August 15, 2022

THE EU’S DIGITAL MARKETS ACT: HOW DOES IT AFFECT THE TECH SPACE?

THE EU’S DIGITAL MARKETS ACT: HOW DOES IT AFFECT THE TECH SPACE?:

THE EU’S DIGITAL MARKETS ACT: HOW DOES IT AFFECT THE TECH SPACE?

For some years now, regulators have raised various concerns regarding how tech companies operate. As a result, tech companies have come under increased scrutiny from legislators in key jurisdictions like the US and UK. As one could expect, these concerns have catalyzed efforts to further regulate the tech space. In the EU, such efforts came in the form of a proposed Digital Markets Act that would change how tech companies operate. Late last month, the EU agreed to this Act.

So far, the law has generated criticisms from big tech like Apple and Google. Thus, in this article, we will consider what the Digital Markets Act is. Furthermore, we will explore how this law might fundamentally change the tech space.

What is the Digital Market Act all about? 

The Digital Markets Act (DMA) is one of two pieces of two EU legislation targeted at regulating online platforms. The other legislation is the Digital Services Act. The initial proposal for the DMA by the European Commission came in December 2020. However, a year later, the European Parliament approved a version of the DMA. The EU eventually agreed to the Act on Thursday, March 24. The law will take effect in 2023.

The DMA incorporates far-reaching provisions to address the power of the biggest tech companies. The law can potentially reshape everyday digital tools ranging from app stores to e-commerce and messaging services. The EU designed the DMA rules to foster more competition, prevent abuse by big tech and protect users. Notably, news reports decribe the Act as the most sweeping piece of digital policy in the EU since the GDPR.

Impact of the Digital Markets Act on Tech Companies

Here are some of the notable ways the DMA impacts the tech space:

Self-Preferencing:

The DMA explicitly prohibits self-preferencing. This refers to the practice of a company favouring its products or services on a platform it owns. In particular, the DMA prevents search engines like Google from showing favouritism to their own services in search results. This means companies like Google would have to rank services, including those of their rivals, fairly and non-discriminatory. Furthermore, companies would not be allowed to set their services as an automatic default on their platforms. For instance, Google would not be allowed to set Chrome as the default browser on Android OS.

Interoperability:

The law mandates interoperability. This is the ability of platforms from different providers to connect. The DMA mainly focuses on interoperability among private messaging apps. This means that apps like Apple’s iMessage, WhatsApp and Messenger must be able to work with one other. Thus, if the government implements the law, a WhatApp user would be able to directly text a friend using iMessage. Users may also be able to make video calls and send files across these apps.

Third-Party App Stores:

Under the DMA, operating systems owners like Apple would have to allow third-party alternatives to their app stores. In the case of Apple, this means it would have to eliminate the monopoly of the Apple App Store. Furthermore, these companies are mandated to allow sideloading. This refers to the ability to install apps from anywhere outside the official app store. Lastly, official app stores are not allowed to delist apps for refusing to use the gatekeeper’s proprietary payment systems.

Data Usage:

The DMA introduces several restrictions to the use of data by big tech. For instance, the law prohibits the use of non-public data by gatekeepers. Similarly, platforms cannot combine users’ personal data generated from multiple services without consent. For example, this restriction could prevent companies like Meta from harvesting data from Facebook and exporting the same data for use on Instagram. Also, regulations prevent companies like Amazon from using data collected from businesses using their platforms to develop competing products.

Conclusion

Undoubtedly, the Digital Markets Act is set to bring a paradigm shift in the regulation of big tech. Moreover, lawmakers may likely replicate its provisions in other jurisdictions in the coming years. Thus, the DMA marks the beginning of a new era of tech oversight.

Links:

https://fortune.com/2022/03/25/apple-google-criticize-eu-digital-markets-act/#:~:text=The%20new%20Digital%20Markets%20Act,sharing%20and%20self%2Dpreference%20practices.
https://www.europarl.europa.eu/news/en/press-room/20220315IPR25504/deal-on-digital-markets-act-ensuring-fair-competition-and-more-choice-for-users
https://www.nytimes.com/2022/03/24/technology/eu-regulation-apple-meta-google.html

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