Digital Markets Act clears an important hurdle, despite GAFAM lobby efforts

  • The European Parliament Internal Market Committee (IMCO) has voted today on the Digital Markets Act, the new EU proposal on competition in digital markets.

  • DIGITAL SME congratulates the Committee on an ambitious text, which takes the concerns of small and medium-sized enterprises (SMEs) seriously.

  • The legal proposal addresses important issues, such as the access of business users of platforms to their end customers, the uses of data, and restrictions to self-preferencing and bundling.

The Digital Markets Act has made an important step forward this morning. The Internal Market Committee (IMCO) of the European Parliament has agreed on a final compromise text. Thus, the legal proposal is on track to be voted in the European Parliament Plenary in Strasbourg on 13 December.

As a reminder: the Digital Markets Act will set new rules for large online platforms, including social media and marketplaces. It will ensure fairness for (business) users who depend on important entry points, such as app stores and operating systems, provided by so-called ‘gatekeepers’ (like Google or Apple), to offer and access digital products and services. In addition to the ‘core platform services’ (for instance, search engines, social networking services or messaging services) originally defined by the European Commission, the European Parliament Committee has voted to include web browsers, virtual assistants, connected TV in the scope of the law.

As a voice of small and medium-sized enterprises in the digital sector, the European DIGITAL SME Alliance is congratulating the Internal Market Committee (IMCO) of the European Parliament on an ambitious text. “We believe that the European Parliament’s leading committee has done a great job negotiating this file, and has taken the concerns of small and medium-sized enterprises seriously. It is important that the vote in the Plenary in December will be successful, and that the Member States will build on the work of the European Commission and Parliament and successfully complete this procedure in 2022.” says Dr Oliver Grün, President of the European DIGITAL SME Alliance.

The Committee and Andreas Schwab, the person in charge of the file (so-called “rapporteur”), have reached a compromise among the different groups in the European Parliament, which meets the expectations of small and medium-sized enterprises (SMEs). To prepare the vote, the leading committee on the file (IMCO) has integrated suggestions from the different political groups and committees providing input on the file, such as the ECON, ITRE, LIBE, TRAN, JURI and CULT committees.

What do we think about the compromise text?

Overall, we think it is an ambitious text that will contribute to fair and competitive digital markets. In line with what we have asked, the law is limited to large platforms only – with thresholds set even higher than originally proposed (€8 billion turnover instead of €6.5 billion, €80 million market capitalisation instead of €65 billion). The thresholds were increased to “make sure that the European Commission can act at the same level as gatekeepers”, Andreas Schwab said in a press conference. The legal proposal addresses important issues, including the access of business users of platforms to their end customers, the uses of data, and restrictions to self-preferencing and bundling.

Ahead of the Plenary vote in the European Parliament in December, there may still be room for a few improvements. Together with a group of technology firms, DIGITAL SME has continuously been asking for three key improvements to the original text proposed by the European Commission:

  • An extension of the interoperability provision to all core platform services to improve efficiency for SMEs and make it easier for companies operating in Europe to compete with gatekeepers.

—> The text voted in IMCO today focuses on interoperability for so-called ‘number-independent interpersonal communication services’, which would likely include messaging services, such as WhatsApp or Messenger, and for social network services. This is a first good step to limit gatekeeper power and to curb network effects that keep users locked in. However, interoperability for other core platform services should be considered in the future, given the rise of connected devices in our offline environment.

  • The introduction of an explicit ban on pre-installed apps and default settings, thus allowing users to choose their own core services such as email, search and messaging apps.

—> The text voted in IMCO allows users to uninstall apps and to change their default settings easier is a welcome step. In its current form, the text does not ban defaults. This may be a missed opportunity, as the default settings of a device are very powerful: 95% of users never change the default settings of their smartphones. This is especially critical for smartphones as they are now the main gateway to the Internet for most users.

  • The widening of the ban on bundling services with operating systems, to also include ancillary services. This, for instance, could ensure that platforms like Android or iOS will no longer be able to force users to sign up for additional Google and Apple products.

—> The European Parliament has even gone beyond the original proposal by the European Commission and introduced stringent measures on bundling.

Following the vote in the European Parliament on 13 December, the torch will be passed on to the Member States, who will discuss and vote on the proposal in the Council of the EU throughout the next months. According to Andreas Schwab, the aim is to ensure that the Digital Markets Act will be finally adopted by the Council and the European Parliament in 2022, and enter into force by November 2022 or January 2023.

Myth-busting

Throughout the preparation of the legislative act, many different stories and interpretations around the DMA have been brought forward, some of which are simply not true. Therefore, we try to provide some myth-busting to counter some of the claims.

The Digital Markets Act is protectionist

Some have argued that the Digital Markets Act is only targeting US-based companies and is therefore protectionist. Here, however, it is important to note that in the US itself, several important bills are in the making, which addresses exactly the same issues that have been raised in the European context.

Large platforms help SMEs

Large players such as Amazon and Facebook have been running campaigns showing to what extent their platforms help SMEs. While selling online and reaching customers is certainly key, this does not mean that large platforms are the only way for SMEs to do so, and that they should be considered the only way. Being dependent on those large platforms holds enormous risks for society but also for the businesses themselves when it comes, for instance, to independently managing their engagement with their customers. Furthermore, statistics about how SMEs reach their end customer show that selling via their own websites and apps is still more important than platforms.

The Digital Markets Act may harm privacy

The Digital Markets Act aims to make closed ecosystems more open. Some argue that this may be at the cost of privacy. However, a large platform’s business model is mainly built around collecting as much data as possible about their users. A more open environment, built on interoperability, would allow users to opt for more privacy-friendly alternatives. In the long run, competition in digital services and products can help to open the path for more privacy-friendly solutions.

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