Will the Digital Markets Act (DMA) change the online industry forever?
“Power corrupts, and absolute power corrupts absolutely,” a wise person once said. It’s not surprising, then, that major digital platforms have been violating users’ privacy and engaging in anti-competitive practices. But EU regulators remain vigilant. Recently, two pieces of legislation came into effect that could change the online industry forever: the digital markets act (DMA) and digital services act (DSA).
“The impact of the DMA and DSA will exceed that of General Data Protection Regulation (GDPR),” says Nicolas Lierman, Head of Innovation and Acceleration at MultiMinds. “They will not only change how online platforms operate, but also how marketeers and users interact with them.”
Why did the EU introduce the DSA and DMA?
The DMA and DSA were introduced due to growing concerns among regulators and policymakers about the market power and influence of large online platforms, such as Amazon, Google, and Facebook. The goal of both acts is to provide effective regulation in the face of rapid technological change and the centralisation of the online market.
The EU wants to ensure a fair and level playing field, while also protecting the rights and interests of consumers. Most big platforms are US-based, which means they primarily benefit the US economy. This makes uncompetitive practices, such as self-preferencing and user lock-in, particularly harmful to EU companies.
What’s the difference between DSA and DMA?
The DSA is focused on, well, digital services and aims to provide a comprehensive legal framework to ensure their safety and accessibility for all users. This means that online platforms must remove illegal content, be transparent and accountable, and protect users’ online privacy.
The DMA is targeted at “gatekeeper platforms” (e.g. Google, Apple, Facebook, Amazon, …) which have significant market power (over 45 million active users per month). The emphasis is on “fair competition,” as well as transparency, disclosure, data portability, and more.
Impact on platforms, users and marketeers
Under the new legislation, gatekeeper platforms and digital services providers
will not be allowed to favour their own products over third-party sellers;
will need to be more transparent about their data collection practices;
will have to disclose how their algorithms work;
will have to enable interoperability between platforms (e.g. sending messages between WhatsApp and iMessage).
As a result, users
will have access to a wider range of products and services at more competitive prices;
will have greater control over their personal data and a better understanding of how it is used;
will be better protected against misinformation and privacy violations.
For marketeers, the DMA will bring significant changes, including:
less restricted promotion of products and services on major platforms, with greater customisation of product listings;
stricter rules regarding the use of personal data for advertising, which may impact marketing strategies.
prohibited retargeting of minors, which will make consent management even more complex.
But perhaps most importantly, the increased transparency will expose any unethical retargeting, causing major harm to your brand’s reputation. Our advice? Wean yourself off third-party data pronto!
But wait… are these things enforceable?
Both the DSA and DMA officially entered into force on 1 November 2022. Until 2024, we’re in a kind of grey zone, where companies and platforms are given the opportunity to make the necessary changes for compliance. But what if they… just ignore it?
“Most existing regulations aren’t very effective,” says Nicolas. “The fines, while mind-boggling to most of us, are often just ‘the cost of doing business’ for these gatekeeper platforms. That’s why, instead of a fixed amount, fines under this new legislation are calculated as a percentage of the platform’s turnover – all the way up to 10%. Now that is pretty scary.”
“Apart from having real leverage, the DMA and DSA also provide very clear and quite progressive rules, which take economic as well as social aspects into account. In fact, the effects of it are already visible. Apple, for example, has already agreed to comply, which means iPhone users will soon be able to install apps that aren’t vetted by the App Store. This creates new opportunities for innovation for app developers. I’m confident we’ll see a lot more of these positive effects further down the road.”v
