The European Commission lists some tech titans as ‘gatekeepers’ of online services
The European Commission has designated six of the largest tech companies on the planet as the “gatekeepers” of online services. You’ll know these names: Apple, Amazon, and Microsoft. Facebook parent Meta. Google and YouTube parent Alphabet. And, maybe you’re less familiar with this one: ByteDance, which owns TikTok.
They’ve all got until March to comply with the continent’s new Digital Markets Act (DMA), which aims to give users more choice. For more, Marketplace’s Lily Jamali spoke with Sumit Sharma, a competition and antitrust senior researcher at Consumer Reports, who explained what the term “gatekeeper” refers to. The following is an edited transcript of their conversation.
Sumit Sharma: These large online platforms not only dominate the markets, they are the markets. And so they set the rules for these markets. And what the [Digital Markets Act] does is, it sets out dos and don’ts for these companies; for example, they cannot self preference their own services, and it would allow businesses to contract directly with consumers.
Lily Jamali: So based on your understanding of how the Digital Markets Act would work, do the remedies that it lays out seem like they could work?
Sharma: Yes. My expectation is that over the next year or so as the DMA is implemented by these various companies, or enforced by the [European] Commission, we will start seeing a divergence in the kinds of products and services that are available to European consumers versus U.S. consumers. So, in fact, the law is already in force. And certain provisions, which are contractual provisions — for example, Apple or Google cannot stop app developers from using alternative payment systems. Apple and Google, Amazon, Facebook, etc. these big companies cannot be intermediaries between buyers, consumers and sellers. So they can’t stop these app developers from telling consumers, “Hey, if you buy a service directly from us, we can offer it to you cheaper.”
Jamali: These are some, it sounds like, very real ways that consumers in Europe will experience their tech differently.
Sharma: I think they will; I mean, all the devices we use today, for example, the Apple Watch, smart speakers, etc, all these devices will need to be much more interoperable. So one would expect that, in a few years time, you’ll see more competitors to the Apple Watch, because the new watch manufacturer will be able to interoperate with the hardware and software features of the iPhone in the same way that the Apple Watch does today.
Jamali: And how are the companies being singled out here as gatekeepers responding? I can’t imagine they’re thrilled with this.
Sharma: No, obviously, I mean, all these companies fought tooth and nail to try and stop and watered down these provisions, and they succeeded in the US, but they didn’t succeed in Europe. So they don’t like any of this, because it’s actually, for the first time in many instances is going to make them compete on a more level playing field with other companies. So they don’t like any of it. But in many cases, they are taking steps now to implement the changes they have to make.
Jamali: What about consumers in the U.S.? Do you worry about Americans being left behind?
Sharma: Yes, I think Americans will be left behind because we’ll get less choice here, poorer, and in some cases, even poorer privacy and security.
Jamali: Than we already have?
Sharma: [Than] we already have. And I think it’s going to get worse, because the European Commission has said that, okay, these are great technologies, we like them, they’re innovative, but at the same time we need to set some rules. So the clear dominance that some of the larger platforms have is going to be taken away. But let me just say, in terms of U.S. consumers, they will not see the same benefits that European consumers will see, because there’s no obligation on these companies to introduce these rules globally. And in instances where the changes they have to make are to the terms and conditions, for example, allowing app developers to use alternative payment systems, or the restrictions on using data — those are things they can easily do just in Europe and not do in the US.
Jamali: Are there any incentives built into the language of the Digital Markets Act aimed at getting these companies to comply willingly?
Sharma: It’s a stake — it’s [a] 10% of turnover and then 20% of worldwide turnover. They can be fined up to those amounts, if they don’t comply. And in case of repeat offenses, then the Commission can even enforce more drastic remedies, like ask them to spin off certain services.
Jamali: Most of these companies have until March of next year to start complying with this law. What are you going to be looking for over the next couple of months as we approach that date?
Sharma: I think it’s worth looking at the competitors of these companies and what will they be doing with these new provisions. Will you be able to start buying a Spotify subscription directly on your iPhone, or buy Kindle books directly on your iPhones — things that you can’t do? Will smart speakers become more interoperable? Will they be more — maybe on a Sonos, you can use more voice assistants more easily, etc. So changes both at the consumer level and also for all sellers and businesses who use the services.
One to-be-determined piece of the Digital Markets Act involves Apple and Microsoft. Apple had pleaded with the European Commission to not subject iMessage to the new law. Microsoft did the same for its search engine Bing. Their argument? Neither’s popular enough to get hit with that “gatekeeper” label. And when the Commission made its decision, neither was included — for now. Both of those products are still under investigation and could end up on the list down the road.
Here’s the European Commission’s full list of gatekeepers, and what the tech companies are saying.
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