The names of the Digital Services Act and the Digital Markets Act of the European Union are not by coincidence: They were conceptualized jointly and jointly offered as a dual package of digital policy improvements at the end of 2020. By the middle of 2022, both regimes had received overwhelming approval from EU MPs, and by the beginning of 2024, they were operational. Even while each law uses a different set of regulations to accomplish various goals, they are all meant to counteract the market dominance of Big Tech.
Legislators are primarily concerned about the perception that large digital platforms have neglected consumer welfare in their haste to increase revenues on the internet. The EU also believes that the competitiveness of the bloc is being undermined by dysfunctional digital marketplaces, as a result of issues
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DSA vs. DMA: The Impact of Europe’s Dual Digital Regulations on Big Tech
Natasha Lomas August 3, 2024, 6:00 AM PDT Comment
hammering brickwork into piecesPicture Sources: Getty Images / Colin Hawkins(opens in a new window)
The names of the Digital Services Act and the Digital Markets Act of the European Union are not by coincidence: They were conceptualized jointly and jointly offered as a dual package of digital policy improvements at the end of 2020. By the middle of 2022, both regimes had received overwhelming approval from EU MPs, and by the beginning of 2024, they were operational. Although each legislation uses a separate collection of regulations to accomplish specific goals, they are best viewed as a cBig platform companies like Amazon, Shein, and Temu; widely used mobile app stores run by Apple and Google; social media behemoths like Facebook, Instagram, LinkedIn, TikTok, and X (Twitter) are just a few of the companies that are subject to the strictest level of regulation under the DSA. More recently, a few adult content websites have also been designated as very large online platforms (VLOPs) after surpassing the DSA usage threshold of 45 million or more monthly active users in the EU.
The enforcement of the DSA’s general rules is decentralized to authorities at the member state level; however, the European Commission is directly in charge of monitoring compliance with the regulations for VLOPs, centralizing the enforcement of the rulebook on Big Tech inside the EU. This arrangement highlights the politicians’ desire to stay away fromooperative
Reduced customer choice (i.e., fewer and less innovative services) and increased costs (free services may still have hefty access fees, such as forcing a lack of privacy on users) are issues that the EU wants the legislation to address by changing behavior in digital markets.
Another target is online business models that don’t properly consider the wellbeing of its users, including Big Tech platforms that rely on advertising and try to increase interaction by inciting divisiveness or outrage. A common thread that unites both regimes is the goal of increasing the responsibility and accountability of platform power.
According to the EU, this is essential to bolster future growth and foster confidence in online services. The argument put forth by the EU is that not even startups can save digital if there isn’t fair and open competition online.
So while the DSA aims to leverage the power of transparency to drive accountability on major platforms — such as by making it obligatory for VLOPs to publish an ad archive and provide data access to independent researchers so they can study the societal impacts of their algorithmic content-sorting — the DMA tries to have a more upfront effect by laying down rules on how gatekeepers can operate strategic services that are prone to becoming choke points under a winner-takes-all playbook.
The EU likes to refer to these rules as the DMA’s list of “dos and don’ts,” which boil down to a pretty specific set of operational requirements based on stuff the bloc’s enforcers have seen before, via earlier antitrust enforcements, such as the EU’s multiple cases against Google over the past two decades. It hopes these commandments will nip any repeat bad behaviors in the bud.
One of the dos on the list, however, is an important order that aims to force CPS to open up to third parties to try to stop gatekeepers using control of their dominant platforms to close down competition.
Changes announced by Apple earlier this year to iOS in the EU, to allow sideloading of apps through web distribution and third-party app stores, are a couple of examples of the DMA forcing more openness than was on offer through Big Tech’s standard playbook.
Another key DMA interoperability mandate applies to messaging platforms. This “do” will require Meta — so far the only designated gatekeeper to have messaging CPS, like WhatsApp and Messenger — to build infrastructure that will allow smaller platforms to offer ways for people to communicate with people using, say, WhatApp without the person needing to sign up for a WhatsApp account.
This requirement is in force but has yet to translate into new opportunities for messaging app consumers and competitors, given that the DMA allows for implementation periods for undertaking the necessary technical work. The EU has also allowed Meta more time to build the technical connectors. But policymakers are hoping that over time, the interoperability mandate for messaging will lead to a leveling of the playing field in this area because it would be empowering consumers to choose services based on innovation, rather than market forces.
The same competitive leveling goal applies across all CPS types the DMA regulates. The bloc’s big hope is that a set of operational commandments applied to the most powerful forces in tech will trigger a wide-ranging market reset that rekindles service innovation and supports consumer welfare. But the success or otherwise of that competitive reset mission remains to seen.
The regulation only started applying on gatekeepers in February 2024 (versus late August 2023 for the DSA rules on VLOPSEs). The real-world effects of the flagship digital market reform will be playing out for months and years yet.
That said, if anyone thought the DMA’s fixed “dos and don’ts” would be self-executing as soon as the law began to apply, then the Commission’s swift announcement (in March 2024) of a clutch of investigations for suspected noncompliance should have destroyed that. On certain issues, some gatekeepers are clearly digging in and preparing to fight.
The EU has been investigating Apple since March regarding whether its guidelines for guiding developers in the App Store, the way its choice screens for web browsers other than Safari are designed, and whether its core technology fee (CTF), a new fee that was introduced along with the set of business terms that implement DMA entitlements, complies with EU regulations. Although charging fees isn’t expressly prohibited by law,
gatekeepers must adhere to FRAND (fair, reasonable, and nondiscriminatory) guidelines.
The Commission verified the official CTF investigation and released first conclusions from the first two Apple investigations in June 2024. At that time, it added in its draft findings that Apple is violating the DMA by preventing developers from openly informing customers of other options for purchases. EverybodyOn the DSA side, the Commission has been slower to open formal investigations, although it does now have multiple probes open.
By far its most used enforcement action is a power to ask platforms for more information about how they’re operating regulated services (known as a request for information, or RFI). This underpins the EU’s ability to monitor and assess compliance and build cases where it identifies grievances, explaining why the tool has been used repeatedly over the past 11 months since the compliance deadline for VLOPSEs.
X (Twitter): The first DSA investigation the EU opened was on X, back in December 2023. The formal proceeding concerned a raft of issues including suspected breaches of rules related to risk management; content moderation; dark patterns; advertising transparency; and data access for researchers. In July 2024 the Commission issued its first DSA preliminary findings, which concern aspects of its investigation of X.
One of the preliminary findings is that the design of the blue check on X is an illegal dark pattern under the DSA. A second preliminary finding is that X’s ad repository does not comply with the regulatory standard. A third preliminary finding is that X has failed to provide the requisite data access for researchers. X was given a chance to respond.
Other areas the EU continues investigating X for relate to the spread of illegal content; its handling of
disinformation; and its Community Notes content moderation feature. So far it has yet to reach a preliminary view.
TikTok: In February 2024 the EU announced a DSA probe of video social network TikTok it said is focused on protection of minors; advertising transparency; data access for researchers; and the risk management of addictive design and harmful content. In April 2024 the bloc also opened a probe of a rewards feature in TikTok Lite over concerns it encouraged excessive screen time. A few days later TikTok suspended the feature after the bloc threatened to use interim powers to enforce a shutdown.
AliExpress: In March 2024 the Commission opened its first DSA probe of an ecommerce marketplace, targeting AliExpress over suspected failings of risk management and mitigation; content moderation; its internal complaint-handling mechanisms; the transparency of advertising and recommender systems; and the traceability of traders and to data access for researchers.
Meta: In April 2024 the EU took aim at Meta’s social networks Facebook and Instagram, opening a formal DSA investigation for suspected breaches related to election integrity rules. Specifically it said it’s concerned about the tech giant’s moderation of political ads. It’s also concerned about Meta’s policies for moderating non-paid political content, suggesting they are opaque and overly restrictive.
The EU also said it would look into policies related to enabling outsiders to monitor elections. A further grievance it’s probing relates to Meta’s processes for letting users flag illegal content. EU enforcers are concerned these are not easy enough.