BRUSSELS—European lawmakers neared agreement on the main points of a new digital-competition law focused on the world’s biggest tech companies, setting the stage for one of the world’s most sweeping pieces of technology-regulation legislation to go into effect next year.
The new law, known as the Digital Markets Act, is part of the biggest proposed expansion of global-tech regulation in decades. It seeks to impose new obligations and prohibitions on a small cadre of digital giants the EU defines as gatekeepers—backed by fines for noncompliance that, based on early drafts of the legislation, could rise into the tens of billions of dollars.
Tech-industry lobbyists say the law is discriminatory because it focuses largely on big U.S. companies, and unworkable because of its breadth—something they say will hobble tech innovation in Europe.
has previously said the legislation’s “one-size-fits all” approach could undermine consumer protections and choice, while
Meta Platforms Inc.
has warned about unintended consequences, such as stifling European innovation.
Which companies count as so-called gatekeepers has been the subject of much debate. In early drafts of the legislation, criteria based on the number of consumer and business users, as well as market capitalization and revenue thresholds, suggested services from
would all be affected, possibly among several others.
Tech giants’ smaller rivals and other tech-company critics say they hope the legislation could become a global standard as lawmakers in other countries, including the U.S., look for ways to rein in the power of global tech giants and make it easier for smaller players to compete. The U.K. government is working on a code of conduct that could be applied to tech companies with substantial and entrenched market power, and U.S. lawmakers have proposed legislation aimed at curbing dominant tech companies’ market power.
“This will be the first comprehensive attempt at making digital markets more competitive,” said Zach Meyers, a senior research fellow with the Centre for European Reform think tank. “And when you look at what the U.K. and the U.S. and other countries are doing, even if they’re not replicating the DMA, they’re certainly inspired and influenced by it.”
Negotiators held discussions on Thursday that were aimed at ironing out remaining disagreements on the main points of the legislation. Once a political agreement on the text is reached, it is unlikely to undergo further substantial changes, though it will still need final approval from parliamentarians and representatives from EU countries.
The goal of the legislation, according to the commission, is to create a clear set of rules that would prohibit the world’s biggest tech companies from engaging in certain behaviors that officials view as harmful to competition. Proponents hope it can cut down on the need to open lengthy investigations into a company’s alleged anticompetitive behaviors, in a process that often goes to the courts and can in some cases take years to resolve. Rivals have complained that EU antitrust cases have so far had limited impact on big tech companies’ revenue and market share.
“What this law is about is changing the burden of proof so that these companies will need to prove that their conduct is fair,” and not regulators who until now have needed to prove violations of antitrust laws, said Andreas Schwab, a member of the European Parliament from Germany who has been the body’s lead negotiator for the DMA.
The DMA is part of a pipeline of recent EU regulations aimed at tech companies. Legislators are also negotiating over the final text of another piece of legislation aimed at forcing tech platforms and social media companies to do more to prevent the spread of a range of illegal or potentially harmful material, or face similarly big fines. Another bill governing the way companies share industrial data was proposed last month.
Elements of the DMA have been strongly opposed by Apple, Google, Amazon and Facebook, and could lead to court challenges. Penalties for failing to comply with the rules could be up to 10% of a company’s global revenue, according to the commission’s initial proposal, although some lawmakers have sought an even higher maximum fine.
Based on recent drafts of the legislation, gatekeeper companies would be limited in how they can privilege their own products or services in rankings compared with those offered by third parties. The rules could also block those companies from tying access to some of their services to the purchase of another service and require companies to make it easier for users to move their data from one service to another.
Another provision could require Apple to allow software makers access to the iPhone without having to go through the company’s App Store. That rule could have a significant impact on the company, which charges up to a 30% commission on in-app purchases, a major source of revenue. Apple has defended its practices, saying it is giving consumers a choice of a digital platform that has proven popular, and that changes would create security and privacy risks.
One point of contention in the negotiations was over which companies, specifically, would be defined as gatekeepers and need to comply with the new rules.
The initial proposal defined gatekeepers as companies whose European revenue was at least €6.5 billion, equivalent to about $7.2 billion, or those with a market capitalization of at least €65 billion. Gatekeepers also had to serve more than 10,000 active business consumers and 45 million active end users in the European Union. The original proposal said the threshold needed to be met over the past three years. Some lawmakers sought to raise the threshold for revenue and market capitalization, which would reduce the number of companies affected by the new rules.
Even if an agreement is reached quickly, experts have cautioned that there are still questions about how the European Commission will implement the new rules and ensure compliance. “The adoption of the text is the easy part,” said Alexandre de Streel, academic director at the Centre on Regulation in Europe. “The difficult part will be the enforcement of that text.”
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8