6 Ways the EU’s Digital Markets Act Will Change Big Tech

The European Union’s Digital Markets Act is coming, and Big Tech will never be the same. In theory.

The rules will be voted on by the EU parliament this week, but are widely expected to pass.

It’s important to remember that these rules apply to companies with a market cap of $90.7 billion, meaning Alphabet (Google), Meta (Facebook), Amazon, Apple, and a few others like Alibaba and Booking.com. So, the ban isn’t on using data profiling in ads targeting children, for example, but on the biggest tech companies doing it.

Here are some of the biggest ways Big Tech will have to change:

1.  Big Tech firms will be a lot more cautious — at least until the ways the rules are enforced becomes clear — as the fines are enormous: up to 20% of global revenue. With Facebook’s 2020 revenue coming in at $86 billion, that’s a potential $17.2 billion fine. That’s hard to explain to shareholders.

2. The DMA puts an outright ban on using data profiling in ads targeting children. While that sounds (and is) a lot weaker than the overall ban that had been discussed, it’ll have a far wider impact than the rules specify. Why? Simply put, it’s hard to figure out who’s a child, so companies like Google and Facebook that rely on profiling users to correctly target advertising may well extend these rules to all users by default. But, it also means they’ll put a lot more effort into profiling that shows a user is an adult. Which isn’t impossible. For example, if you have researched home mortgages, you’re unlikely to be a child.

3. The rules will ban “combining personal data for the purpose of delivering targeted or micro-targeted advertising” unless there is “clear, explicit, renewed, informed consent.” However, tech firms are masters of getting people to give consent by making it the path of least resistance. In other words, if a Facebook user wants to access a popular service they could be asked to consent to ad tracking. Virtually no one reads those pop-up terms and conditions statements, and even if declining doesn’t stop you from accessing a service, just asking will often succeed. However, the rules ban tricky terms and conditions, and the DMA also creates a new EU-wide enforcement agency that will be wise to those tricks. Still, Facebook will at least have to offer a way for users to opt out of tracking.

4. The DMA bans self-preferencing in search results, meaning Google won’t be able to make it easier to put its own products and services at the top of a search results page. One thing that means is that the tech giants captured by the rules may have to work harder to make their services better, advertise them more frequently and effectively, and fight off smaller competitors fairly. Which means small, nimble companies will have a better chance of becoming bigger. But competing with Facebook’s budget is still a tall hill to climb.

5. Messaging and social media will be less of a closed ecosystem as they will have to be interoperable. It’ll give smaller platforms more of a chance to become bigger ones. That said, WhatsApp has 2 billion users and Facebook Messenger 1.3 billion.

6. Apple will lose its control of the iPhone’s App Store, as consumers will be able to add apps by downloading them, and the 30% transaction commission may be hit harder by the DMA than by the Epic Games’ U.S. lawsuit, which was a mixed bag that did not include a finding that the App Store was a monopoly.