Key Contact: Ronan Dunne – Partner
The long-running saga that is European Commissioner for Competition Margrethe Vestager’s campaign against Big Tech looks set to ratchet up a notch in 2023.
This follows the EU’s recent entry into the forcing of new legislation called the Digital Markets Act, or DMA. The DMA seeks to address concerns regarding “fairness” in the digital economy and introduces a number of prohibitions and obligations on large tech corporations which qualify as “gatekeepers” , primarily in relation to the advertisement or distribution of products.
The rules are grounded in, and inspired by, the Commission’s competition case law. The main policy argument driving the DMA is that, notwithstanding the many billions of euros in fines that have been levied against tech monopolists in recent years, this has not been enough to deter anti-competitive behaviour.
Ms Vestager has admitted as much in interviews on the matter. She has described the DMA as part of the new rule book by which the tech titans, primarily from the US, must now abide. The Commission will shortly start the process of designating as gatekeepers certain providers of “core platform services”.
Given that the designation will only apply to entities with either annual turnover of at least €7.5bn in the EU in the past three years, or with a market valuation of at least €75bn, it’s clear that this designation will be focused on the likes of Google, Amazon, Facebook, Apple, and Microsoft. After the gatekeepers are designated, the relevant businesses will have six months to start complying with the DMA’s obligations.
The Commission sees the DMA as an important next step in helping to drive innovation in the digital market. In particular, the legislation is intended to facilitate smaller businesses in Europe and give them, at least in theory, a better opportunity to thrive by forcing Big Tech to discontinue practices which the Commission believes dampen competition and exploit customers.
One effect of the new laws will be the enforced opening-up of messaging protocols and platforms. This will mean that the likes of Apple Messages, WhatsApp, and Facebook Messenger will have to be interoperable with smaller, lesser-known messaging apps such as Telegram and Signal.
The DMA is also designed to give the Commission data on acquisitions by Big Tech of smaller companies, so that, in Ms Vestager’s words, “we can check whether a target is something that actually ought to scale independently”. This is expressly focused on stopping the phenomenon of “killer acquisitions” eliminating promising, but competing, innovation before it has an opportunity to take off.
While the Commission holds the power to enforce the DMA across the EU, there will undoubtedly be implications for Ireland given the proliferation of tech businesses headquartered here.
For example, enforcement action under the DMA may see EU officials conducting so-called “dawn raids” on Irish HQs, potentially in conjunction with the Irish Competition and Consumer Protection Commission, to gather evidence in relation to certain offences under the DMA.
In addition, Ireland could be a forum for litigation by private claimants seeking damages for infringements under the DMA, including third parties suing a gatekeeper for damages for allegedly harming them through an infringement of the DMA.
This is particularly the case given that many gatekeepers will have their EU operations structured through Ireland. Ireland is also well placed for litigation in this regard because of its common law system with a well-developed discovery regime that, in a post-Brexit world, is generally considered more plaintiff-friendly than the civil law systems applying in continental Europe.
The DMA comes at a time where the EU and the US, under the Biden administration, are seeking to rebuild better relations following the tensions encountered during the Trump presidency. The Commission has been open about the need for co-operation between the EU and US in dealing with the dominant position of online platforms and Big Tech.
Indeed, European Commission President Ursula von der Leyen has gone so far as to state that President Biden and the EU share the same position regarding the regulation of tech companies, and this is largely borne out in practice by the multiple competition investigations ongoing at federal and state levels in the US.
Closer to home, Ms Vestager’s work continues unabated. With ongoing investigations into Google, Facebook-owner Meta, and Apple, it is clear the Commissioner will have a full agenda in 2023. The DMA should provide an important additional tool in the Commissioner’s arsenal.