Europe Takes Aim at Big Tech With Digital Markets Act

The European Union has done it again. Three years after a European privacy law forced big tech to overhaul how they deal with user data, European legislators have agreed on new sweeping legislation to rein in the market power of tech giants like Google, Amazon, Facebook, Apple and Microsoft.

Europe’s antitrust chief Margrethe Vestager on Thursday won backing from European Union members and EU lawmakers for her proposal, the Digital Markets Act, which targets so-called gatekeeper firms, requiring them to change allegedly anticompetitive practices or face major fines.

The new law, set to take effect next year, sets out a list of dos and don’ts that outlaw many of what are currently core business practices among major tech companies. Apple, for example, will have to allow alternatives to its App Store for downloading apps and allow payment methods for the App Store other than Apple’s own. (Apple charges a 30 percent commission on all Apple App Store payments.)

Google and Meta, the parent company of Facebook and Instagram, will no longer be able to offer targeted ads across multiple platforms — using data gathered as users move between services owned by the same company, YouTube and Google Search, for example, without receiving explicit consent.

Amazon will be barred from using data collected from outside sellers on its services to offer competing products, a practice already the subject of a separate EU antitrust investigation.

The regulation will apply to companies with a market value of 75 billion euro ($82.4 billion) or 7.5 billion euro ($8.26 billion) in annual revenue within the EU, and at least 45 million monthly end-users and 10,000 yearly business users of at least one core platform, including web browsers and virtual assistants.

Violating the DMA will come at a hefty price. The law will apply fines of up to 10 percent of a company’s global annual sales for a first offense and up to 20 percent for repeat infringements. Companies that routinely violate the rules will be temporarily banned from conducting mergers and acquisitions.

“The gatekeepers will now have to comply with a well-defined set of obligations and prohibitions,” Vestager said in a statement. “This regulation, together with strong competition law enforcement, will bring fairer conditions to consumers and businesses for many digital services across the EU.”

The European Union has long tried to break what it calls the stranglehold a handful of giant companies have over its digital markets, but antitrust cases against the likes of Amazon and Google take years to work through the courts and, in the past, have had little real impact on the companies’ behavior.

European-wide legislation, however, has a stronger track record of forcing change. The EU’s online privacy law, the General Data Protection Regulation, passed in 2018, and not only changed business practices around data collection in the region, but also has been used as a model for similar laws around the world.

It remains to be seen if the DMA will have a similar global impact. Big tech has warned the law could cause problems for users and be a major financial burden on companies.

An Apple spokesperson wrote after the agreement that the company remains “concerned that some provisions of the DMA will create unnecessary privacy and security vulnerabilities for our users while others will prohibit us from charging for intellectual property in which we invest a great deal.”