European Digital Markets Act forces tech giants to make changes

This week, Europeans on their phones and computers will get new choices about their default browser and search engine, where they download iPhone apps, and how their personal online data is used.

They are part of changes needed under the Digital Markets Act, a set of EU regulations that lists six tech companies as “watchable” including Amazon, Apple, Google parent Alphabet, Meta, Microsoft and TikTok parent ByteDance. Gatekeepers” must begin following Wednesday before midnight.

The DMA is the latest in a series of regulations Europe, a global leader, has passed to curb the dominance of big tech companies. Tech giants have responded by changing some long-standing ways of doing business, such as Apple allowing people to install smartphone apps outside of its App Store.

The new rules have the broad but vague goal of making digital markets “fairer” and “more competitive.” The rules come into effect as efforts to crack down on the tech industry gather pace around the world.

Here’s how the Digital Markets Act works:

Which companies must comply with the rules?

About 22 services will be on the DMA’s radar, ranging from operating systems to messaging apps and social media platforms.

These include Google services such as Maps, YouTube, the Chrome browser and the Android operating system, as well as Amazon’s Marketplace and Apple’s Safari browser and iOS.

Meta’s Facebook, Instagram and WhatsApp and Microsoft’s Windows and LinkedIn.

These companies face the threat of hefty fines of up to 20% of their global annual revenue (which could amount to billions of dollars) for repeated violations, or even having their businesses broken up due to “systemic violations.”

What impact will these rules have globally?

The Digital Markets Act is a new milestone for the 27-nation European Union, which has long been a global trendsetter in cracking down on the tech industry.

The EU has previously slapped Google with huge fines in antitrust cases, introduced tough rules to clean up social media and introduced the world’s first artificial intelligence regulations.

Now, places like Japan, the UK, Mexico, South Korea, Australia, Brazil and India are developing their own versions of DMA-like rules aimed at preventing tech companies from dominating digital markets.

“We’re already seeing imitators around the world,” said Bill Etchikson, a senior fellow at the European Center for Policy Analysis, a Washington think tank. He said the DMA “will become the de facto standard for digital regulation in a democratic world.”

Zach Meyers, assistant director of the Center for European Reform, a think tank in London, said officials would look to Brussels for guidance.

“If it works, many Western countries may try to follow the DMA to avoid fragmentation and the risk of failure with different approaches,” he said.

How will downloading apps change?

One of the biggest changes is that Apple said it will allow European iPhone users to download apps outside of the App Store installed on their mobile devices.

The company has long resisted such moves, with a large portion of its revenue coming from charging a 30% fee on payments made through the iOS app, such as a Disney+ subscription. Apple warns that “sideloading” apps poses additional security risks.

Now, Apple is cutting the fees it charges European app developers who choose to stay within the company’s payment processing system. But it adds a 50-eurocent fee for every iOS app installed through third-party app stores, which critics say will prevent many existing free apps (whose developers currently pay nothing) from jumping ship.

“Why might they choose to pay 50 cents per user?” said Avery Gardiner, director of global competition policy at Spotify. “As a result, these alternative app stores will never gain traction because they will miss out on the vast number of apps that need to exist for customers to find the store attractive.”

Gardner added: “This is completely contrary to the original intention of the DMA.”

Brussels will be keeping a close eye on whether tech companies comply with the rules.

EU competition chief Margrethe Vestager said this week that after a decade on the job, “I’ve seen quite a few antitrust cases and used a lot of creativity in how to get around the rules we have.”

How do people get more choice online?

Consumers will not be forced to make default choices for critical services.

Android users can choose which search engine to use by default, while iPhone users can choose their preferred browser. Europeans will see a selection screen on their devices. At the same time, Microsoft will stop forcing people to use its Edge browser.

The idea is to stop people from being forced to use Apple’s Safari browser or Google’s search app. But smaller businesses remain concerned they may be worse off than before.

Christian Kroll, chief executive of Berlin-based search engine Ecosia, said users may just stick with what they know because they know nothing about other options.

Ecosia has been pushing Apple and Google to include more information about rival services in their selection screens.

“If people don’t know what the alternatives are, many of them are less likely to choose the alternatives,” Kroll said. “I’m a big fan of DMA. I’m not sure yet if it’s going to get the results we’re hoping for.”

How will internet search change?

Some Google search results appear differently because the DMA prohibits companies from prioritizing their own services.

For example, searching for hotels will now show an additional “carousel” of booking sites like Expedia. At the same time, the Google Flights button will be removed from the search results display and the site will be listed in a blue link on the search results page.

Users can also choose to stop targeted advertising analysis based on their online activities.

Google users can opt out of having their data shared between the company’s services to help better target ads to them.

Meta allows users to keep their Facebook and Instagram accounts separate so that their personal information cannot be combined for ad targeting.

DMA also requires messaging systems to be able to cooperate with each other. Meta, which has the only two chat apps subject to the rule, is expected to put forward a proposal on how Facebook Messenger and WhatsApp users can exchange text messages, videos and images.