The US wants Europe to amend its Digital Markets Act. Here’s why
- The EC’s proposal argues the Digital Markets Act will address the way some tech companies have exploited their size and entrenched position to become “gatekeepers”
- US lawmakers “are greatly concerned” that the EU’s proposed approach to promoting competition among digital platforms unfairly targets US tech companies
In December 2020, the European Commission (EC) proposed a new piece of legislation, the Digital Markets Act, to better govern predominantly US internet giants operating in Europe. Fast forward to the present, the European Union (EU) is close to finalizing the rather forward-looking regulatory framework — but a handful of parties in the US are demanding for a change as they claim the act “unfairly” targets their tech companies.
EU lawmakers are in the process of putting the final touches on the new law that would impact the likes of Google, Meta, Apple, and Amazon. “We really expect that we can reach an agreement on Thursday, that we can endorse the Digital Markets Act,” said French MEP Stephanie Yon-Courtin, a key backer of the law. This is “a historic text that will clearly change the rules of the game,” she added.
The Digital Markets Act will, as the EC puts it, bring much-needed measures to curb harmful behavior by the most powerful digital firms and create fairer, more competitive digital markets in Europe. “The Commission has proposed today an ambitious reform of the digital space, a comprehensive set of new rules for all digital services, including social media, online marketplaces, and other online platforms that operate in the European Union: the Digital Services Act and the Digital Markets Act,” the Commission said in a December 2020 statement.
In essence, the EC’s proposal argues the Digital Markets Act will address the way some tech companies have exploited their size and entrenched position to become “gatekeepers,” whose control over access to digital markets gives them undue power over other companies and consumers.
Once adopted, the Digital Markets Act would give regulators in Brussels unparalleled power to take a close and up-to-the-minute look at business decisions by the giants, especially when they acquire promising startups. The rules would also set a list of do’s and don’ts, including forcing Apple to open up its app store to competing payment systems — a demand the iPhone maker has resisted arduously in courts for years.
The Digital Markets Act (DMA) could also force Google and Meta-owned Facebook to reveal precious information from their world-dominating ad platforms, potentially leaving them vulnerable to new rivals.
In their final push, lawmakers from the European Parliament would also like to impose interoperability between messaging systems such as WhatsApp, Signal or Apple’s iMessage. Violation of the rules could lead to fines as high as 10% of annual global sales with some MEPs calling for even tougher penalties for repeat offenders.
The proposed act is currently being debated by representatives from the European Parliament and the EU Council and is expected to be finalized by the end of this month. Although it was approved by the EU Parliament back in December, due to the complexities of the EU legislative system, it still needs to be ratified by the 27 member states.
The legislation lays a series of prohibitions and obligations for some of the world’s largest digital platforms, including Google parent Alphabet, Amazon, Facebook parent Meta, and Apple. The Digital Markets Act covers a range of practices from unfair data use across platform services to self-preferential restrictions. Knowing that, a bipartisan group of 30 lawmakers has apparently sent a letter to President Joe Biden urging him to talk to EU leaders and persuade them to change the ruling.
In their view, it “unfairly” targets US tech companies. According to CNBC, the group in their letter said that they “are greatly concerned that EU’s proposed approach to promoting competition among digital platforms unfairly targets American workers by deeming certain US technology companies as ‘gatekeepers’ based on deliberately discriminatory and subjective thresholds.”
They have also received criticism in Washington with the perception that they unfairly target US companies, though in the latest drafts of the law, non-US giants such as Booking.com or TikTok could also be roped in. Looking back, similar laws have been introduced in the US such as the Open App Markets Act and the American Innovation and Choice Online Act — and both bills have passed the Senate Committees and are now on their way to the Senate for a vote.
“As European leaders have made clear, the DMA as currently drafted is driven not by concerns regarding appropriate market share, but by a desire to restrict American companies’ access in Europe in order to prop up European companies,” the US lawmakers wrote.
It is fair to note that the incoming legislation is not targeting US companies specifically. It includes all the digital platforms that meet certain criteria in terms of revenue and users. However, because of the presence of US companies in Europe and the smaller market share of other companies, the law can be seen as having the heaviest impact on the American internet giants.