Opinion: Europe’s new big tech law could actually deliver results, like iMessage and Facebook Messenger playing well and big fines
European regulators have had a big focus on Big Tech for years, but companies have largely just paid their fines and tweaked their business models to maintain their response trajectory.
However, after the EU passed a draft version of the Digital Markets Act, or DMA, businesses should be shaking in their boots and consumers should brace for real change.
The new law, which was designed to “make the digital sector fairer and more competitive” and will still see some finalization of the text in the coming days, could result in hundreds of billions of dollars in fines for violating the new standards based on previous actions against the companies. Even after fining US tech giants “billions of dollars” over the past decade for anti-competitive behavior and breaches of privacy, the EU is getting even tougher, saying the companies targeted in the new law are the “gatekeepers” who maintain walled gardens, with revenues of 7.5 billion euros ($82.4 billion), or a market capitalization of at least 75 billion euros, and at least 45 million monthly users and 10,000 business users in the European Union.
Read more: Landmark European law could take billions from Apple and has already forced major change at Google
The law directly targets Alphabet Inc. GOOG,
Amazon.com Inc. AMZN,
Facebook parent Meta Platforms Inc. FB,
and Microsoft Corp. MSFT,
but could affect others. If any of these companies break a host of new rules (which may change slightly depending on future changes to the text), they can be fined up to 10% of their annual turnover for the first offence, and up to 20% of its annual turnover in the event of a repeat offence. offences.
These fines would be incredibly high, especially compared to what the EU has already imposed. Alphabet, with 2021 annual revenue before traffic acquisition costs of $257 billion, could see an initial fine of up to $26 billion. But his unlikely Europe would see any action against Google as a first, having fined the company nearly $10 billion in total in three separate actions, and a 20% fine could exceed $50 billion.
Apple, with $366 billion in fiscal 2021 revenue, could see an initial fine of up to $37 billion, Microsoft with $168 billion in fiscal 2021 revenue, could see fines of up to $37 billion. at $17 billion, and Meta, with $118 billion in revenue for 2021, could see a fine of up to $11 billion.
Don’t Miss: Big Tech’s Pandemic Year Delivers Staggering Financial Results
The rules could also mean big changes for businesses. Tech giants are urged to ensure that their messaging platforms have basic interoperability or interact at a very basic level; guarantee users the right to unsubscribe from the services; allow application developers fair access to new smartphone functions; allow advertisers to access their marketing or advertising performance data; and informing the EU of mergers and acquisitions. Additionally, companies can no longer rank their own products first in search; pre-install certain software; require app developers to use certain payment services; and reuse private data collected from one service for another service.
The new rules could impose very big changes on consumers. For example, at first glance it looks like Apple’s iMessage would be forced to interact at a very basic level with Meta’s Facebook Messenger, at least for basic text messages. Alphabet’s Google and Apple would no longer be allowed to pre-install apps on their smartphones (boring ones that cannot be removed by users currently) and Apple would have to allow developers fair access to the App Store, and possibly allow third-party apps stores.
More from Therese: Regulating Big Tech will be tough, and California proves it
The language of all these new laws is likely to change and will be reinterpreted in many ways by legions of Big Tech lawyers in the future. That might be why Wall Street, so far, doesn’t seem too concerned. In a note on Thursday about Apple and a new law in South Korea requiring Apple and Google to allow third-party payment systems, an analyst said he was not yet worried about “hardware changes.”
“The App Store remains under siege, but we’ll likely see a lengthy legal battle before Apple is forced to make any significant changes,” Evercore ISI analyst Amit Daryanani wrote in a note. “[The] The EU DMA (is) probably the most short-term threat and could potentially come into effect early next year. Additionally, we think advertising and Apple Pay could more than offset these concerns given the massive ramp up ahead.
While it’s true that giant legal teams at Big Tech will fight these laws as hard as they can and push them as far into the future as possible, this new legislation has a lot of teeth and seems to require a lot of platform changes. expensive form. for Big Tech. Governments around the world are watching and may follow with their own new laws, with many of the same ideas already floating through the halls of the US Congress.
Attempts to crack down on Big Tech have been going on for years, but none have really brought these corporate giants to their knees. DMA could be the law that swings on this edge, and there should be real concern in Silicon Valley about the long-term effects.