The European Union’s Digital Markets Act (DMA) is a key piece of pending legislation aimed at regulating major technology players operating in the EU. The law establishes specific criteria to determine whether large platforms act as gatekeepers, then applies a set of rules to rein in anti-competitive behavior.
This article provides an overview of the DMA’s gatekeeper designation process, analyzes controversial near-designations during draft regulations, and examines arguments that strict EU tech regulations may undermine innovation.
Digital Markets Act: Overview and Gatekeeper Criteria
The Digital Markets Act was proposed by European Commission and approved by EU Parliament in 2022. It is due to take full effect starting in Spring 2023.
The legislation singles out large online platforms acting as “gatekeepers” between businesses and consumers. Specific quantitative thresholds determine which companies meet the gatekeeper criteria:
- Must have €8+ billion market cap or €80+ billion turnover in last 3 years
- Provide a core platform service like marketplaces, social media, search engines etc
- Have over 45 million EU users each month and 10,000+ business users
Services meeting these thresholds must then follow fair practices around data usage, interoperability, and allowing third-party access to their platforms. The European Commission can levy stiff fines up to 10% of revenues against non-compliant gatekeepers.
Initial Gatekeeper Designations Cause Controversy
During the public feedback process on draft DMA regulations in early 2022, a key issue was the initial designation of certain companies as gatekeepers.
The European Commission’s draft explicitly named Apple’s iMessage platform and key Microsoft services – Bing, Microsoft Edge browser, and Microsoft Advertising – as gatekeepers alongside more established Big Tech players like Meta, Google, and Amazon.
Both Apple and Microsoft disputed their gatekeeper designation:
- Apple claimed rules tailored for fair competition in free services don’t apply evenly to a paid service like iMessage
- Microsoft argued they lack sufficient market power in search and advertising to warrant gatekeeper status
Final Gatekeeper Designations
After extensive economic impact assessment and consultation with key stakeholders, EU regulators ultimately backed down from explicitly naming iMessage or Microsoft’s services as DMA gatekeepers in the final legislation.
The list of companies meeting current thresholds now focuses more narrowly on big players like Amazon, Apple’s App Store, Meta, and Google.
So for now, Apple iMessage, Microsoft Bing, and other services avoided designation. But they remain at risk if market positions evolve to clearly meet gatekeeper criteria in the future.
Do Stringent Regulations Undermine Innovation?
While the EU feels strongly about enforcing fair digital markets, some have argued strict regulations like the Digital Markets Act may backfire.
Imposing overly burdensome obligations around interoperability, data usage, and access rights could discourage investment and innovation, critics suggest. Startups may balk at launching in such a restrictive environment.
However, the European Commission’s impact assessment found the overall economic gains from stimulating competition outweigh compliance costs of new rules. And special allowances exempt emerging competitors and smaller EU players from the toughest requirements.
Striking the optimal balance remains a work in progress – but the goal is balancing innovation now with safeguarding consumer interests long-term.
Upcoming DMA Reviews
Importantly, built-in DMA review processes allow reevaluating rules down the line. Reviews must occur within 2 years and every 3 years after that.
So future policy updates could tweak interoperability obligations, enforcement, or fine amounts if regulation starts to significantly curb EU digital development and innovation over time.
Takeaway: Fluid Rules Open to Regular Revisions
The EU’s Digital Markets Act shows policymakers taking legitimate concerns around fair competition and access seriously with a flexible framework.
Establishing fluid digital markets rules subject to recurring review strikes a balance between promoting innovation and preventing abusive behaviors from emerging gatekeepers.
With future tweaks expected, the DMA takes a measured approach that neither gives Big Tech free reign nor clamps down indiscriminately on progress.
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