Digital Markets Act could usher in big changes to big tech
The EU's Digital Markets Act will be fully in effect by March 2024. Companies that fail to comply could receive fines of up to 10% of their annual global revenue.
Apple might soon be forced to allow European users to download apps outside of its tightly controlled app store, one of many changes tech companies could make to comply with the European Union's Digital Markets Act.
The European Commission, the EU's executive arm, adopted the Digital Markets Act (DMA) in July 2022, laying out obligations for companies to be interoperable in certain circumstances with third parties, remove processes that favor their own products over third-party products and open up ecosystems by March 2024. The DMA could result in significant changes to the way companies such as Apple, Amazon and Google operate; failure to comply could result in fines of up to 10% in annual global revenue and other remedies.
No such legislation has passed in the U.S., although a slew of antitrust reform bills introduced in 2021 aimed to accomplish similar goals, such as limiting the control platform owners have over third parties.
This year, the commission is in the process of classifying "gatekeepers" -- companies that operate core digital platforms, earn at least 7.5 billion euros ($8.2 billion) annually and have more than 45 million monthly active users in the EU. Between May and July 2023, companies will need to provide all relevant information for gatekeeper classification.
That way, any operational changes companies make will be evident by March 2024, the official compliance date, Gartner analyst Nader Henein said. The DMA aims to eliminate dominant platforms' ownership of economic markets, he said.
"It's meant to make it a little easier to compete," Henein said.
3 potential effects of DMA
Although big tech's plans for DMA compliance are unclear, experts are expecting to see three possible changes:
1. A new app store on iOS
The DMA requires the ability to sideload or download apps outside designated app stores, something that's been "impractical" in the Apple iOS system, said Marshall Van Alstyne, professor of information systems at Boston University's Questrom School of Business.
Apple has long made a security argument for tightly controlling what apps it does or does not allow users to download through its app store. Apple also takes up to a 30% commission on app fees and subscriptions for apps downloaded from its store.
If you want to launch something to compete with these players on their platforms with these capabilities, you're going to have to come set up shop in Europe.
Nader HeneinAnalyst, Gartner
The DMA could prompt a new app store for iOS that competes with Apple by offering the same apps but taking a lower commission, Henein said. By operating independently of Apple's app store, it would also eliminate the risk of Apple having access to too much data, he said.
"This is going to hurt Apple a lot more than it's going to hurt Google because Android has been a much more open platform," Henein said.
2. Businesses shifting to Europe
The DMA provides new and existing businesses with protections and opportunities to compete on dominant platforms, which could push big tech competitors toward more European investments, Henein said.
"If you want to launch something to compete with these players on their platforms with these capabilities, you're going to have to come set up shop in Europe," he said.
3. Different ecosystem built on existing dominant platforms
Third parties will be able to interact with gatekeeper services under the DMA, which Henein said will open up new avenues of competition. Businesses will, for example, be provided access to advertising performance metrics that the platforms use.
The DMA strengthens data portability requirements, making it easier for users to obtain their personal data. It also requires companies such as Google to maintain an even playing field among search rankings to avoid preferencing their own products in queries.
"[Rankings] must be based on objective and transparent criteria," Van Alstyne said.
Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget Editorial, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.
