Big tech companies will face an even more stringent regulatory environment in Europe heading into 2024 as the Digital Markets Act goes into effect today and requires digital platforms to be more accessible.
The DMA aims to boost competition in digital markets by focusing on "gatekeepers" -- major U.S. firms such as Google, Apple, Amazon and Meta that dominate access to critical online services, including app stores, search engines and messaging platforms. The EU wants to make it easier for other firms to challenge the U.S. giants.
The DMA requires gatekeepers to let third parties interoperate with those companies' platforms as well as allow data access. It also prevents large platform operators from favoring their own products over third parties. The goal of the DMA is to make it easier for smaller businesses to set up and compete in Europe, Gartner analyst Nader Henein said.
"That's going to encourage small startups or even bigger players to come and build things in Europe where there is a market available because of the DMA," he said. "They're making data more available and they're making the platforms permissible to them building things."
Over the years the EU has not hesitated to target big tech companies' business operations and issue hefty fines for their business practices. It recently fined Apple $2 billion for "abusing its dominant position" in the market for the distribution of music streaming apps through its App Store. But going forward, big tech companies will be forced to navigate multiple pieces of legislation aimed at their business practices, including the DMA, the Digital Services Act, the EU Data Act, the EU Corporate Sustainability Reporting Directive and the EU AI Act.
Henein said the EU's legislative efforts are foundational measures to ensure that data is well-treated once it's democratized.
"It's all part of one big strategy," Henein said. "Europe can't compete on manufacturing anymore with the U.S. or China; it can't compete on raw materials like Africa or Asia. The big value is data."
Complying with the DMA
As part of their compliance with the DMA, big tech companies had to submit plans outlining changes to business operations. Google, for example, has implemented more than 20 product changes affecting its search results.
Google will allow app developers to use alternative billing systems for in-app purchases through the Google Play store. The company will also continue investing in its data transfer initiatives meeting DMA requirements to allow greater data portability between Google and third-party apps.
The U.S. platforms will likely do the bare minimum to comply with the DMA, Henein said. Apple announced some changes to its internal operating system and App Store to comply with the DMA but noted that the new options for processing payments and downloading apps on iOS "open new avenues for malware, fraud and scams, illicit and harmful content, and other privacy and security threats."
Henein said it will take time for big tech companies to comply with the DMA. But he expects significant changes in some areas of those companies' business operations.
It's all part of one big strategy. Europe can't compete on manufacturing anymore with the U.S. or China; it can't compete on raw materials like Africa or Asia. The big value is data.
Nader HeneinAnalyst, Gartner
"Are we going to see Apple allowing new app stores to be sideloaded on devices in Europe immediately? No. … Rumors have been floating around that they've been testing that, and that's coming," he said. "This is arguably one of the more interesting ones -- seeing Apple allow other app stores and sideloading of apps."
Companies that don't comply with the DMA will face fines of up to 10% of the company's annual global turnover.
The Biden administration has voiced no opposition to the EU's regulatory demands, even though the DMA affects many U.S. firms. Indeed, the U.S. is taking its own approach to concerns about big tech through lawsuits filed by federal law enforcement agencies like the Federal Trade Commission and Department of Justice.
EU might struggle to enforce DMA as companies push back
The DMA marks a "seminal moment" in tech regulation, said Bill Echikson, non-resident senior fellow at the Center for European Policy Analysis, during a briefing Tuesday.
Moving forward, big tech companies will be regulated similarly to banks and telecommunications companies, industries that exert a "tremendous impact" on individuals' lives and the economy, according to Echikson.
However, Echikson voiced some concerns with the DMA and its ability to foster a more competitive digital environment.
"One, it's going to be difficult to enforce," he said. "We've found, in the past, Europe has had trouble enforcing its tech laws. Two, it's difficult to really predict. There's a lot of unanswered questions about this law."
Makenzie Holland is a senior 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.
