EU is left to regulate American Oligarchs because America won't
Monopoly laws have been left toothless thanks to legal chicanery, so another stick needs to be invented
It was Rockefeller’s Standard Oil that gave the world the first monopoly laws. His company was split into several smaller companies. Today’s monopolies are harder to pin down.
In order to declare a company a monopoly, you need to first define the market that they are monopolising. With tech companies, this often becomes a huge problem because there are so many adjacencies and their business straddles so many industries.
Take Amazon for instance. They are a near-monopoly in e-commerce and have engaged in a lot of dirty tricks in order to cement their position in the industry. But every time that Amazon is questioned, they frame themselves as a small fish in the larger retail industry.
In a similar vein, Facebook would always like to suggest that LinkedIn is a large competitor that they have. LinkedIn’s business is in no way competing with that of Facebook (actually it is replete with long shit-posts, but that is for another time). LinkedIn is a professional network whereas Facebook is not, but it is in Facebook’s interest to blur the lines.
Is Apple a devices company, a software company, a content distributor or a fintech company?
In April 2016, I had written a piece it was not the business models but the law that was being disrupted.
It is safe to say that most of the laws across the world were written before Internet became a part of our lives. I would wager, perhaps, 99% of them. Consequentially, almost all of the business models that seem to be materialising everyday and becoming a part of our daily lives are constantly challenging the law. While the popular media thinks of this as business model disruption, it is in fact, legal disruption. It is the law that is being challenged and since law moves slowly, often, law is not even aware of it. Well, it is about to be shaken out of its comfort zone.
The European Union is fed up with having to deal with this duplicity. They are introducing the Digital Markets Act to put an end to the degree of power that these companies seem to wield. Think of it as a monopoly law that is directed only toward Tech companies of a certain size.
The legislators seem to be hitting back.
The Digital Markets Act introduces rules for platforms that act as “gatekeepers” in the digital sector. These are platforms that have a significant impact on the internal market, serve as an important gateway for business users to reach their customers, and which enjoy, or will foreseeably enjoy, an entrenched and durable position. This can grant them the power to act as private rule-makers and to function as bottlenecks between businesses and consumers.
The Digital Markets Act aims at preventing gatekeepers from imposing unfair conditions on businesses and consumers and at ensuring the openness of important digital services. Examples of these unfair conditions that gatekeepers sometimes impose on others include prohibiting businesses from accessing their own data when operating on these platforms, or situations where users are locked into a particular service and have limited options for switching to alternative services.
So companies that have a turnover of more than 6.5 Billion Euros; more than 65 Billion Euros in market cap; 45 million monthly active users or 10,000 yearly active business users; in the EU; are deemed gatekeepers.
Some examples of the “do's” are the following:
There will be specific situations in which gatekeepers need to allow third parties to inter-operate with the gatekeeper's own services.
Gatekeepers need to provide the companies advertising on their platform with access to the performance measuring tools of the gatekeeper and the information necessary for advertisers and publishers to carry out their own independent verification of their advertisements hosted by the gatekeeper;
Gatekeepers need to allow their business users to promote their offers and conclude contracts with their customers outside the gatekeeper's platform;
Gatekeepers need to provide their business users with access to the data generated by their activities on the gatekeeper's platform.
Some example of the “don'ts” include:
Gatekeepers may no longer block users from un-installing any pre-installed software or apps;
Gatekeepers may not use data obtained from their business users to compete with these business users;
Gatekeepers may not restrict their users from accessing services that they may have acquired outside of the gatekeeper platform.
Now, this gets quite complicated, fast. Facebook’s WhatsApp is on the Apple App Store; hence Apple is the gatekeeper. Interoperability means that WhatsApp should be able to interoperate with iMessage. I do not think either of them wants it. Alex Muffet tells you why this is going to be stupid.
Ad driven platforms need to open up all the data being collected to their users AND allow independent verification - actually audits - on their ads.
Breaking the back of App Store hegemony, the law wants to permit sales to take place outside the App Store. And the data generated by a business on the platform belongs to them and not entirely to the platform.
It would not be hard to see that this law is designed like a sniper’s rifle. They are going after the American Oligarchs. They will disrupt companies with very specific business models. And what if the companies do not comply?
To ensure the effectiveness of the new rules, the possibility of sanctions for non-compliance with the prohibitions and obligations is foreseen.
If a gatekeeper does not comply with the rules, the Commission can impose fines of up to 10% of the company's total worldwide annual turnover and periodic penalty payments of up to 5% of the company's total worldwide daily turnover.*
In case of systematic infringements the Commission can impose additional remedies. Where necessary to achieve compliance, and where no alternative, equally effective measures are available, these can include structural remedies, such as obliging a gatekeeper to sell a business, or parts of it (i.e. selling units, assets, intellectual property rights or brands).
So the EU is willing to treat American tech giants like Russia.
Without a doubt, the tech majors in the US must be spooked. The likely date for the implementation of this law is going to be in 2023. There is still a lot of time for organised corruption (lobbying) to play its card to influence the process and change or amend the law; if not get it completely thrown out. But if the law goes through in its current form, it would break open all of the tech companies and force them to run their business in a manner that they would not want to.
Rest assured that in the coming days a lot of ink will be spilt in the American media, especially deeming this move as Anti-American.
Will the NATO unity that has been forged in the fire of the Ukrainian war be tested once more? Putin would have his misinformation army rubbing their hands with glee and waiting for the assault to begin.