Gatekeepers to Provide Compliance Reports for EU’s Digital Markets Act on March 7
On March 7, six major tech companies, namely Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft, are required to submit compliance reports for the European Union’s Digital Markets Act, which has been in force since May 2023. These companies, known as “gatekeepers,” must show how they have adhered to the Act and who else the DMA may apply to.
A significant change set to take effect on March 7 is the introduction of new fees for app developers on the Google Play Store if they direct users to sites or apps outside of Google’s ecosystem. The DMA aims to ensure that digital markets are fair and open, fostering competition and innovation, and preventing companies from restricting users to explore solely within their ecosystem of apps and products.
In September 2023, the European Commission identified Alphabet (Google’s parent company), Amazon, Apple, ByteDance, Meta, and Microsoft as gatekeepers, offering essential “core platform services” such as Google Maps, Apple AppStore, and Amazon Marketplace. Alerting the European Commission on March 1, companies like Booking, ByteDance, and X were recognized as potential gatekeeper candidates. ByteDance challenged its gatekeeper status in November 2023, citing that its primary product, TikTok, was not sufficiently established to warrant such a designation. As of March 2024, ByteDance has reverted to being a potential gatekeeper.
It should be noted that the EU’s regulations may have global implications, extending their reach to countries like Australia, according to TechRepublic. Gatekeeper firms have until March 7 to submit compliance reports regarding the DMA to the EU. Failure to file by the deadline or make necessary adjustments to comply could result in fines imposed by the Commission, ranging from up to 10% of the organization’s total worldwide turnover. Repeated non-compliance may see fines escalate to 20%, with the most severe cases possibly leading to the divestiture of parts of a business or restrictions on acquiring certain services.
The DMA is applicable to organizations with substantial economic influence in the EU, generating at least €7.5 billion in revenue per year over the last three fiscal years, and having over 45 million monthly active end users in the EU or more than 10,000 yearly active business users for a minimum of three fiscal years.
In January 2024, Apple unveiled changes to the App Store in response to the DMA, including the introduction of fees for app developers and a Core Technology Fee of €0.50 for each first installation for applications with over one million annual installs. However, this move was met with criticism, with Epic Games CEO Tim Sweeney describing it as “malicious compliance.” Other services reliant on the App Store also expressed dissatisfaction with Apple’s actions. In a significant development on March 4, Apple was fined $1.95 billion by the DMA, specifically due to protests initiated by Spotify regarding how Apple promotes its music service. Apple has indicated its intention to appeal this penalty.
In efforts to comply with the DMA, Google made substantial changes to its products and services on March 5. These adjustments encompassed the removal of certain Google Search widgets like Google Flights, enhancing access for individual businesses, as well as implementing new data sharing settings between Google services. Additionally, Android and Chrome now feature “choice screens” prompting users to select their preferred search engine or browser, a practice already in place for third-party app stores and side-loading on Android, which Apple is urged to adopt for its AppStore. On March 6, Google unveiled a feature allowing developers on the Google Play Store to guide users in the European Economic Area outside the app for advertorial promotions to visit other app stores or the developer’s website. Developers enrolling in Google’s external offers program will incur initial acquisition fees ranging from 5% to 10% for auto-renewing subscriptions and ongoing service fees from 7% to 17% for other offers over the initial two-year period.
Moving forward, Meta, Amazon, ByteDance, and other gatekeepers are expected to take steps to ensure compliance with the DMA. Still in its early implementation phase, it remains uncertain how the DMA will impact the industry and customers. Advocating for a proportionate and unbiased approach to enforcement and compliance assessment, Daniel Friedlaender, Senior Vice President and Head of Europe’s Computer and Communications Industry Association, emphasized the importance of considering the diverse nature of gatekeepers and the practicalities of their services. Friedlaender cautioned against adopting a one-size-fits-all approach to DMA compliance, insisting that tech firms should retain the ability to differentiate themselves from competitors to uphold innovation. Failure to do so could lead to services becoming more homogenous or forced to relinquish distinctive features.
As the tech industry navigates the complexities of complying with the DMA, stakeholders are urged to adapt to evolving regulatory frameworks while striving to maintain competitive and innovative digital ecosystems.