EU Enforces DMA, Forcing Open Ecosystems

- Under the Digital Markets Act, designated "gatekeeper" companies must adhere to a list of "do's and don'ts," such as allowing third-party interoperability and providing business users with access to their data. Prohibited actions include ranking their own products more favorably than those of third parties and tracking end-users for targeted advertising outside their core platform without explicit consent. - To be designated a "gatekeeper," a company must have an annual turnover of at least €7.5 billion within the EU, a market capitalization of €75 billion, and provide a core platform service in at least three EU countries to a minimum of 45 million active monthly end-users and 10,000 active business users per year. As of May 2024, the European Commission had designated seven gatekeepers: Alphabet, Amazon, Apple, ByteDance, Meta, Microsoft, and Booking. - The Digital Services Act imposes stricter obligations on "Very Large Online Platforms" (VLOPs) and "Very Large Online Search Engines" (VLOSEs)—those with over 45 million users in the EU. These platforms must conduct risk assessments concerning the dissemination of illegal content, fundamental rights, public security, and well-being. - The DSA's targeting of "addictive design patterns" is a direct challenge to the engagement-based business models of many platforms. The European Commission has specifically cited features like infinite scroll and algorithmic recommendations as potential systemic risks to mental health, particularly for minors. - Non-compliance with the DMA can result in fines of up to 10% of a company's total worldwide annual turnover, with the possibility of increasing to 20% for repeated infringements. For systematic non-compliance, the Commission can impose structural remedies, such as forcing the divestiture of parts of a business. The DSA allows for fines of up to 6% of global annual turnover. - The EU's digital regulatory push is a core component of its broader International Digital Strategy, which aims to promote a rules-based global digital order aligned with European values. This strategy focuses on shaping international standards in areas like AI, 5G/6G, and secure digital infrastructure through global partnerships and cooperation. - These regulations have significant geopolitical implications, with critics arguing they disproportionately target U.S. tech companies, potentially creating a vacuum that Chinese competitors could fill. Five of the first six designated gatekeepers were U.S.-based, while only one, ByteDance, was Chinese. Some analysts suggest this could handicap Western firms in their global competition with China's state-supported tech companies. - The compliance timeline is staggered; the DMA became applicable on May 2, 2023, and designated gatekeepers had six months from their designation date to comply, with the first deadline being March 2024. The DSA became fully applicable on February 17, 2024, but VLOPs and VLOSEs had to comply with their specific obligations four months after their designation.