Europe is entering a new era of technology regulation with the Digital Markets Act

The Digital Markets Act (DMA) is a new European Union law that aims to change the way businesses are conducted online by regulating the world’s largest technology companies. It will come into force today, Thursday 7 March.

The regulation applies to companies with a market value of €75 billion ($81.7 billion) or €7.5 billion ($8.17 billion) in annual revenue in the EU that have at least 45 million monthly end users and 10,000 business users per year using at least one core platform, including web browsers and virtual assistants.

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The DMA will initially target six companies designated as gatekeepers to their perceived dominant positions in digital market areas: Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft. The EU has also designated 22 core platform services of these tech giants – Facebook, Instagram and WhatsApp Meta; TikTokByteDance; Google search engine etc. – as falling within the scope of the new rules.

It will be months, if not years, before the usefulness and unintended consequences of the EU legislation become clear, but the DMA has already forced tech giants from Alphabet to TikTok to change how they operate in the EU or face hefty fines. First-time DMA violators can be fined up to 10 percent of their company’s total global turnover. For repeat offenders, the EU can impose a 20 percent fine. For Meta, for example, that would mean a fine of $13.4 billion, 10 percent of the company’s $134 billion in global revenue in 2023, for a first violation.

These regulations are among the most restrictive in the world when it comes to limiting the market influence of technology companies. They could revolutionize the way Europe regulates its activities.

Rather than waiting until it sees evidence that market dominance is harming consumers and using traditional antitrust law to correct it – the approach taken by US regulators to reign in big tech – with the DMA, Europe is trying to get ahead of digital markets by erecting barriers requiring the world’s biggest tech players to open up their systems to competition, to ensure, in the words of the European Commission, a “level playing field” for businesses in the digital sector.

According to Enrique Dansa, professor of innovation at Madrid’s IE University and research fellow for the digital innovation initiative at the Center for European Policy Analysis (CEPA) think tank, EU legislators believe that antitrust law is “too slow” to cope with rapidly changing digital market conditions .

Governments around the world seem to agree with Brussels. Before European law came into force and before the full impact of the legislation could be assessed, governments around the world, from the UK to Japan, rushed to write their own copies of the DMA.

“What we’re seeing,” says CEPA senior researcher Bill Echikson, “is the ‘Brussels effect,’ the effect of Brussels wanting to be the global regulator of technology. That’s what happened with the GDPR privacy law in 2018, (which) has been copied all over the world. And we’re already seeing copies of that Digital Markets Act, or variants of it, popping up in places like Japan, the U.K., Brazil, Mexico, even India. I think in the democratic world, (the DMA) will become the de facto standard.”

Some copycat DMA regulations, such as the one proposed in Japan, are more targeted and narrower in scope than the DMA, while other governments, especially in the UK, want stricter regulations. The UK’s proposed Digital Markets and Consumer Competition Act goes beyond the DMA and requires tech giants to, among other things, share their data with rival search engines, step up the fight against fake online reviews and modernize their app stores.

As if to show it means business, the European Union imposed an antitrust penalty on Apple on Monday, March 4, fining the company nearly $2 billion for violating competition law by unfairly favoring its own music streaming service at the expense of competitors. The case against Apple was brought by a group of smaller technology companies, led by Swedish music streaming service Spotify.

Google recently received an antitrust fine of 2.42 billion euros ($2.64 billion) from the EU for using its own price comparison service to gain an unfair advantage over smaller European rivals. Both Apple and Google are appealing the fines.

The DMA comes into force alongside another important piece of EU legislation, the Digital Services Act (DSA), which focuses on consumer protection.

The scope of the DMA and the harsh penalties it provides could mean that the legislation will have a major impact on the development of digital industries around the world. However, new EU rules still exclude some digital markets, including video streaming, from antitrust considerations.

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