In March 2022, the Digital Markets Act (“the DMA”) was approved by the European Parliament to limit the power of the large tech companies in the digital economy, known as “gatekeepers”. The gatekeepers are Alphabet, Amazon, Apple, Byte Dance, Meta, and Microsoft. DMA strives to ensure “contestable and fair markets” and make it safer for users in the digital markets.
On March 6, 2024, the six-month compliance period finally came to an end, which means all gatekeepers are now obliged to comply with the DMA’s requirements and submit comprehensive compliance reports. According to the defined obligation under DMA, the gatekeepers shall “do” the following:
(a) allow third parties to interconnect or connect their products with the services provided by the gatekeepers in certain specific situations;
(b) allow their business users to access the data that they generate through their use of the gatekeeper’s platform;
(c) offer tools and data to advertisers and publishers to carry out independent verification of their advertisements that are displayed on the gatekeeper’s platform; and
(d) permit business users to advertise their offerings and conclude contracts with their customers outside the gatekeeper’s platform.
In contrast, the gatekeepers shall “not do” the following:
(a) give preferential treatment to their services over the third-party providers on their platform;
(b) limit or control the ability of the users to interact with businesses that are not part of their ecosystem;
(c) prevent users from uninstalling any pre-installed app; and
(d) tracking the end-users to show them personalized advertisements.
As such, the EU Commission will conduct a market investigation against gatekeepers to ensure there is no systematic infringement of the DMA. Failure to comply can result in hefty fines or non-financial remedies, for instance, the divestiture of a business or being banned from operating within European borders.
Among others, the European Union will focus on Apple and Google’s new fees, terms, and conditions for app store developers. Moreover, the EU will scrutinise the Meta Platforms’ proposal to charge users a monthly subscription fee for accessing Facebook and Instagram without advertisements. Recently, Apple has been fined by the EU Commission for €1.8 billion due to its blocking music streaming apps from informing users of cheaper deals. It is worth noting that the shares of Apple and Alphabet fell as much as 3.8% and 1.2% in trading, respectively, on 21st March 2024.
Furthermore, the advertising provisions in DMA aim to create a more competitive environment between the gatekeepers and their commercial users so that advertisers and publishers can have access to essential data and compare the performance of various advertising platforms.
Certainly, the use of artificial intelligence (“AI”) in advertising is beneficial in terms of efficiency and targeting. The Parliament approved the Artificial Intelligence Act in December 2023 to ensure safety, ensure compliance with fundamental rights, and support innovation and SMEs (see the previous article). However, the use of AI is a “dual-edged sword”, in which there is a risk of entrenching the market power of platforms that can leverage certain technologies effectively. In other words, it is difficult for smaller or less tech-savvy companies to compete in the digital market as they are not able to keep up with the big tech. Previously, RWC has written about the EU’s Artificial Intelligence Act. The article can be found here.
As such, the DMA’s advertising provisions hugely impact the gatekeepers, who shall provide unrestricted access to advertisers and publishers in terms of their pricing and remuneration structures, as well as performance measurement tools. All data provided must be accessible and free of charge unless it is for additional services that need specialised analysis and the information requests are deemed to be excessively burdensome. Unfortunately, the provisions are designated for Big Tech companies that provide a core platform service (“CPS”). Even though generative AI does not fall under the category of CPS, the EU Competition Circles suggest that DMA’s scope might be extended to cover generative AI in due course, in line with the recent Artificial Intelligence Act and the Commission’s Call for Contribution.
In short, DMA has stopped Big Tech from abusing its market dominance, which leads to greater innovation, competition, innovation, and transparency. Even though DMA has a highly technical regulation, the EU Commission shall continue reviewing AI applications for consumers as they carry significant pro-competitive potential in the digital market, which can be a driver of innovation and competition.
Kindly find the link to the latest news on Digital Markets Act.
The Parliament and Council of the European Union’s Artificial Intelligence Act can be found here.
