What Does the New Digital Markets Act Mean for Brands?
The Digital Markets Act (DMA) is a new EU law aiming to prevent those online platforms that connect customers with goods, content and services from abusing their market power. The EU asserts that Big Tech companies have been gatekeeping the digital economy, and that the DMA will foster more choice for customers and more competition for smaller businesses, as well as cultivate a landscape of higher quality, lower prices and greater innovation.
The DMA became largely applicable on May 2 of this year, and companies will have to comply with the new law in its entirety from March 6, 2024. Failure to do so will result in hefty fines, and potentially even the forced offloading of assets or bans from operating within the EU. While the DMA doesn’t apply to non-EU countries, the significant penalties incurred for noncompliance make it a potentially game-changing piece of legislation with major implications, both for Big Tech and every one of us as users of the internet.
What are the goals of the Digital Markets Act?
The primary objective of the DMA is to make the internet simultaneously safer and more competitive. Its rollout has galvanised much discussion among clients at my own performance marketing agency, Pixated, because the plan is to level the playing field by making Big Tech companies prove their worth after having gained monopolies in their respective digital realms. This is the culmination of years of discussion in Brussels surrounding Big Tech companies’ all-encompassing power, which these days even extends to their controlling of access to essential services. The DMA aims to prevent these so-called ‘gatekeepers’ from essentially forcing internet users to use only their platforms, as well as make it harder for them to track users’ activity for the purpose of hyper-personalising their ads. Furthermore, the EU also contends that the DMA will nurture more innovation and entrepreneurship, and that we’ll start seeing an increasing number of startups springing up, resulting in a greater diversity and higher quality of services at more reasonable prices.
What kind of measures has the Digital Markets Act implemented?
- Gatekeepers are unable to leverage user data for advertising unless people have consented to having their activities tracked for that specific purpose.
- People will be presented with the option of uninstalling those preloaded apps that track their data.
- Gatekeepers can no longer rank their own products and services higher than their competitors’ in online searches.
- We’ll see an increase in messaging services and social media platforms teaming up and sharing users, who will be able to message one another directly across completely different apps.
What are the potential downsides to the Digital Markets Act?
One concern voiced by pundits is that the DMA will negate the incentive to innovate, and thereby have the opposite effect of that intended by actually curbing the inexorable drive to increasingly higher-quality goods and services. Some go further still, worrying that the DMA could even indirectly reduce competition, thereby only cementing even more solidly the various Big Tech monopolies at the base of all internet commerce and activity. Moreover, Big Tech companies represent some of the most widely held stocks in the world. Legislating in such a way as to potentially dethrone them could jeopardise the investments of those same regular people whom the DMA is supposed to protect.
Whatever the outcome, the DMA without doubt marks a groundbreaking moment in European law, as the EU seeks to limit the rapidly increasing sway held by Big Tech over the population of the continent. If the new law effects the kinds of change envisaged by the EU, the DMA should see major online platforms that connect customers across multiple channels having to be more careful with their user data and generously welcoming competition. Hopefully it leads to an explosion in choice, quality and innovation and a concomitant drop in prices, although it remains to be seen whether instead the naysayers’ concerns manifest and it’s the customers who end up footing the bill for this pricey piece of legislation.
Pixated Agency is a performance marketing and web design agency with a proven track record for scaling up some of the most exciting brands.