EU Regulators Agree to Rein in Big Tech’s Walled Gardens

EU Regulators Agree to Rein in Big Tech’s Walled Gardens
Image: FRANCOIS WALSCHAERTS,JOEL SAGET, Getty Images

Regulators in the European Union’s Parliament reached an agreement on a package of laws aimed at curtailing technology companies’ anti-competitive practices late Thursday.

The Digital Markets Act would open up so-called “walled gardens,” ecosystems of linked software and hardware. To that end, the legislation would prohibit technology companies from conferring preference on 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 behaviour. But when things become systemic, then we need regulation as well,” said Margrethe Vestager, the European Commissioner for Competition, who has led the EU’s antitrust enforcement since 2014, which is more stringent than that in the United States.

The act takes aim at companies with market capitalizations above €75 billion or annual revenues within the EU, such as Google, Meta, Apple, and Amazon as well as Chinese tech giants that operate on the European continent like ecommerce titan Alibaba.

Apple, which is worth $US2.85 ($4) trillion as of press time, told CNBC, “We believe deeply in competition and in creating thriving competitive markets around the world,” but said the legislation would create “unnecessary privacy and security vulnerabilities and would “prohibit us from charging for intellectual property.” Google, Meta, and Amazon did not immediately issue statements.

Violations could carry penalties as high as 10% of annual global revenues or even 20% for repeated infractions, massive sums for such high-value companies. Apple, for example, did $US50.3 ($70) billion in sales in Europe in 2018 alone, with an operating profit of $US14.4 ($20) billion.

“If there is a systemic misbehavior, if there are entrenched positions, then we need regulation to come in. For companies that play the role as gatekeepers, now the Digital Markets Act will set the rules of the game,” Vestager said.

The Digital Markets act would also specifically force tech giants to allow more interoperability between their own messaging services and those of competitors. The result could operate more like SMS texting protocols than Apple’s iPhone-only iMessage. The rules are not final, as the members of the EU must still vote in favour of adopting them, though this appears likely. If passed, they would be go into effect in October.

Andreas Schwab, a German member of the European Parliament, said, “The Digital Markets Act puts an end to the ever-increasing dominance of Big Tech companies. From now on, Big Tech companies must show that they also allow for fair competition on the internet.”