Status: 05.07.2022 18:32
In the future, US Internet companies such as Alphabet, Amazon and Apple will be more strictly regulated in the European Union. The goal is fair competition – German medium-sized companies in particular could benefit.
The European Parliament has issued stricter rules and regulations for US Internet companies. Critics of the business practices of the US tech giants and above all companies that want to be successful in the digital markets have high hopes for the two laws passed today.
The Digital Service Act (DSA) focuses in particular on the consumer side and the content level. Among other things, it regulates the obligations of digital services that act as intermediaries and enable consumers to access goods, services and content. Topics such as disinformation, hate speech and illegal content are also dealt with in the DSA. It is also significant that platforms will have to disclose the most important parameters of their recommendation algorithms in the future.
Enable fair competition
The focus of the Digital Markets Act (DMA), on the other hand, is on competition and companies. Since only a few corporations such as Amazon, Alphabet, Meta, Microsoft or Apple determine the digital markets as so-called gatekeepers and dominate with their enormous market power, the aim of the law is to enable fair competition and to reduce the barriers to entry into the markets. Because of their special characteristics and disruptive power, digital business models would not only change everyday life, but also markets and economic power relations, according to the Federal Ministry of Economics.
Gatekeepers are digital platforms with a strong market position that turn over more than 6.5 billion euros a year or achieve a capital market value of 65 billion euros. They must also have more than 45 million monthly users and more than 10,000 commercial providers in the EU.
This is regulated by the “Digital Markets Act”
For example, it was decided that messenger services such as WhatsApp and iMessage must open up to also receive messages from other applications, so-called interoperability. Business users must also have access to their data on the gatekeeper’s platform. In the future, it will no longer be possible for large corporations to rate their own services or products better than those of their competitors.
In addition, users can no longer be prevented from easily uninstalling pre-installed software or apps or from using third-party applications and app stores. Finally, gatekeepers may no longer use users’ personally identifiable information for targeted advertising unless they consent. Violations of the DMA can result in fines of up to ten percent of annual sales. With the DSA, up to six percent can be due if the regulations are not complied with.
No more “wild west methods”
In recent years, tech companies have created and dominated markets with disruptive practices and technological innovations. In view of the enormous speed of innovation in the technologies, legal regulations and provisions could hardly play a part. Wild West methods have taken hold in the digital world, with the biggest and strongest making the rules, explains Christel Schaldemose, rapporteur for the Digital Markets Act (S&D, Denmark). Even EU antitrust proceedings with fines in the billions for violations of competition law, for example against Google, had not changed much in the end.
The DMA must be about enabling competition by also giving small companies the opportunity to participate, said Monika Schnitzer from the Ludwig Maximilian University in Munich as an expert on the DMA before the Economic Committee of the Bundestag.
Really more competition?
Will the DMA change the game in favor of smaller companies? Andreas Schwab (EPP, Germany), also rapporteur for the Digital Markets Act, is certain: “The Digital Markets Act (DMA) puts a stop to the business practices of the big digital companies.” With the DMA, the EU is ending the cat-and-mouse game in which the competition authorities have lagged behind the digital giants in lengthy procedures.
“The clear regulation of the digital economy is a necessary step,” comments Hildegard Reppelmund, legal expert at the DIHK tagesschau.de. This not only affects the gatekeepers themselves, but also the users of these platforms. “In addition to consumers, there are also companies that offer goods or services on the platforms, for example.” Whether the regulation really leads to more competition in connection with the use of data is completely open, Reppelmund qualifies. “The DMA is just a first tentative attempt to do justice to the challenges of the digital economy in the legal and digital jungle.”
Digital economy characterized by medium-sized companies
It is often forgotten that the digital economy in Germany and Europe is characterized by medium-sized companies, emphasizes Patrick Häuser from the Federal Association of IT SMEs (BITMI) in an interview tagesschau.de. Of the 10,000 digital platforms in Europe, 9,000 are operated by small and medium-sized companies. Due to the dominant position of the large digital groups, digital innovations would be inhibited in this country in the medium term.
“From the point of view of IT SMEs, the DMA is a milestone because it finally makes fairer competition for the best digital solutions and products possible with a whole set of new rules,” says Häuser. “It therefore also means strengthening our domestic digital economy as a whole.”
Haeuser states that for a self-determined, digital transformation, it is crucial that one’s own technological skills are strengthened and dependency on tech giants is reduced: “But that’s only possible if we promote the development of digital business models in Europe. A modern competition law , as is now being created by the DMA, is an important prerequisite for this.”
New business models
From the point of view of the BITMI, digital medium-sized companies can particularly benefit from this: “In the area of messaging services, the large providers must now open themselves up to smaller competitors in order to ensure interoperability. This can result in new business models for service providers that previously had no chance on the market had.”
The fact that powerful gatekeeper platforms no longer offer their own services with unrestricted preference in order to bind users even more strongly is also positive. “Small and medium-sized digital companies benefit from this, as they gain more visibility and can compete better in this way,” Hauser concludes.