Europe Agrees on New Rules for Competition in Tech—What Will Change?

The new rules known as the Digital Markets Act, set out a list of Dos and Don’ts for Big Tech, but how these new rules will apply to any one company in any one area in any one country is still largely uncharted and will be determined to a large extent by narratives and policy choices. Here is what we know and what we don’t know.

What we know

The rules aim to designate Big Tech companies as gatekeepers controlling access to certain core services, and then pry open those core services for new entrants as well as force more fair treatment of consumers and business users.

Underpinning the new rules is the belief that creating more opportunities for competition will spur innovation of better digital tech to everyone’s benefit. However, that belief is tempered by a desire for balance and proportionality. The new rules therefore strive to avoid any unintended negative consequences of prying Big Tech’s beloved current products and services open. To this end, many of the sweeping Dos and Don’ts have narrowly phrased exceptions which allow Big Tech to take necessary measures to protect system integrity, or security and privacy.

The most important changes fall into these four areas:

  • Dissection and gratuitous use of distribution platforms
  • User-generated data
  • Self-preferencing
  • Interoperable messaging systems.

Dissection and gratuitous use of distribution platforms

The most radical changes will potentially arise from the dissection and opening of the valuable distribution platforms built by Big Tech.

On top of granting consumers easy ways to un-install apps and change default settings, the once seamless and elegantly designed distribution platforms will be chopped up into separate and interoperable segments that users can mix and match. These segments include a choice of downloading apps from outside a platform’s curated app store, downloading entire alternative app stores and using alternative payment systems for in-app purchases. Similarly, for services that steer users to a platform’s own products and services, such as online search engines, virtual assistants or web browsers, consumers will be prompted to choose from a drop-down list of the main available providers.

Business users, such as app developers, will have access to these distribution platforms that facilitate sales and promotions to their users without having to pay any fee to the platform for this access. They will notably also have the right to interoperate free of charge with hardware or software features of a platform’s operating system or virtual assistant. Big Tech will also have to publish general conditions of access stamped as fair by the European Commission for app stores, search engines and social media networks.

In this sphere, the new rules include narrowly phrased exceptions which allow Big Tech to take necessary measures to protect system integrity, or security and privacy.  However, in the case of downloading apps from outside a platform’s app store or downloading entire alternative app stores, these measures can only be taken by Big Tech at the choice of the user.

User-generated data

For consumers, changes include a ban on having their personal data combined by Big Tech from different sources without meaningful consent, as well as for each user, a right to access real-time disaggregated data generated by that user without any additional charge. That right will also include free of charge portability of that data to another provider through tools provided by Big Tech. Presumably, this will allow for development of new ways that users could employ to trade and monetize the data they generate by using Big Tech.

For business users, changes bring a halt to Big Tech using data generated by these businesses to better compete with them and a right for advertisers to receive granular data about ads without any additional charge.

Important new rules on access to data generated by connecting various smart products to the Internet will come from another regulation known as the Data Act, currently being negotiated in Europe’s legislative decision-making process.

Self-preferencing

Big Tech will no longer be able to treat more favorably its own products or services in ranking, and related indexing and crawling activities.

Interoperable messaging services

The basic functionalities of number-independent messaging services will become interoperable, without additional charge to those requesting interoperability, over a phased period mandating milestones immediately, two years out and four years out from the date of a company’s gatekeeper designation. Given the sensitivity of sharing interfaces, which are likely protected intellectual property, with direct competitors, here too there is an exception allowing Big Tech to protect security and privacy.

What we don’t know

The rules for competition in tech are new, and their application to specific companies in specific markets will be constructed from scratch by the European Commission, in consultation with enforcers and policymakers from other policy areas or national systems. The whole point is to escape the shackles of prior competition law principles and precedents, and to embrace new thinking about progressive remedies considering new “economic realities”—a buzz phrase newly tossed around in Brussels policy circles to refer to a nebulous set of geo-political and geo-commercial challenges.

There is also a consensus in the EU’s informal capital that the new rules for Big Tech require the European Commission, as the enforcer-in-chief, to become nimbler in crafting creative solutions to these “economic realities” in fast-moving digital markets.  To increase its fitness for tackling digital markets both ex-post under the competition law framework and ex-ante via new regulations such as the Digital Markets Act and Data Act, the European Commission is now formally reviewing its enforcement powers and procedures under what is known as Regulation 1/2003. This exercise will bring changes to many of the bloc’s current powers and practices, likely focusing on shifting the burden of proof, the standard for imposing interim measures and the mechanisms for cooperation between the Commission and national competition authorities (including on informal investigations and formal fact-finding efforts).

In such a climate of sweeping change and re-invention, public debate and discourse on policy considerations will have a significant impact on ultimate outcomes in specific scenarios caught by the new rules. Stakeholders will create momentum for certain expected outcomes and enforcers will interpret, assess, and take decisions against that backdrop.

Now is the time for each stakeholder to formulate positions and speak up. Those who remain silent or unprepared to navigate this sea of change are bound to be swept up in unexpected ways by others who harness the winds that move its many waves.