Google, Apple, Facebook, Amazon and Microsoft logos displayed on a mobile phone with an EU flag in the background.
Justin Tallis | AFP via Getty Images
An EU law aimed at reining in big digital companies has officially come into force, predicting big changes mostly for US tech giants.
The European Union’s landmark Digital Markets Act officially came into force on Thursday. This means that the European Commission, the EU’s executive body, can start taking action against companies that break the rules.
The Digital Markets Act aims to crack down on anti-competitive practices by technology players as well as force them to open up some of their services to other competitors. Smaller Internet companies and other businesses have complained that they have been hurt by these companies’ practices.
Bill Etchikson, senior foreign policy fellow at the Center for European Policy Analysis (CEPA), said EU reforms meant tech giants would now turn from “teenagers” to “adults”.
“There are a lot of changes that may or may not happen. A lot of them are insecure,” Etchikson said. But, he added, the new law could inspire change in other countries, such as the US and the UK, and eventually force tech firms to make global adjustments to their platforms.
CNBC details how the law affects major US tech companies as well as consumers in the EU.
What does this mean for Big Tech?
The EU’s digital markets law mainly affects US tech giants – the likes of Alphabet, Amazon, An appleand Meta.
This is because the rules impose strict restrictions on so-called “gatekeepers” – companies with an established position in the relevant market, with a market capitalization of at least 75 billion euros ($81.7 billion) and a platform with 45 million monthly active end users in EU.
This makes US tech giants a key target. So far, six firms have been designated as watchdogs: Alphabet, Amazon, Apple, Meta, Microsoft and China’s ByteDance, the only non-US firm on the list.
These companies are required to adjust their platforms to make competition stronger on the block.
For example, they must ensure that they do not favor their services over competitors on their own platforms. Google, for example, cannot force users to choose their own search engine on Android phones when setting up their devices and must show alternatives, such as DuckDuckGo or Ecosia.
Some messaging apps, such as Facebook Messenger, must also make their services “interoperable” with third-party messaging services so that users can message people using alternative products.
Companies with entrenched positions in app distribution should, meanwhile, allow competing apps to appear on their platforms.
Under the DMA, Apple was first ordered to allow alternative app stores on the iPhone.
The tech giant was fined more than 1.8 billion euros ($1.96 billion) by the EU this week for breaching competition rules following an investigation into its App Store practices.
The EU believes Apple broke the law by preventing app developers from informing iOS users of alternative and cheaper music subscription services available outside the app. Spotify praised the Commission’s decision, while Apple denied that the App Store was breaking the law.
The fine may be a sign of things to come as DMA enforcement officially begins. Companies that consistently violate the law can face fines of up to 10% of their global annual revenue.
How are EU citizens affected?
The rules have already prompted big changes for tech giants in the way they serve customers in the EU.
More adjustments are likely to come as competitors of the big tech firms are not happy with the offerings introduced so far.
Apple recently announced that it will open up its iPhone and iPad to alternative app stores. Developers have long complained about the 30% fee Apple charges for in-app purchases.
Still, app developers such as Microsoft, Spotify and video game developer Epic Games remain unhappy as Apple’s implementation adds hurdles beyond offering an installer download on their website.
Meta also says that Facebook Messenger and WhatsApp can now work with third-party messaging services as long as they follow Signal’s end-to-end encryption protocol to ensure privacy.
Meanwhile, for Google, there is now a selection screen that allows users to choose which search engine they want to set as their default on Android phones. This is already in place, allowing Microsoft, Ecosia and DuckDuckGo to gain a place on a list of multiple search engine providers.
Google recently added even more screens to choose from. Opponents say this makes things unnecessarily complicated, as users have to click more than they would like to set their primary search provider.
“There’s going to be a lot of pop-ups because you’re going to get browser choices from other search engines somehow,” said CEPA’s Etchikson.
With Google, the actual search engine will also change. The company removed flights from search results for EU users, and search results now also show a carousel of ads from price comparison sites when searching for a hotel.
Some experts worry that this will actually lead to major online booking sites such as Booking.combenefited from the changes, quite a few local hotels.
“We’re entering new ground, there are a lot of uncertainties that can come up,” Etchikson said. “It might strengthen some of the guards as well as allow the little guys, the Davids, more room against the Goliaths.”
https://www.cnbc.com/2024/03/07/what-the-eu-digital-markets-act-means-for-us-tech-giants-like-apple.html
