Big Tech has a chance to put things right with Europe

Europe’s Digital Markets Act is the region’s latest salvo in its crackdown on big tech. Expect tough enforcement and more action if nothing changes.

European politicians agreed late Thursday on the details of a sweeping regulation of so-called gatekeepers that will reshape companies like Google and Facebook,

FB 1.02%

Apple AAPL 0.37%

and Amazon AMZN 0.69%

operate in the European Union. The law comes into effect six months after a final round of approvals expected shortly.

It applies to large companies that operate a “core” platform – such as an app store, marketplace, social network, cloud or advertising service – in at least three EU countries. The company has to serve more than 45 million EU users monthly and 10,000 business users and a market capitalization of over 75 billion euros, equivalent to 83 billion US dollars, or an EU turnover of more than 7.5 billion euros over the last three years exhibit.

The law aims to ensure that gatekeepers do not use their market power to prevent competitors from accessing their own users. It provides a list of do’s and don’ts, including a requirement to use messaging apps with other services and a ban on preferential treatment for a platform’s own product, service, or payment tool. Rule breakers can be fined up to 10% of global sales, and repeat offenders even up to 20%.

If that sounds punitive, that’s intentional. EU officials created the rules because they were frustrated that their antitrust cases couldn’t stop digital giants from doing things they believe hinder competitors. Tech companies have adjusted some practices, but European regulators see most changes as complying with the letter of the rulings, not the spirit.

The Justice Department is investigating the largest technology companies in the United States for allegedly monopolistic behavior. About 20 years ago, a similar case threatened to destabilize Microsoft. WSJ explained.

US tech companies were sufficiently concerned about the law to lobbied massively, but ultimately unsuccessfully, against it. Many of their concerns about the rules go unspoken. Meanwhile, work continues on the Digital Services Act, a related set of rules covering illegal content, disinformation and advertising.

Apple, Facebook, Google and Amazon all have significant sales in Europe. They have little choice but to abide by the new rules, but can choose to implement them to a minimum or maximum. The former route might delay some of the more costly impacts, but it would also likely anger EU officials and lead to another crackdown.

A package runs through a fully automatic scanner system in Amazon’s logistics and distribution center in Germany.


Photo:

Friedemann Vogel/Shutterstock

Microsoft‘S

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The European cartel fight in the early 2000s provides an instructive example. For years, the software giant has rejected EU arguments that it has dominant market power that limits others’ ability to compete. Things only settled down when the company started acting like it believed European officials were right. Whether or not Microsoft had a real change of heart or a lesson in realpolitik, the crackdown ended — although the company could also potentially be considered a gatekeeper under the new rules.

Today’s tech giants might also opt for a forgiving approach. That might mean a slightly bigger hit, but it would come with the chance of a lasting ceasefire with the EU. With other countries following the bloc’s example on technology regulation, relaxation in Europe could prove valuable globally.

While the new rules are strict, they also offer the tech giants an opportunity to reshape their relationship with a key regulator. Otherwise the hits will probably keep coming.

write to Rochelle Toplensky at rochelle.toplensky@wsj.com

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https://www.wsj.com/articles/big-tech-has-a-chance-to-patch-things-up-with-europe-11648207997?mod=rss_markets_main Big Tech has a chance to put things right with Europe

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