Margaret Vestager, Executive Vice President of the European Commission for Digital Age Europe.
Theory Monass | Getty Images News | Getty Images
The EU has agreed to new hopeless rules that could redesign the business models of American technology giants. Meta, Apple, Amazon And Google Dramatically. The rules are expected to take effect in October.
The European Parliament and EU member states reached a historic agreement on digital market law on Thursday, which is a set of comprehensive rules aimed at restricting the market power of companies in the tight grip of the internet economy.
The rules apply to so-called “gatekeepers” of technology companies with a market capitalization of at least 75 billion euros ($ 83 billion) or annual revenues of at least 7.5 billion euros in the EU over the past three years. The EU must have at least 45 million monthly users or 10,000 business users.
The law has not been passed. The finalized version has not yet been officially adopted by the European Parliament and the 27 countries that make up the European Union.
EU competition leader Margrethe Vestager said he expects the rules to take effect “in October”. He likened the DMA to historically hopeless reforms for the banking, energy and telecommunications sectors.
“What we have learned over the years is that we can correct specific cases and punish illegal behavior,” Westerger told a news conference Friday morning.
“But when things become orderly, we also need discipline because if there is a systematic misconduct, if there are rooted conditions, then we need control to come.”
“For companies that participate as gatekeepers, the digital markets law will now set the rules of the game,” he added.
The main purpose of the reforms is to prevent technology companies from abusing their market position to the detriment of smaller competitors. Large Internet companies are often criticized for running “wall gardens” that are closed systems that make it difficult for one user to push one provider over another.
Companies that qualify as gatekeepers should avoid setting their most important software – Google’s Chrome web browser – as the default option when a user sets up their device. They will also be barred from prioritizing their own services over others.
In addition, gatekeepers need to ensure “mobility” between instant messaging services or the ability of different applications to interact with each other. That means Apple’s iMessage is forced to exchange data with Meta’s Facebook Messenger or WhatsApp.
“Big Tech is forced to embrace the platform, which will usher in a new era of innovation,” said Amandin Le Babe, CEO of Element, an encrypted messaging processor. “There will be more choice, better features and enhanced privacy for consumers and businesses.”
Apple claims that certain components of the DMA can lead to “unnecessary privacy and security vulnerabilities” for users and “prevent the charging of intellectual property.”
“We believe in competition and create emerging competitive markets around the world, and we will continue to work with partners across Europe in mitigating these vulnerabilities.”
Meta and Amazon declined to comment on the EU deal. Google was not immediately available for comment when contacted by CNBC.
The consequences of breaking the rules can be severe. Gatekeepers who violate the DMA are fined up to 10% of their global revenue. This will increase to 20% for repeat offenders. To put it in context, it would be $ 23 billion for a company like Meta.
Gatekeepers who violate the rules at least three times in eight years are at risk of facing market scrutiny and, if necessary, “behavioral” or “structural” solutions, including the breakdown of companies.
“Europe is eager to play a leading role in digital enforcement,” said Bernd Mering, a partner at law firm Linklaters.
“Eyes will now turn to how the Commission is implementing an exciting new rule book for the digital sector, while gatekeepers and other market participants must begin to fight over how the rules can be applied in practice.”
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