In 2022 the European Union approved the Digital Markets Act after long negotiations. The Regulation entered force last May, and some important steps towards its implementation were taken in September.
On the surface, this law doesn’t have much to do with privacy. But in practical terms, it could be really, really important. Here’s what the Digital Markets Act says and why it matters.
- What is the Digital Markets Act?
- When does the Digital Markets Act apply?
- Why these companies?
- What does the Digital Markets Act say?
- Why does the Digital Markets Act matter for privacy?
What is the Digital Markets Act?
The DMA is an antitrust law that aims to make key online markets fair and contestable by telling monopolists such as Google and Meta what they can and cannot do when dealing with both their users and the businesses that advertise their services on their platforms.
When does the Digital Markets Act apply?
The DMA only applies to a very small number of companies that fit very specific criteria. These criteria are assessed and periodically re-assessed by the European Commission.
Right now, the Act only covers six companies: GAFAM (Google, Apple, Meta, Amazon and Microsoft) and TikTok owner ByteDance. Not all services from these companies are covered by the act: for instance, Windows and LinkedIn are covered by the DMA, but Edge and Bing were spared- presumably because Google controls the browser and web search markets almost entirely.
Why these companies?
The DMA mainly aims to regulate core platforms that serve as key intermediaries between businesses and users: think of Facebook, Google Search, the Amazon Store, TikTok, and so on. The companies under the DMA are not simply Big Tech: they are monopolizing the Internet and becoming a chokepoint for the online economy- and, by extension, a good chunk of all retail economy!
This is why Netflix and Spotify do not fall under the Act despite their size, turnover, and user base.
It is an open secret that the EU first decided to target specific platforms and then came up with criteria to capture them within the Act without naming names. The US Congress is not happy that most of the companies are American and is accusing the EU of protectionism. Then again, better enforcement of US antitrust law would have prevented some GAFAM from becoming such a huge political issue in the first place.
What does the Digital Markets Act say?
The DMA includes a long list of rules. A comprehensive overview can be found on the European Commission’s website.
These are some of the key points:
- certain anticompetitive strategies are no longer allowed. For instance, Amazon can no longer favor its own products on the Amazon Store or fix prices outside the Store by imposing a favored nation clause
- interoperability and data portability become mandatory in certain scenarios
- companies must share certain data with competitors
In some important ways, the DMA goes above and beyond traditional antitrust law by forcing monopolists to actively foster competition in markets where there is little or none. In other words, antitrust law is traditionally made of “dont’s”, but the DMA includes a lot of “do’s” as well.
All these “do’s” are stabs at the monopolistic business model of Big Tech. For instance, search engines (read: Google Search, as it is the only search engine falling under the Act!) will be under an obligation to **share raking and query data with competitors **under fair, reasonable, and non-discriminatory terms. Query data are some of Google’s most precious information and a core element of its data advantage over competitors!
Likewise, mandating interoperability and data portability reduces the switching costs for the end users. In other words, it makes it easier for users to move to a different service- and harder for the dominant platforms to retain them through the “lock-in effect.”
All of these “do’s” are very important! To a large extent, the Act’s success will depend on the EU Commission’s ability and willingness to firmly enforce both the “do’s” and the “dont’s” of the Act.
Why does the Digital Markets Act matter for privacy?
Online privacy and competition are inextricably linked, and we need both for a better Internet.
We often say that the public is increasingly concerned with privacy. And yet, surveillance machines like Facebook and Google are not losing an inch of their market share. How come?
Because consumers have nowhere else to go. The products you like are on Amazon, your friends are on Instagram, your parents are on Facebook, and your coworkers communicate via WhatsApp. By deliberate design, none of these services is interoperable with anything else (Whatsapp gets a pass because of encryption, but the others have no excuse). The idea that you can stop using these services is a convenient fiction to justify deeply unfair terms under the pretense that you are free to refuse them- as highlighted by two recent legal actions against Meta.
Tech giants spent years crushing competitors through unfair commercial practices and buying out the survivors (see Instagram). Now, they get to make the rules. And the rules always include unfair and borderline criminal privacy policies (yes, even Apple’s- don’t believe their privacy claims).
The monopolization of the Internet is the reason we are stuck with Big Tech and its data-hungry, privacy-invasive services. If Facebook faced real competition, half its user base would have left after Edwards Snowden’s revelations, and the other half would have left after Cambridge Analytica.
If iOS and Android faced real competition, few consumers would buy phones with illegal advertising trackers.
And if YouTube faced real competition, users would not be stuck on a platform that snoops into their browsers and punishes them for using ad blockers.
The DMA promises to change that. The Act acknowledges that the current state of key online markets is not ok. The privacy cost of a monopolized Internet is simply not sustainable long term. The same goes for other economic and social costs, such as the decreasing variety in market offers, the unfair and predatory treatment of businesses, and the pitiful remuneration of content creators.
The DMA is expressly looking to stop this by cutting digital behemoths down to size. Should it succeed, better privacy will be one of the many benefits to reap.