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What does the Digital Markets Act mean for big and small tech companies?

Thu 16 Feb 2023

As regulators around the world discuss potential rules and restrictions that address the growing dominance of tech giants, the European Union hopes the Digital Markets Act (DMA), that came into force in November 2022, will foster innovation and enable startups in the tech space to compete more effectively.

The main target of this new legislation are so-called gatekeeper companies like Google, Amazon and Apple, who must commit to a number of rules that attempt to give customers more choice and protect their interests.

There is no question that the impact of the DMA will be significant in the coming years, especially for smaller tech companies who seek a larger market share. While the DMA technically only applies to gatekeeper companies with an annual turnover of more than $7.5 billion or at least 45 million monthly users, in practice, all companies in the tech ecosystem will see a major change to how they operate.

One of the most contentious sections of the Act relates to forcing tech giants to fully embrace interoperability. This will mean that, for example, WhatsApp must exchange data with Apple’s iMessage service. Gatekeepers will also require explicit consent from consumers before their activity can be tracked across the Internet for the purposes of targeted advertising.

Companies like Apple will no longer be allowed to force users to only use pre-installed software on devices, such as Internet browser apps. “What we have learned over these years is that we can correct in specific cases, we can punish illegal behavior,” said Margrethe Vestager, the EU’s Competition Chief, at a press conference in March 2022.

“But when things become systemic, then we need regulation as well because, if there is a systemic misbehaviour, if there are entrenched positions, then we need regulation to come in. For companies that play the role as gatekeepers, now the Digital Markets Act will set the rules of the game,” added Vestager.

Industry response to the Digital Markets Act

Tech companies have come out strongly against competitive legislation, such as the DMA. Apple’s CEO, Tim Cook, said at a privacy summit that Apple as a whole is deeply concerned about rules that would force the company to give users the choice to download applications from outside of their proprietary App Store.

Smaller tech companies stand to gain the most from the implementation of this act, as larger competitors will be required to allow third-party payments, interoperability will be enforced, and competition on app stores will grow.

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