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European Parliament agrees to tougher rules for tech companies

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Status: 05.07.2022 18:32

Going forward, US internet companies such as Alphabet, Amazon and Apple will be more strictly regulated in the European Union. The aim is fair competition – German medium-sized companies in particular could benefit from this.

By Thomas Spinnler, tagesschau.de

The European Parliament has issued stricter rules and regulations for US internet companies. Critics of the business practices of US tech giants and especially companies that want to succeed in digital markets are pinning high hopes on the two laws passed today.

The Digital Services Act (DSA) particularly focuses on the consumer side and content level. Among other things, it regulates the obligations of digital services that act as intermediaries and allow consumers to access goods, services and content. Topics such as misinformation, hate speech and illegal content are also addressed in the DSA. It is also significant that in the future platforms will have to disclose the most important parameters of their recommendation algorithms.

Allow fair competition

The Digital Markets Act (DMA) focuses on competition and business. Since only a few companies such as Amazon, Alphabet, Meta, Microsoft or Apple determine digital markets as so-called gatekeepers and dominate with their enormous market power, the aim of the law is to enable fair competition and reduce barriers to market entry. Due to their special characteristics and their disruptive power, digital business models would not only change everyday life, but also markets and economic power relations, according to the Federal Ministry of Economics.

Gatekeepers are digital platforms with a strong market position that achieve a turnover of more than 6.5 billion euros per year or reach a market value of 65 billion euros. They must also have more than 45 million monthly users and more than 10,000 commercial providers in the EU.

This is regulated by the “Digital Markets Act”

For example, it was decided that messaging services such as WhatsApp and iMessage should open up to also receive messages from other apps, which is called interoperability. Business users should also have access to their data on the gatekeeper platform. In the future, it will no longer be possible for large companies to rate their own services or products better than those of their competitors.

Additionally, users can no longer be prevented from easily uninstalling pre-installed software or apps or using third-party apps and app stores. Finally, gatekeepers can no longer use users’ personally identifiable information for targeted advertising purposes unless they consent. DMA violations can result in fines of up to ten percent of annual sales. With the DSA, up to 6% can be due if regulations are not followed.

More “Wild West Ways”

In recent years, technology companies have created and dominated markets with disruptive practices and technological innovations. Given the enormous speed of technological innovation, regulations and legal provisions could hardly play a role. Wild West methods have taken hold in the digital world, with the biggest and strongest setting the rules, says Christel Schaldemose, rapporteur for the Digital Markets Act (S&D, Denmark). Even EU antitrust proceedings with multi-billion fines for violation of competition law, for example against Google, had not changed much in the end.

The DMA should enable competition by also giving small businesses the opportunity to participate, said Monika Schnitzer of the Ludwig Maximilian University of Munich as an expert on the DMA before the Economics Committee of the Bundestag.

Really more competition?

Will DMA be a game-changer for small businesses? Andreas Schwab (EPP, Germany), also rapporteur for the Digital Markets Act, is certain: “The Digital Markets Act (DMA) puts an end to the business practices of large digital companies.” With the DMA, the EU puts an end to the game of cat and mouse in which competition authorities have fallen behind digital giants in lengthy procedures.

“Clear regulation of the digital economy is a necessary step”, comments Hildegard Reppelmund, lawyer at DIHK tagesschau.de. This affects not only the gatekeepers themselves, but also the users of these platforms. “In addition to consumers, there are also companies that offer goods or services on platforms, for example.” The question of whether the regulation really leads to more competition in the use of data is completely open, Reppelmund qualifies. “The DMA is just a first attempt to do justice to the challenges of the digital economy in the legal and digital jungle.”

Digital economy characterized by medium-sized companies

It is often forgotten that the digital economy in Germany and Europe is characterized by medium-sized companies, emphasizes Patrick Haeuser of the Federal Association of IT SMEs (BITMI) in an interview tagesschau.de. Of the 10,000 digital platforms in Europe, 9,000 are operated by small and medium-sized enterprises. Due to the dominant position of large digital groups, digital innovations would be slowed down in this country in the medium term.

“From the perspective of IT SMEs, DMA is an important step because it finally makes competition fairer for the best possible digital solutions and products with a whole set of new rules,” says Häuser. “So that also means strengthening our national digital economy as a whole.”

Haeuser says that for a self-determined digital transformation, it is crucial that one’s own technological skills are strengthened and that dependence on tech giants is reduced: “But this is only possible if we promote the development of digital business models in Europe. Modern competition The law, as it is being created by the DMA, is an important prerequisite for this.”

New business models

From BITMI’s point of view, mid-sized digital companies can particularly benefit: “In the field of messaging services, large providers must now open up to smaller competitors in order to ensure interoperability. This can result in new business models for service providers who previously had no chance in the market.”

The fact that powerful gatekeeper platforms no longer offer their own services with unlimited preference in order to bind users even more strongly is also positive. “Small and medium-sized digital businesses benefit from this, as they gain visibility and can thus be more competitive,” concludes Hauser.

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Source www.tagesschau.de

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