A new landmark EU law that will force Big Tech to open up their services and level the digital playing field has been criticized by Apple and Google.
The new Digital Markets Act, passed into law late on Thursday night, seeks to curb the dominance of major tech companies through a number of hefty sanctions and new restrictions including limits on data sharing and self-preference practices. It is expected to reshape the way companies like Apple, Meta, Google, Amazon and Microsoft manage their app stores, advertising, e-commerce, and messaging services.
The new rules will only apply to “gatekeeper” platforms or large companies with a market capitalization of €75 billion or more that run on one core “platform” like web browsers and social media sites.
The law is the biggest regulatory move from the EU so far to counter what it calls antitrust or anti-competitive behavior exhibited by mainly U.S. technology companies. German Member of the European Parliament Andreas Schwab, who led the negotiations on the Digital Markets Act for the European Parliament, said “the agreement ushers in a new era of tech regulation worldwide.”
But Google and Apple have already hit back, suggesting the legislation will throttle innovation and efficiency.
A spokesperson for Apple, which lobbied intensively against the new legislation, said in a statement sent to Fortune, “we remain concerned that some provisions of the [Digital Markets Act] will create unnecessary privacy and security vulnerabilities for our users, while others will prohibit us from charging for intellectual property in which we invest a great deal.”
Meanwhile a spokesperson for Google told Fortune the company was “worried that some of these rules could reduce innovation and the choice available to Europeans,” adding it would now study the text to work out what’s needed to comply.
More rules and stiff sanctions
The new sanctions under the Digital Markets Act are stiffer than what the tech companies lobbied for, and are expected to radically change the way they have operated for the past two decades.
If major tech companies violate the law, the European Commission will be able to impose penalties and fines of up to 10% of their global revenues. If the companies continue to break the new laws, the Commission can take away 20% of their global revenues and impose “behavioural or structural remedies” to break the tech giants up in Europe.
The law will force companies to allow users to install apps from third-party platforms and prohibit the combining of personal data from different sources, bundling services and self-preferencing practices. It will also will require interoperability requirements for messaging services, which means outfits like WhatsApp will have to open up their services and work with smaller messaging platforms. It is also expected to force Apple to open up its App Store to third-party payment options instead of forcing users to use Apple’s payment system.
How it will look in practice, however, is unknown. Companies are expected to look for ways to diminish its impact through courts, and European regulators will need money to fund their expanded oversight responsibilities.
Cédric O, the French minister for the digital economy who drafted the legislation, told the Financial Times that while industries like banking and energy fear regulation will hamper innovation, the Digital Markets Act would do the opposite.
“More competition fosters more innovation and this is precisely what will happen,” he said. “It’s very good news for European innovators and start-ups.”
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