Europe's Digital Markets Act is forcing tech giants to make changes; Here's what that will look like

Europeans scrolling their phones and computers this week will get new choices for default browsers and search engines, where to download iPhone apps and how their personal online data is used

Updated - March 07, 2024 11:06 am IST

Published - March 07, 2024 08:42 am IST - LONDON

Level playing field: The rules have broad but vague goals of making digital markets ‘fairer’.

Level playing field: The rules have broad but vague goals of making digital markets ‘fairer’. | Photo Credit: AP

Europeans scrolling their phones and computers this week will get new choices for default browsers and search engines, where to download iPhone apps and how their personal online data is used.

They’re a part of changes required under the Digital Markets Act, a set of European Union regulations that six tech companies classed as “gatekeepers” — Amazon, Apple, Google parent Alphabet, Meta, Microsoft and TikTok owner ByteDance — will have to start following by midnight Wednesday.

The DMA is the latest in a series of regulations that Europe has passed as a global leader in reining in the dominance of large tech firms. Tech giants have responded by changing some of their long-held ways of doing business — such as Apple allowing people to install smartphone apps outside of its App Store.

The rules have broad but vague goals of making digital markets “fairer” and “more contestable.” They are kicking in as efforts around the world to crack down on the tech industry are picking up pace.

Here’s a look at how the Act will work:

Some 22 services, from operating systems to messenger apps and social media platforms, will be in the DMA’s crosshairs.

They include Google services like Maps, YouTube, the Chrome browser and Android operating system, plus Amazon’s Marketplace and Apple’s Safari Browser and iOS. Meta’s Facebook, Instagram and WhatsApp are included as well as Microsoft’s Windows and LinkedIn.

Threat of fines

The companies face the threat of hefty fines worth up to 20% of their annual global revenue for repeated violations — which could amount to billions of dollars — or even a breakup of their businesses for “systematic infringements.”

The DMA is a fresh milestone for the 27-nation European Union in its longstanding role as a worldwide trendsetter in clamping down on the tech industry. The bloc has previously hit Google with whopping fines in antitrust cases, rolled out tough rules to clean up social media and is bringing in world-first artificial intelligence regulations.

Now, places like Japan, Britain, Mexico, South Korea, Australia, Brazil and India are drawing up their own versions of DMA-like rules aimed at preventing tech companies from dominating digital markets.

“We’re seeing copycats around the world already,” said Bill Echikson, senior fellow at the Center for European Policy Analysis, a Washington-based think tank. The DMA “will become the defacto standard” for digital regulation in the democratic world.”

Officials will be looking to Brussels for guidance, said Zach Meyers, Assistant director at the Center for European Reform, a think tank in London.

“If it works, many Western countries will probably try to follow the DMA to avoid fragmentation and the risk of taking a different approach that fails.”

In one of the biggest changes, Apple said it will let European iPhone users download apps outside its App Store, which comes installed on its mobile devices. The firm long resisted such a move, with a big chunk of its revenue coming from the 30% fee it charges for payments — such as for Disney+ subscriptions — made via iOS apps. Apple warned “sideloading” apps will come with added security risks.

Apple cutting fee

Now, Apple is cutting those fees it collects from app developers in Europe that opt to stay within the company’s payment-processing system. But it’s adding a 50-euro cent fee for each iOS app installed through third-party app stores, which critics say will deter the many existing free apps — whose developers currently don’t pay any fee — from jumping ship.

“Why would they possibly opt into a world where they have to pay a 50 cent per-user fee?” said Avery Gardiner, Spotify’s Global Director of competition policy. “So those alternative app stores will never get traction, because they’ll be missing this huge chunk of apps that would need to be there in order for customers to find the store attractive.”

“That is utterly at odds with the very purpose of the DMA,” Ms. Gardiner added. Brussels will be closely scrutinising whether tech firms are complying.

EU competition chief Margrethe Vestager said after 10 years in the job, “I have seen quite a number of antitrust cases and quite a lot of creativity built into how to work around the rules that we have.”

Consumers won’t be forced into default choices for key services. Android users can pick which search engine to use by default, while iPhone users will get to choose which browser will be their go-to. Europeans will see choice screens on their devices. Microsoft, meanwhile, will stop forcing people to use its Edge browser.

The idea is to stop people from being nudged into using Apple’s Safari browser or Google’s Search app. But smaller players still worry that they might end up worse off than before.

Users might just stick with what they recognise because they don’t know anything about the other options, said Christian Kroll, CEO of Berlin-based search engine Ecosia.

Ecosia has been pushing for Apple and Google to include more information about rival services in the choice screens. “If people don’t know what the alternatives are, it’s unlikely many of them will select an alternative,” Mr. Kroll said.

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