How the Changing Regulations for Big Tech will Impact your Business

By Manny Berhanu
on 5th July, 2022

In the opinions of various lawmakers across the world, “big tech” firms are gaining dominance a bit too quickly, and are obtaining too much influence over the world of business, abusing their strength to overpower smaller competitors, trap sellers under terms viewed as unfair, and removing the availability of choice from consumers.

The five big tech giants – Apple, Microsoft, Google (Alphabet), Meta, and Microsoft – brought in a combined $1.4 trillion in revenue in 2021. According to figures from the World Bank, if these companies combined to make a state, they would have ranked as the 12th largest country in the world with regards to GDP, ahead of the likes of Australia and only just below Brazil. As a result, certain lawmakers have recently introduced ways to hit back against their dominance.

One of the most significant changes has been introduced by the European Union which has announced the enforcement of the new Digital Markets Act (DMA). These regulations are set to have big impacts on various businesses, but how could your business be affected?

The Digital Markets Act

The act will levy a strict regulatory regime on big online platforms (so-called “gatekeepers”) and give the European Commission new enforcement powers, such as the capability to apply substantial fines and remedies for noncompliance. Lawmakers hope that it will thwart these gatekeepers from imposing unfair conditions on businesses and end-users and guarantee the openness of vital digital services. Those who will be subject to the DMA are companies that fit within the “gatekeepers” criteria.

The criteria to fit under the scope of the DMA:

A company that achieved an annual turnover in the European Economic Area (EEA) equal to or more than €7.5 billion in each of the past three financial years or a company with a market capitalization of at least €75 billion.
A company operating a core platform service with at least 45 million monthly active end users located in the EU or more than 10,000 yearly active business users.
A company that enjoys a long-term, entrenched position in its operations where it has met the above two criteria in each of the past three financial years.

“The gatekeepers will now have to comply with a well-defined set of obligations and prohibitions,” European Commission Executive Vice President Margrethe Vestager said. “This regulation, together with strong competition law enforcement, will bring fairer conditions to consumers and businesses for many digital services across the EU.”

Cédric O, France’s digital sector secretory, said: “These rules are key to stimulating and unlocking digital markets, enhancing consumer choice, enabling better value sharing in the digital economy, and boosting innovation. The European Union is the first to take such decisive action.”

So, what consequences will the “big tech” companies face and how will other businesses, including your own, be impacted?

Consequences

The likes of Apple, Microsoft, Google (Alphabet), Meta, and Microsoft, will be subject to several dos and don’ts. They will have to expand their services and platforms to other businesses, making the markets more open and contestable, and they will have to shoulder the extra responsibility of conducting themselves in a way that is deemed fair for these other businesses as well as consumers.

Ensuring there is freedom is a large fragment of the DMA’s obligations. Business users will be allowed to promote their product range and conclude contracts with their customers outside the gatekeeper’s platform. Additionally, tech giants must provide business users with access to the data generated by their activities on the gatekeeper’s platform.

In terms of the ‘don’ts’, other businesses will be less restricted and be able to contest on more of a fair ground with the tech giants. “Big tech” services will not be able to prevent or limit business users from competing with them on their platform and from raising any issues with any relevant public authority relating to any gatekeeper.

In Practice

Once the act comes into effect, the Commission evaluates which of those companies classed within the core platform services qualify as a “gatekeeper” under the DMA.

Companies will need to confirm if they meet the quantitative thresholds included in the DMA to detect gatekeepers. After that, they will have to pass that information on to the commission.
The Commission will then label those companies as “gatekeepers” that meet the thresholds in the DMA formulated on the information supplied by the companies.
Within six months after a company is acknowledged as a “gatekeeper”, it will have to conform to the “dos” and “don’ts” listed in the DMA.

Global Attitudes

This is not a regulation concentrated in only one part of the world, with nations in Europe and China leading the way. In recent months, China has been following this path too. In January, it announced plans to govern the way companies operate algorithms, specifically targeting the more successful and largest companies in the country. One of the main reasons for this is to allow the uncovering of more innovative companies and allow for their ideas to gain more traction instead of it being overshadowed by giant businesses who with their significant resources, copy its idea.

It is a similar story in European nations, such as the UK. The likes of Facebook and Google will no longer have a tight grip on algorithms and will allow smaller businesses to come into play. Chris Philp, UK Digital Secretary, said: “We want to level the playing field and we are arming this new tech regulator with a range of powers to generate lower prices, better choice, and more control for consumers while backing content creators, innovators, and publishers, including in our vital news industry.”

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Have the Tables Turned?

Over the years, tech giants have hardly seen any form of regulation, and this has allowed the biggest companies across the world to run digital space to their liking. But that now looks like it is about to change. The days of unlimited expansion, unrestricted acquisitions, and copying rivals’ models, along with privacy violations, could be about to end – which may bring a smile to faces of smaller companies trying to make their impact on the world stage.