Technology giants have become "gatekeepers", and the EU anti-monopoly has punched hard

On antitrust, the EU has always been soft. On September 6, local time, the European Union announced the latest Digital Markets Act (DMA), which is another major legal move following the entry into force of the EU's Digital Services Law last month to curb the market power of technology giants. According to the bill, the European Commission designated six technology giants such as Apple and Google as "gatekeepers" for the first time to accept stricter supervision, which has become an important node in the EU anti-monopoly process.

Six companies

The European Commission defines six technology companies, Apple, Google, Microsoft, Amazon, Meta and Tiktok, as the "gatekeepers" of Internet services. It also covers 22 core platform services provided by the six companies, including Google Search and the browser Chrome, Safari and iOS.

Passed in September 2022, the DMA is a bill that aims to combat anti-competitive practices by big tech companies, encourage greater competition in the digital marketplace and ensure consumers have more choice. The DMA stipulates that the European Commission can designate a "gatekeeper" for a digital platform that provides an important gateway between businesses and consumers in relation to core platform services.

According to the bill, "gatekeeper" enterprises refer to large enterprises that provide core platform services such as social networks and search engines, with a market value of at least 75 billion euros or an annual turnover of 7.5 billion euros, and at least 45 million end users per month in the EU and 10,000 business users per year. The bill ensures that these businesses do not abuse their position or face fines of up to 10% of their annual global turnover. The above-mentioned companies will have 6 months to bring their core platform services into compliance with their obligations under the EU DMA.

Businesses labeled as "gatekeepers" need to interoperate their applications with competitors, which means these businesses need to open their interfaces to their applications, interact with other applications, and share data; And it's up to the user to decide which apps are pre-installed on their device, such as Google or Apple's Maps app.

The DMA bill also prohibits big tech companies from monetizing information about mobile phone users and prohibits tech companies from using data collected from mobile apps to build details of individual consumer behavior for advertisers.

Some rejoice, others worry. Samsung once hovered on the edge of the "gatekeeper" because of browser services, but was eventually excluded from the European Union. It is understood that the list of "gatekeepers" is open and the European Commission can add or remove companies over time.

The move aims to allow tech startups to compete fairly in the same market as tech giants by weakening the power of tech giants and preventing price fixing. The bill would also restrict Apple and Android's mobile payment systems, allowing some startups to offer innovative payment services to consumers.

Affected by this, Apple's stock price fell by 3.6% that day, and its market value lost hundreds of billions of dollars overnight. Amazon and Google shares also fell by about 1%. In response, companies have responded differently. Apple said it was concerned about privacy and security risks in the new EU Digital Markets Act. Microsoft said it accepted the "gatekeeper" label, and Meta said it was evaluating the "gatekeeper" label.

AI pushes

How will the Digital Markets Act affect tech companies? Mark Mahaney, an analyst at investment bank Evercore ISI, previously said in an interview with CNN that Google, Meta and Apple are expected to be the most affected by the Digital Markets Act. According to the 2021 annual report, Google, Meta and Apple have a market share of about 31%, 24.6% and 24.4% in Europe, respectively, which are their largest markets outside the United States.

Lu Dingliang, a partner at Beijing Jingshi Law Firm, said that the market structure and competition status of the United States and the European Union in terms of digital markets are significantly different, and at the EU level, the European Council and the European Commission are trying to regulate the digital market through the regulation of "gatekeepers", creating a more fair and competitive digital environment, so that competitors and consumers can benefit from the digital economy. Therefore, the Digital Markets Act designates and regulates "gatekeepers" through dimensions such as turnover, number of active users, and provision of core platform services, so as to ensure that technology giants do not abuse their dominant position, so as to build a level playing field for digitalization.

Lo pointed out that the Digital Markets Act requires "gatekeeper" enterprises to comply with the obligations of "should do" and "should not do", and that those who meet the relevant "gatekeeper" threshold but fail to inform the European Commission in accordance with the requirements of the DMA, as well as the "gatekeeper" who fail to comply with the key obligations of the DMA, may be fined 1%-20% of their total global turnover in the previous financial year, and can take behavioral or structural remedies against the "gatekeeper". As a result, tech giants need to make voluntary filings as "gatekeepers" and comply with a series of DMA requirements or face hefty fines and penalties such as structural stripping.

Under the new bill, these companies have 6 months to comply. After 6 months, if they do not comply with the Act, they may be fined up to 10% of their turnover. In the case of Meta, the company has a turnover of about $120 billion a year.

Chen Jia, an independent international strategy researcher, said that from the perspective of the evolution of EU science and technology regulatory policy reform in recent years, DMA itself is the most important change event in the EU's science and technology regulatory reform in the past two decades. From the perspective of the attitude of EU legislation and law enforcement, it is hoped that the effectiveness of DMA will force technology giants to change their past operation and maintenance models in core business sectors in EU countries, and evolve according to the pattern of ensuring a fairer and more open European digital market.

In addition, with the ongoing AI controversy, regulation is even more imminent. "Although the original intention of the EU's DMA policy this year stems from the relatively mature anti-monopoly legal framework that the EU has long adhered to, with the wave of scientific and technological revolution triggered by a new round of strong artificial intelligence AGI in the world, countries around the world urgently need to comprehensively upgrade in the field of scientific and technological ethical dilemma and regulatory innovation for science and technology for good." Chen Jia said frankly.

For example, on September 6, Google said in a blog post that it would mandate all U.S. election-related advertisers to add clear and prominent disclosures when ads contain AI-generated content from mid-November. This policy will apply to image, video and audio content on all of its platforms.

Long-term game

At the practical level, in recent years, the EU's anti-monopoly supervision of large technology companies has been pressing step by step and without mercy. For example, in March 2022, Meta was fined 17 million euros by the European Union for failing to prevent a series of data breaches on the Facebook platform in 2018, violating EU privacy rules; In May, the Irish Data Protection Commission (DPC) announced that Meta would be fined around $1.3 billion for allegedly transferring EU user data to the United States.

Thierry Breton, head of industrial policy at the European Union, said: "Today is an important and decisive time for DMA. The most influential internet companies will now have to comply with our EU rules. But EU officials expect their decisions to be taken to court by businesses, and those cases could drag on for years.

Chen Jia believes that from the perspective of the layout of the global technology industry chain and the strategy of technology giants, it will take time for the EU DMA to be truly fully implemented, and the degree to which its policy effectiveness can ultimately be exerted depends not only on the law enforcement process, but also on the response strategies of major technology giants. "It's going to be a long-term game, and the short-term impact of every big market event is critical."

Taking Apple as an example, Chen Jia mentioned that as the most closed iOS system in the past two decades and has always adhered to the system closed loop, opening the third-party App market installation authorization is not only a simple market monopoly behavior, but also involves the entire Apple iOS ecosystem, bottom layer, architecture and business logic. "Due to the huge differences in the direction of science and technology among the major gatekeepers, these technical contradictions are still difficult to reconcile in the short term, and only with the EU DMA policy, if there is no sufficiently accurate policy innovation, a little inattention is likely to cause some market segments to be full of messes."

Tim Sweeney, founder and CEO of gaming company Epic Games, commented on the EU's latest DMA bill on the X platform. He argues that Apple and Google will eventually still be able to establish a system of anti-competition through their marketplaces and continue to impose so-called "Apple taxes" and "Google taxes." A longtime critic of the "Apple tax" and the "Google tax," he argues that the platform's use of its monopoly to take a 30 percent cut is highly unreasonable, and Epic Games has previously filed lawsuits against Apple and Google.

Sweeney wrote: "I believe the end result of the DMA will be that Apple and Google acquiesce to third parties to open stores and establish payment methods, but will still desperately work to weaken real competition, maintaining the 'Apple tax' and the 'Google tax' to prevent price competition from undermining their monopoly of unearned profits." ”

Beijing Business Daily reporter Fang Binnan, Zhao Tianshu/Wen

Xinhua News Agency/Photo