European Union Parliament regulators reached agreement on a package of laws aimed at curbing anti-competitive practices by tech companies on Thursday evening.
The Digital Markets Act would open up so-called “walled gardens,” ecosystems of linked software and hardware. To that end, the legislation would prohibit tech companies from privileging their own services, i.e. Apple could not set Safari as the default browser on a new MacBook.
“What we have learned over these years is that we can correct in specific cases, we can punish illegal behavior. But when things get systemic, we also need regulation,” said Margrethe Vestager, the European Commissioner for Competition, who has led EU antitrust enforcement since 2014, which is tougher than the United States.
The law targets companies with a market capitalization exceeding 75 billion euros or annual revenues within the EU, such as Google, Meta, Apple and Amazon, as well as Chinese tech giants that operate in the European continent. like e-commerce titan Alibaba.
Apple, which is worth $2.85 trillion at press time, said CNBC“We believe deeply in competition and creating thriving competitive markets around the world,” but said the legislation would create “unnecessary privacy and security vulnerabilities and “prohibit us from charging for intellectual property.” Google, Meta and Amazon did not immediately release statements.
Violations could result in penalties of up to 10% of annual global revenue, or even 20% for repeated violations, huge sums for such large companies. Apple, for example, has made $50.3 billion in sales in Europe in 2018 alone, with an operating profit of $14.4 billion.
“If there is systemic misbehaviour, if there are entrenched positions, then we need regulation. For companies that act as gatekeepers, the Digital Markets Act will now set the rules of the game,” Vestager said.
The Digital Markets Act would also specifically require tech giants to enable greater interoperability between their own messaging services and those of their competitors. The result could work more like texting protocols than Apple’s iPhone-only iMessage. The rules are not final, as EU members have yet to vote in favor of their adoption, although that seems likely. If adopted, they will come into force in October.
Andreas Schwab, German Member of the European Parliament, noted, “The Digital Markets Act ends the ever-increasing dominance of Big Tech companies. Now, Big Tech companies must show that they also enable fair competition on the Internet.