation. However, there’s absolutely no agreement on how it should be implemented or what it should encompass. It’s proven to be an extraordinarily difficult task and the European Commission should be commended for the progress to date. The inherent difficulty in delivering the first major regulation of big tech gives CCS Insight little confidence in timely and meaningful regulation of artificial intelligence, but that’s a topic for another day.
The commission now faces the unenviable task of defending its determinations and reaching unimpeded conclusions on the areas for further investigation. This process is critical, because the strength of the legislation will hinge on the consistency in its determinations, forthright defence against opposition and effective implementation. It will be a fascinating few months ahead.
For example, many of the areas for investigation represent highly contentious components or at least, services that are of great importance to their owners. In some cases, iMessage being a good example, the requirements of designation as a gateway would force substantial change to the very essence of the service. iMessage would be forced to open up and interoperate with other messaging platforms, notably Android, requiring Apple to provide the same APIs to third-party developers that it uses internally.
CCS Insight will look at some of these issues separately as developments unfold given that the DMA is poised to wreak unprecedented change on the technology industry. In CCS Insight’s Predictions for 2023 and Beyond, published in October 2022, we stated that although the DMA is specific to Europe, it would have global implications that dictate how large platform companies operate. It is also likely to impact the shape of similar legislation in the US. The reaction to the European Commission’s designations on 6 September underlines its looming significance.
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