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Leash the Beast

What is the Digital Markets Act? And what could it all mean?

The Blogfather wades into and dissects the potentially huge impact that the Digital Markets Act could have on the EU, huge tech companies and businesses, ably assisted by Andrew “ASD” Spurrier-Dawes.

The act is a set of landmark digital rules designed to rein in the power of online “gatekeepers” such as the ‘duopoly’, Google and Meta.

At the end of last month, an agreement with potentially huge ramifications was reached, in principle, that seemed to slip under the industry radar.

But luckily the Blogfather has a fair few look outs and informants kicking about whose identity he always protects, and one of these (Andrew Spurrier-Dawes) tipped me the wink on the European Union reaching an agreement on the wording of the Digital Markets Act.

Now, it's no understatement to say that if this act comes into effect (admittedly still a big-ish if), the impact could blow the Richter scale.

The act is a set of landmark digital rules designed to rein in the power of online “gatekeepers” such as the ‘duopoly’, Google and Meta (or Facebook, to everyone but Facebook themselves). The EU claims the regulation will allow for more competition, more innovation and more choice for users. Andreas Schwab, of the EU Parliament’s Internal Market and Consumer Protection Committee, explains:

“The Digital Markets Act puts an end to the ever increasing dominance of Big Tech companies. From now on, they must show that they also allow for fair competition on the internet. The new rules will help enforce that basic principle.”

To delve a bit deeper into what the EU has revealed so far, the act includes a number of eye-catching measures that could shake up the way big tech companies operate:

  • Companies would not be allowed to rank their own products or services higher than those of others in online search results or reuse data collected from different services.

  • Tech companies would face tighter restrictions on using people’s data for targeted online ads, so for example a user’s personal data cannot be combined for targeted ads unless “explicit consent” is given.

  • Targeting concerns that apps have become walled off from one another, so messaging services and social media platforms must work with each other to avoid the domination of a few companies that have already established big networks of users. That opens up the possibility, for example, of Telegram or Signal users being able to exchange messages with WhatsApp users.

In seeking to police these laws, and preventing the biggest tech firms from dominating digital markets, the EU will use the threat of fines or even the possibility of a company breakup. Anyone caught breaking these will be fined up to 10% of their annual global turnover and up to 20% for repeat offenders. That’s a fair wedge in anyone’s ledger.

What is meant by “gatekeepers” exactly? They are defined as companies with a market capitalisation of at least €75bn, with at least 45 million monthly users, and a “platform” like an app or social network. So this definition captures all the usual suspects of big boys like Amazon and Apple, but also relatively smaller sites like Booking.com.

Some people are sceptical that the Act, in reality, will be capable of keeping these companies in check.

For all that this is clearly a potentially bloody massive piece of digital legislation, it is very curious that the advertising and marketing industry’s media have barely said a word on it. The Drum, Campaign and Marketing Week don’t have so much as a single article on the subject (at the time of writing, website word searches revealed nae articles, captain).

Of course, this may be because it is all subject to sign off by some big wigs in the EU, but surely it’s newsworthy? The Drum, for example, currently has a ‘Deep Dives Digital Advertising Focus’ all over its home page. Odd they don’t talk about this then. Ah, but some of those articles are sponsored. Maybe that’s the clue. Don’t cover any news that may potentially be bad news for people you are in bed with eh?

The intent and reasons behind why reining in the power of these digital global behemoths will be a good thing are clear, but some people are sceptical that the Act, in reality, will be capable of keeping these companies in check.

One such person is Dr Johnny Ryan*, who was moved to take action, alongside other competition and privacy leaders, to draw up a letter urging the EU to make urgent amends to the Act’s wording. Dr Johnny and others have identified a fatal flaw in the language (Article 5(1)a to be precise) that will render the Act largely useless by enabling Big Tech firms to undermine data protection and competition. If you have a head for all things law, you can read the full letter here.

Outside of legal loopholes, the reality of policing this Act globally, especially when it comes to the vast ‘duopoly’ of Google and Facebook, is equally a huge concern. …Gasp! founder, Giles Edwards, makes this point with a perfect analogy that also triggers some memories for The Blogfather of a Costa del Sol holiday that suddenly took a turn for the worse:

“One of the big problems the police have with high-end drug cartels, is resource. Or relative resource. The gulf between them, the criminals, and those responsible for enforcing the law is never more evident than in a straight out race at sea. Drug traffickers versus police. High-octane, expensive, speed boats versus relative tug-boats. Chugging in chase. Now, I’m not comparing the big digital duopoly (Meta/Facebook & Google) to known criminals. But I’m not not either; let’s not pretend they don’t have form. What I am highlighting, is the resource available to keep these two (et al) in check, may not be sufficient. So whilst I applaud this Act’s intent, loudly, as I did GDPR’s (and we know what happened there), and whilst I hope it is enforced effectively, I fear that in reality these big slippery fish will wriggle free.”

Obviously, the tech companies themselves are somewhat unenthusiastic.

Apple said it was concerned that parts of the Act “will create unnecessary privacy and security vulnerabilities for our users while others will prohibit us from charging for intellectual property in which we invest a great deal”.

Google said it will study the text and work with regulators to implement it. “While we support many of the DMA’s ambitions around consumer choice and interoperability, we remain concerned that some of the rules could reduce innovation and the choice available to Europeans.”

Facebook said nothing, as they were presumably too busy frantically and retrospectively labelling posts promoting bioweapons conspiracy theories. Or similar.

The European entrepreneurs who got through Covid will not be thanking the legislators when media costs become untenable.

Yet even from a more impartial view point, there is still concern. Between both the DSA (Digital Services Act) and DMA (Digital Markets Act) there is a lot of European legislation that will impact large tech. Businesses built on and into this web will find it hard to remain viable and so will suffer. There is also set to be a vast amount of unanticipated collateral damage. As one commentator said on LinkedIn: “The early stage investment thesis of entire sectors is about to be put into question. The European entrepreneurs who got through Covid will not be thanking the legislators when media costs become untenable...talk about knocking a man when he is already down."

One of the few cool dudes to pick up the torch of enlightenment on the subject of the Digital Markets Act is, as alluded to earlier, Andrew Spurrier-Dawes, EMEA Head of Precision, Wavemaker.

So much so that he has published an article for WARC on the subject.

Dare I say, even in these times of rising living costs, it’s worth pushing a few pence through the slot in the digital paywall (or get access to someone’s/an agency’s WARC login, but you didn’t hear that from me, kapish?).

I’m going to dangle a tempting carrot in front of you and offer a little cheeky peek through a crack in said paywall so you can read what Andrew thinks this act could mean specifically for one of the big boys, Amazon:

“The big one for Amazon will be the pricing rulings, where businesses must be allowed to offer products or services to customers in other marketplaces at different prices. Amazon’s pricing policy focuses around customer trust, where a seller can be removed from the platform if they offer prices that are significantly higher than those found off-platform. In the past, this has led to Amazon being sued for anti-competitive practices, and for allegedly forcing sellers to offer their lowest prices on Amazon first. If businesses no longer have to offer the lowest price on Amazon first, they may look to other, more competitive or specialist marketplaces first, which could impact the user volumes and experience on Amazon.”

So what are the next steps for businesses and brands? Sometimes you have to exit stage left and make way for someone who knows their digital and tech onions better than you, so here is ASD with some succulent nuggets of advice for the future:

“I feel this really pulls apart the connective tissue of the companies. Anyone with business online, advertising or otherwise, needs to take notice as this will impact them. Even if their business is not a core platform service, they will certainly be using a product that is, and so need to prepare for the change in the commercial environment that the DMA will bring about. Brands will also need to make sure they understand the interplay and are compliant with the competition and regulatory initiatives within the EU and at a global level.”

You may have to delve a bit deeper into mainstream media to find it when the time comes, but keep your eyes peeled for if and when this Act comes into law. And be ready.

*Many thanks to the legend Bob Hoffman for pointing me to the work and newsletter of Dr. Johnny Ryan. Bob has his own wonderful newsletter that you can subscribe to here.

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