Digital Markets Act: EU imposes stricter requirements on Internet companies
The EU has agreed on a Digital Markets Act. The Act is intended to make it easier for small companies to compete with the large Internet corporations and could significantly change existing business models.
The EU has agreed on a Digital Markets Act. The Act is intended to make it easier for small companies to compete with the large Internet corporations and could significantly change existing business models.
After 16 months of negotiations, the EU Commission, the EU Parliament and the Council of EU member states have agreed on the contents of the Digital Markets Act.
What does the Digital Markets Act provide for?
Among other things, the DMA stipulates that large corporations must not give preference to their products and services over those of their competitors. This applies, for example, to the Chrome browser on Android devices or Safari on iOS. The regulation also applies to search results, where Google is not allowed to give preference, or to payment methods in app stores, for example. Here, for example, Apple still has a monopoly under iOS and collects 30 percent in each case. According to the DMA, Apple must also allow other payment methods. In this context, it should be possible to delete preinstalled apps and change standard settings more easily.
In addition, companies should only be allowed to merge data from different sources in the future with the express permission of the individual. You remember Facebook and WhatsApp?
Small companies are to be given access to data they generate for larger platforms. A store with a marketplace function, for example, would then have to give merchants more insight into sales data than before.
For advertisers, the DMA envisions more transparency. Those who buy ads on Facebook, for example, are to be given tools that allow them to independently check their reach.
And then there are the messengers. They are to open up for communication with smaller services. But that's not a no-brainer. The small messengers have to actively demand this. So you won't be able to automatically send pictures and messages from Signal or Threema to your WhatsApp contacts. Moreover, this requirement will only apply to group chats after a delay of four years. According to the EU, the time is needed to ensure security standards.
The demand to oblige social networks to cooperate did not make it into the DMA. The ban or restrictions on personalized advertising is also not an issue. Here, the Digital Markets Act refers to the Digital Services Act (DSA), which the EU is still discussing and which deals with personalized advertising.
To whom does the DMA apply?
The Digital Markets Act applies to those companies that meet the following three conditions:
- Annual revenue of 7.5 billion euros or a stock market value of 75 billion euros
- More than 45 million monthly users in the EU
- Operation of at least one central platform service
Platform services include search engines, operating systems, social media, messengers, video platforms, cloud or mediation services, web browsers or voice assistants. The DMA rules apply to the platform services, not the entire enterprise.
It is estimated that 10 to 15 companies currently meet these criteria. Unsurprisingly, Google, Apple, Meta or Amazon are among them, but Booking or TikTok are also already big enough and if growth continues at a similar rate as before, Zalando, for example, will soon fall under the DMA as well.
What are the penalties?
If a company does not comply with the regulations of the Digital Markets Act, the EU can impose fines. This can be up to ten percent of the global annual turnover of the group in question - or up to 20 percent in the event of a repeat offence.
Here's what happens next
The EU Parliament and the Council of EU member states still have to confirm the Digital Markets Act. Following the agreement, this is purely a formality. However, the DMA still has to be legally formulated and translated beforehand. Publication in the EU Official Journal is therefore not expected until early 2023. The Digital Markets Act would come into force 20 days later.
There will then be a transitional period during which the EU Commission will designate the companies that fall under the Digital Markets Act. These then have a further six months to implement the requirements. This means that the current agreement will have a noticeable impact from 2024. How exactly the various points will be implemented can only be guessed at the moment, but one thing is certain: the enthusiasm of the companies affected is limited.
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