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'These big companies seem happy to get fined'


US tech giants are facing a crackdown on their market power as new European Union legislation promises to rein in their monopolistic practices and create a level playing field for businesses. The Digital Markets Act came into force last month (November) and gives the industry six months to make progress on complying with its stringent rules in their EU operations.

The DMA takes aim at what it calls the "gatekeeper" technology companies, likely to include Google, Amazon, Apple, Microsoft and Meta plus up to ten others, which control the platforms that provide access to digital services. Gatekeepers will be forbidden from giving preference to their own products and services in their search rankings. They will have to end the walled gardens where they build ecosystems that lock users into their own products and services. They will be forced to allow users to link to third parties outside their platforms.

In practice, this could mean WhatsApp and Apple's iMessage being obliged to accept messages from other services such as Telegram or Signal. Apple could be prevented from insisting payment for apps are made through Apple Pay. Smartphones could be forced to offer apps from rivals' app stores. In short, this promises to break open the digital market and let in smaller players. Some wonder whether the DMA could backfire. Jack Shearring, co-founder of LEAD Digital Consulting, Shearring worries that if the DMA succeeds in forcing the tech giants to intertwine their services, this risks shepherding them into a cartel. By insisting on interoperability of their services, the DMA could create a combination of the most powerful giants, in effect building a super walled garden for all the gatekeepers. "It's like all of the baddies in a superhero movie potentially coming together to defeat the innocent protagonist," says Shearring.

However, he is sceptical about the EU's prospects of success in enforcing the DMA, pointing to the huge legal firepower of the big tech company companies. "I feel like it's going to be a very big task for the EU to go up against all of these vast legal teams," he says. The EU has previously struggled to bring the tech giants to book on competition and privacy issues despite levying huge fines. Google has racked up numerous fines for GDPR breaches and monopolistic practices. These include a €4bn fine imposed last month for anti-competitive behaviour in requiring mobile manufacturers to pre-install Google's search and Chrome apps on handsets as a condition for carrying the Google Play app store. Google vigorously opposes the fine and has tried to have it annulled. With other competition and GDPR fines included, Google's EU fines total nearly €10bn. Meanwhile, Amazon was hit last year with the biggest ever GDPR fine, worth €886m, though it strongly denies any breach of the rules took place.

Shearring says: "I'm dubious whether the DMA can be applied if the EU has struggled to apply GDPR to these big companies - they seem happy to get fined. I haven't seen any anything so far that gives me confidence that they can action this regulation in an effective way.'' A big challenge for the EU Commission, tasked with enforcing the DMA, is a lack of technical expertise when negotiating with some of the most sophisticated technology organisations on the planet. Mainly staffed by economists and lawyers, the Commission struggles to engage with and win arguments with the high-flying data scientists and software developers employed by big tech who tend to run rings around them. They will need to significantly upweight their technical expertise to give the DMA sharper teeth. "I think it's very brave for the EU to be going after what they call the gatekeepers. But at the moment, I can't see the logistics of how it can work," he adds though he says he is "more than more than happy to be proved wrong."

A company that welcomes the new rules is Kelkoo, a comparison shopping service that has been battling Google for 13 years. It argues that Google has unfairly promoted its own comparison shopping service over rivals in its search results. A search for trainers on Google – which has over 90% market share of the search market in most European countries – will bring up Google's own comparison shopping service at the top of the page. This self-preferential treatment favours Google's own business interests and is considered an abuse of its market dominance. In 2017, the EU fined Google €2.4bn for this practices and ordered it to remedy the situation. But Steve Thomas, general counsel at Kelkoo Group, says the company is not happy with the remedy Google created, which is to show results from Kelkoo in its own comparisons rather than allowing Kelkoo's results to get on to the first search page. "So that remedy really hasn't done an awful lot to change the market," he says. Thomas believes the DMA will put a stop to such practices. "The DMA contains a very explicit provision saying that gatekeepers can't self-preference, but it doesn't have all of the other complications of competition law and it has a much more prescribed timetable for dealing with things." He is confident that the DMA will succeed in ending Google's monopoly on the route to market. Google rejects the idea that it is damaging the market says the new "rules could reduce innovation and the choice available to Europeans." And Apple says the DMA "will create unnecessary privacy and security vulnerabilities for our users." Over coming years, there will be a huge battle for control of Europe's digital industry. But whether the regulators at the European Commission emerge victorious remains to be seen. 

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