The European Union is getting tough on antitrust behavior. After 16 months of discussions and negotiations, the European Parliament and European Union member states reached a deal, creating the Digital Markets Act, a sweeping set of antitrust regulations designed to curb the anticompetitive behavior of technology companies who effectively rule the internet, reports CNBC.
The rules will apply to tech companies with market capitalization of $83 billion (€75 billion) or more, or annual revenue within the EU of at $8.3 billion (€7.5 billion) in the last year years. In addition, affected companies must have at least 45 million monthly users or 10,000 business users in the EU. Companies that will be impacted including Alphabet, parent company of Google and YouTube; Amazon; Apple; Microsoft; and Meta, parent of Facebook, WhatsApp and Instagram.
The fines for violating the DMA could be as high as 10% of the violating company’s annual revenue, says The New York Times. The fines increase to as much as 20% for repeat offenders, and the European Commission could impose “behavioral or structural remedies,” reports Fortune.
DMA to set rules of the game
Though a deal has been reached, the antitrust regulations have not yet passed or been officially adopted. Margrethe Vestager, commission executive vice president in charge of competition for the EU, said the rules are likely to be put into effect in October.
Vestager said, that to be ready by October, things are moving fast, but she believes that is necessary because antitrust complaints continue. Vestager said that there have been four cases against Google, four against Amazon, three cases against Apple, and one against Facebook.
“What we have learned over these years is that we can correct in specific cases, we can punish illegal behavior. But when things become systemic, then we need regulation as well because, if there is systemic misbehavior, if there are entrenched positions, then we need regulation to come in,” Vestager said at a March 25, 2022 press conference. “For companies that play the role as gatekeepers, now the Digital Markets Act will set the rules of the game.”
“The DMA will give us the tools to enforce these obligations. Without enforcement, there is no real change on the ground. The possibility to intervene if gatekeepers break the rules, with fines and a wide range of sanctions in case of systematic non-compliance,” Vestager added.
After much debate and political engagement, Vestager said the DMA requires interoperability between message services, a ban on collecting data for targeted advertising without effective consent, widened sanctions for non-compliance, and the possibility of a merger ban for the worst offenders.
“…a fair marketplace is part of the democracy. The steps we took last night are huge steps, in terms of securing every business but also the digital marketplace is fair for the benefit of every consumer,” said Vestager.
Tech companies react to antitrust regulations
Fortune received statements from Apple and Google about the DMA. A spokesperson for Apple told Fortune in a statement that they are concerned about provisions of the DMA that “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.” A spokesperson for Google told Fortune that the company was concerned that some of the rules “could reduce innovation and the choice available to Europeans.” As of this writing, Amazon, Meta and Microsoft had not issued statements or commented on the DMA.
Insider Take
The Digital Markets Act has been in the works for 16 months, and in that short period of time, regulators across the European Union have amassed a huge amount of work in the name of consumer and competitive protections. While these antitrust regulations are sure to be unpopular with technology companies, consistent complaints and monumental fines for anticompetitive behavior have shown that sweeping legislation is needed. Kudos to the European Commission and the EU member states for pulling this off. Perhaps this will serve as a reminder to the U.S. that they are lagging behind.
