Tough times for Big Tech?

The global dominance and inevitability of certain internet platforms in the digital world is an undisputed fact. Nowadays, the internet is hardly definable without Google, Facebook (Meta), Amazon, Apple or Microsoft. Almost all of us are using their platforms - or at least one of them – on a daily basis.

Online market environment still favors the “gatekeepers” of web

These service providers have enormous economic power. Their revenues exceed the gross domestic product of some countries, thankful to the huge amount of valuable user data they possess and concentrate, on the first place. The exclusive access to mass user data opens the door to personalised advertising and other services with unimaginable profit generating effect.

The economic dominance of tech giants by the mass data they possess on an exclusive basis raises serious questions, as the number of small and large enterprises on the internet is almost endless. Only in the European Union, there are more than ten thousand companies that operate through trading marketplaces, application stores or even traffic navigation platforms. This means that they are only available through Big Tech platforms, which includes their advertisement possibilities as well (e.g. Google Ads, Facebook Ads Manager).   

The way to digital markets therefore almost always leads through certain huge platforms, the so-called “gatekeepers”, and accordingly, the accomplishment of digital transactions is largely depending on them. This dependency can pave the way to unfair market practices, which are very difficult to eliminate. One of the most common features of e-commerce is its cross-border nature, this is why EU Member States have no sufficient national legislations to prevent the overreaching and, in some cases, anti-competitive actions of gatekeeper platforms. Currently, only EU or national competition law could address the problem, but in many cases, their scope does not cover the activities of gatekeepers, or only hardly enforceable and time-consuming sanctioning mechanisms are offered by such laws. Although the GDPR was also expected to prevent the concentration of personal data and thereby to indirectly prevent anti-competitive behaviour, these expectations were not met. The Big Tech continues to collect huge amounts of personal data, and the distortion of competition caused by data concentration has not decreased but rather increased in the recent years.

EU regulation for the protection of digital markets

The European Commission recognised this problem as well, and proposed a regulation to ensure fair and open digital markets. The text of the Digital Markets Act (DMA) was approved by the European Parliament in last December, and the DMA is expected to be published and to enter into force in 2022. Based on our current knowledge, it is doubtful whether the DMA can live up to the expectations. The explicit aim of the legislation is to ensure fair competition in the digital sector. The DMA plans to introduce a set of requirements for the biggest players in digital markets and thereby it will complement the European Commission's existing competition powers and hopefully prevent the anticompetitive behaviour of Big Tech firms.

The draft text of the DMA is rather vague concerning personal scope. What is certain is that it will apply to Big Tech companies and platforms present in the EU market with the strongest economic position, with a solid market of millions of people. The legislator’s intention is that these platform providers should only provide a platform for consumers and traders to interact, without interfering with market processes. As far as eligibility criteria for qualifying under the scope of the DMA is concerned, an annual turnover of at least EUR 6.5 billion in each of the previous three financial years, a minimum of 45 million end users per month, and a yearly amount of at least 10,000 business users selling products or services are likely to become the final requirements. The numbers seem to be very high, but the DMA will be "tailored" to a few giant corporations who will not be able to get out of it.

The legislator’s purpose with the DMA is obvious. But what will exactly the DMA prescribe and how will it enforce compliance? First and foremost, it will prohibit the current practice of gatekeepers requiring exclusivity from traders registered with them. Platforms will be obliged to disclose the generated data not only to end-users, but to business users as well. This is very important, because the exclusive access to data was the factor that led to the enormous competitive advantage of Big Tech, and made way for them to gain more power than countries, in some cases. The DMA also contemplates to create fairer circumstances regarding platform advertising. It bans platform operators from presenting the advertisements of business clients in smaller or otherwise less visible form compared to their own advertisements. In addition to the above, the DMA will also introduce plenty of other rules to promote transparency and equal digital market access to traders.

But what kind of sanction tools will the European Commission have in order to enforce the desired compliance? For regular breach of obligations, so-called corrective measures, severe fines, and periodic penalty payment may be imposed. The initial proposal for fines was a maximum of 10% of the total global annual turnover, but this is being revised due to the initiation of the European Parliament, and there is a possibility that the maximum fine will climb up to 20%. As the hardest correction sanction, the compulsory selling of the enterprise may also be imposed under the DMA. 

Brave new future?

The envisaged sanctions seem to be very serious, but the actual enforcement of compliant behaviour will not be easy. There had been countless unsuccessful attempts to regulate Big Tech. The main problem is that even the most detailed regulations are very hard to be enforced in the digital sphere, where value lies in the mass of data. By taking a brief look at GDPR, we can neither be optimist concerning DMA. For the time being, it is not yet even clear how the European Commission would sufficiently enforce the selling or breaking up of a company that is based outside the EU. Regardless of the upcoming entry into force of the DMA, there are currently more questions than answers about its actual implementation.

Nevertheless, the draft text was recently approved by the European Parliament, taking another big step towards regulating Big Tech companies, at least at the level of intention. It is expected that the DMA will be published later this year, but it will still require the approval of the European Council and therefore the Member States. The current French presidency is reportedly determined to make the DMA a binding law as soon as possible. The difficult part of the process, however, comes now as the draft still has to be finalised along national interests, and the representatives of the member states will certainly have their own word in the process.

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