EU Big Tech Clampdown Probe Bites Apple, Microsoft

Apple and Microsoft will soon find out if more of their services will be included in tough new regulations as European regulators continue their clampdown efforts under the Digital Markets Act (DMA).

The EU on Wednesday named 22 services from six companies (mostly American), including Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft. Companies on the list have six months to comply with the new tough standards or challenge them in court. The European Commission (the EU’s executive arm) will investigate whether Microsoft’s Bing, Edge, and Advertising services, along with Apple’s iMessage can be exempt from the regulations.

The DMA focuses on “gatekeepers” -- big tech companies that offer services to millions globally -- and will limit the way the companies combine user data to gain competitive advantage, among other anti-trust measures. Along with the consumer privacy-focused Digital Services Act (DSA), the EU has created the world’s most stringent technology regulations that will have far-reaching impacts.

“We are finally reining in the economic power of six gatekeepers, giving more choice to consumers and creating new opportunities for smaller innovative tech companies," Thierry Breton, the EU’s internal market commissioner said in a statement.

The DMA will cover 10 core platform services, including online intermediation services, online search engines, online social networking services, video sharing platform services, number-independent interpersonal communication services, operating systems, cloud computing services, advertising services, web browsers, and virtual assistants. The DMA provides a long list of requirements, including allowing end users to install third party apps or app stores, a ban on using data of business users when gatekeepers compete on their platform, a ban on requiring app developers to use a gatekeeper’s services, such as payment systems or identity providers, along with many other requirements.

Big Tech Leaders Voice Concerns

American tech companies dominate the list impacted by DMA, including Alphabet, Amazon, Apple, Meta, and Microsoft. Samsung successfully lobbied to have their web browsing service removed from the list, successfully arguing they didn’t meet the threshold for being a gatekeeper.

In a statement, Apple voiced concerns about the DMA’s potential impact on its services’ privacy and security. “Our focus will be on how we mitigate these impacts and continue to deliver the very best products and services to our European customers,” the company said. In a blog post, Google’s Oliver Bethell said, “Our aim is to make changes that meet the new requirements while protecting the user experience and providing helpful, innovative, and safe products for people in Europe.

China’s ByteDance, owner of TikTok, took a harder stance against the regulations. TikTok public policy head Caroline Greer said the company fundamentally disagreed with their designation as a gatekeeper. “TikTok has brought choice to a space largely controlled by incumbents and this decision risks undermining the DMA’s stated goal by protecting actual gatekeepers from newer competitors like TikTok,” Greer said in a statement.

US Firms Bracing for Big Impact

Tech companies could be looking at a huge operational cost spike as the regulations go into effect, according to a study from the Center for Strategic & International Studies. Study author Kati Suominen found that new compliance and operational costs for US digital services providers could reach up to $50 billion annually, or up to 17% of their EU revenues.

“In addition, since they target primarily US digital services providers while excluding European or Asian firms, the DMA and certain provisions of the DSA may be discriminatory against the United States while helping grow Chinese tech companies’ European market share,” the report stated.

Suominen wrote that US small- and medium-sized enterprises (SMEs) could end up spending up to $45 billion more in digital services costs because of the new regulations.

But EU officials contend that SMEs will benefit from the tough new regulations. “We know that some tech giants have used their market power to give their own products and services an unfair advantage and hold back competitors from doing business and creating added value and jobs. These practices distort competition, undermine free consumer choice and hold back SMEs’ innovation potential,” Breton said at a digital conference in Estonia on Tuesday.

Penalties for breaking the rules can reach up to 10% of global annual turnover -- and repeat offenses could cost companies as much as 20%. The rules will go into full effect in March 2024.

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