EU parliament adopts regulation targeting internet giants

European Parliament member Andreas Schwab delivers his speech during a debate on the Digital Markets act at the European Parliament in Strasbourg, eastern France, 14 December 2021. [JEAN-FRANCOIS BADIAS / POOL / EPA]

EU lawmakers adopted their version of the Digital Markets Act (DMA) in a plenary vote on Wednesday (15 December), formalizing their mandate to enter interinstitutional negotiations on this key piece of digital legislation with the European Council and Commission.

The Council adopted its position on the DMA last month and the three-way negotiations are expected to start in January.

“With this Digital Markets Act we are guaranteeing that at the time of digital communications, in the internal market a level playing field will prevail,” said Andreas Schwab, the leading negotiator for the file. “The best rather than the fattest should win.”

The DMA aims to introduce ex-ante obligations for tech companies that have acquired such a significant market power in key areas of the digital economy to play a ‘gatekeeper’ role between other businesses and users.

Scope

The parliament’s text raised the bar for designating gatekeepers to €8 bn in financial turnover and €80 bn in terms of market capitalization, under the insistence of Schwab.

On the other hand, progressive MEPs managed to expand the list of key digital services, which ranged from social media to search engines, to also include voice assistants, web browsers and connected TVs.

A narrower scope is likely to face resistance from the Council, which maintained the same thresholds as the initial proposal but might find support from Germany and the Netherlands as both countries host potential gatekeepers.

Similarly, other EU countries insisted the addition of new services should be based on ‘evidence’.

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Systematic non-compliance

Major changes were brought to the draft law by the Parliament’s economic committee (ECON) about systematic non-compliance. According to the final text, a gatekeeper that disregards the DMA obligations more than once might be sanctioned with a minimum of 4% to a maximum of 20% of the annual turnover.

Measures against killer acquisitions were also introduced, empowering the EU Commission to temporarily halt virtually any takeover from reticent gatekeepers.

“Startups don’t want to be bought off by five American companies,” said ECON rapporteur Stéphanie Yon-Courtin.

However, the plenary vote rejected an ECON amendment that would have obliged the gatekeepers to prove the takeover would not harm competition, as reversing the burden of the proof was deemed disproportionate by centre-right lawmakers.

Initial concerns were raised that measures against killer acquisitions might go beyond the legal basis of the proposal, but several parliamentary sources confirmed that the Commission actively contributed to shaping the article and was eventually convinced that text would stand legal review.

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Default settings

Yon-Courtin scored a major win by getting a key amendment through the plenary. The provisions would allow users to decide the default settings the time they first use a service, and to change them at any time, including by uninstalling pre-installed apps.

Smaller tech players have been calling for these measures as a key way to challenge the dominant position of dominant companies.

“Big tech knows 95% of people never change their defaults, making this an incredibly harmful form of self-preferencing. By banning self-preferencing defaults, the DMA is finally addressing the cause of the lack of competition and not just the symptoms,” said Proton CEO Andy Yen.

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Interoperability

Interoperability measures were another major addition to the Parliament’s text, requiring social media and messaging apps to communicate with each other. During the plenary discussion on Tuesday, lawmakers from right to left stressed interoperability as an important step to reduce dependency on the largest online platforms.

“By strengthening provisions on interoperability of messaging services and social networks, we can establish a market with more privacy-friendly services to choose from. We don’t need to get stuck in dominant social networks that monetise our data,” said MEP Marcel Kolaja from the Czech Pirate Party.

Concerns were raised that these measures should not jeopardise privacy and security, however, a last-minute amendment specifying that interoperability should not result in weakening data protection for users failed the plenary test.

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Despite a ‘gentlemen’s agreement’ between the main political groups in the European Parliament, a number of alternative amendments to the proposed Digital Markets Act (DMA) have been tabled ahead of the plenary vote due on 14-15 December, and more surprises might come later in the week.

Targeted ads

A more controversial point in the negotiations was a proposal for a ban on targeted ads pushed from centre-left MEPs and resisted from the centre-right. The compromise includes a ban only for minors and limits the processing of sensitive information such as political views, religious beliefs and sexual orientation.

“We do need to look after the weaker people in society, and minors, in particular, need protection,” said Social Democrat lawmaker Evelyne Gebhardt, exhorting Schwab to defend the measure in the upcoming negotiations, where strong resistance from member states is expected.

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Upcoming negotiations

The tighter scope, killer acquisitions, default settings, interoperability and targeted ads are all not part of the text the EU Council adopted last month, which is much closer to the initial proposal of the Commission.

Schwab met with French digital secretary of state Cédric O on Wednesday, to start discussing how to bridge the major differences between the two institutions. France will represent the member states in the negotiations as it will hold the EU Council Presidency in the first half of 2022.

“The challenge is making our rules something that can be enforced seriously, and cannot be challenged in court all the time,” Schwab told EURACTIV, adding that between the Parliament and Council “there is 100% agreement on what we want to achieve.”

EU ambassadors approve 'general approach' to Digital Markets Act

Ambassadors from the 27-member European Union unanimously adopted their “general approach” to the DMA on Wednesday (10 November), bringing several modifications to the European Commission’s proposal to rein in the dominance of big players on the EU’s digital market.

[Edited by Zoran Radosavljevic]

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