The European Union has named six tech giants whose market power it wants to reign in by applying a novel set of proactive, pro-competition rules over how these gatekeepers may operate the so-called "core platform services". They are: Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft.

The Commission says that in total 22 core platform services of the six gatekeepers have been designated under the Digital Markets Act (DMA).

Here's the full break-up: Four social networks (TikTok, Facebook, Instagram, LinkedIn); six "intermediation" services (Google Maps, Google Play, Google Shopping, Amazon Marketplace, iOS App Store, Meta Marketplace); three ADS, or ads delivery systems (Google, Amazon and Meta); two browsers (Chrome, Safari); three operating systems (Google Android, iOS, Windows PC OS); two N-IICS, or Number-Independent Interpersonal Communication Service in regulatory jargon, (WhatsApp, Facebook Messenger); one search engine (Google); and one video sharing platform (YouTube).

But the DMA proactively deals with competition concerns when a certain level of market power is reached — including getting to 45 million+ active local users for the giants. Other gatekeeper selection criteria include a turnover of €7.5 billion+ in the last three financial years and a market capitalization over €75BN, though the Commission has a degree of latitude in designations to ensure the law is able to target platforms that look set to gain an "entrenched and durable" position in the "near future".

The regulation technically comes into effect in May, since the last few details had been agreed by EU lawmakers earlier this year. That accord followed lengthy negotiations between the European Parliament and Council on the Commission's late 2020 proposal to reform its approach to digital competition.

Seven tech titans -- Alphabet/Google, Apple, Amazon, ByeDance/TikTok, Meta/Facebook, Microsoft and Samsung -- said they anticipate being included in the regime. But Samsung is not on today's official list so TikTok's parent ByteDance is the only non-U.S. tech titan on the list.

Another two examples of surprising omissions where web-based email service Gmail, from Google; and webmail alternative offering Outlook.com, from Microsoft, are also not listed as core platform services. Not a single webmail-based service, per se, features in the list. No cloud-based storage platforms, either.

"the Commission has established that, although Gmail, Outlook.com and Samsung Internet Browser reach the thresholds in the DMA to become a gatekeeper, Alphabet, Microsoft and Samsung raised sufficiently justified reasons demonstrating that these services do not constitute a gateway for the relevant core platform services, so the Commission has decided accordingly not to designate Gmail, Outlook.com and Samsung Internet Browser as core platform services,. It thus follows that Samsung is not designated as a gatekeeper with regard to any core platform service.

On being asked for the reason for not designating any webmail or cloud storage services, a Commission spokesperson said: "None of the companies providing cloud computing services which had been in discussion with it regarding DMA notification had considered these services meets the thresholds.".

In response, it stated that despite its stance, it will continue to observe developments in the market on offering cloud computing service.

On Gmail and Outlook.com, these core platform services are informed by Alphabet and Microsoft respectively, supported by the reasons why they should not be regarded as gateways. After an evaluation of the submissions, it is the Commission's view that with respect to such arguments adequately justified, Alphabet and Microsoft respectively established that Gmail and Outlook.com did not represent important gateways and has, therefore not been designated them, as it added.

Key provisions the DMA applies to core platform services include banning self-preferencing or gatekeepers requiring business users to make use of their own services and a ban on gatekeeping app stores preventing the installation of rival stores. Gatekeepers cannot prevent business users from offering and promoting competing services, and they have a duty to share with them information that their platform usage generates.

There have also been precepts on requirements of data portability and service interoperability, specific interoperability obligations on messaging giants and choice screens-style obligations on OSes, browsers, search engines, and virtual assistants. The Commission has actually banned the gatekeepers from tracking or profiling users with a view to ad targeting without their explicit consent, stopped other interferences with users' freedom to uninstall gatekeeper preloads, and required that FRAND terms be applied for general access and discriminatory T&Cs avoided when treating business users fairly.

EU's internal market commissioner, Thierry Breton, summed up the bloc's purposes of the regulation yesterday while speaking at a digital conference in Estonia: "We know that some tech giants have used their market power to give their own products and services an unfair advantage and hold back competitors from doing business and creating added value and jobs.". These practices distort competition, undermine free consumer choice and hold back the innovation potential of SMEs notably arising from Web 4.0 and virtual worlds," he said.

"It was high time that Europe sets its rules of the game upfront, providing a clear enforceable legal framework to foster innovation, competitiveness and the resilience of the Single Market, rather than having to rely on lengthy and not always effective antitrust investigations. The DMA does just that.
 
Some fines will be able to be as high as 10% of turnover in each year into which the infringement ran — or 20% in cases of serious repeated infringements.

Beyond that, the Commission has the power to apply additional remedies — such as requiring a gatekeeper sell a business or parts of it, or banning gatekeepers from acquisitions of additional services related to "systemic non-compliance". And, on this front, it's notable that the EU's competition division, which has been investigating Google's adtech business since 2021, warned this summer the only effective remedy if its concerns are confirmed would be to break Google up.

Europe warns it may break up Google's adtech empire

The new rules are likely to open new competition possibilities on major platforms - from independent app stores, alternative payment services and emerging search engines - while at the same time policing directly abusive behaviour by gatekeepers, such as enforcing T&Cs in a random manner.

Among the first to note were payment unicorn Paddle, who prebriefed with a statement welcoming the official designation of gatekeepers. CEO Jimmy Fitzgerald termed the move "a step toward equal competition, customer choice, and real business innovation." "The pressure that major actors in the industry provide for app stores and payment systems for third parties, without the preference of self-products, will be highly beneficial to programmers capable of selling their products wherever, however they would like, without losing some percentage on a sale," he said.

A new regime may also spur the emergence of less exploitative business models, in that consumers will have more room to slip the noose of platform giants' lock-ins. How effective the pan-EU regime will be in rebalancing a digital playing field that Big Tech not only still firmly dominates but has essentially defined and configured in its interest over decades remains to be seen.

So, too, would the entry of new companies be a lengthy process in which the network effect of the most powerful is diluted, as consumers are likely to keep looking toward the biggest names as the most trusted brands for some time to come. Still, innovative and determined startups should enjoy better chances than ever at disrupting GAFAM's hold on tech users. Or, at any rate, that's the newly disruptive regulated reality for entrepreneurs launching services in the EU.

Still time for a little nipping at the bulk of DMA compliance: six months to ensure compliance as a designated gatekeeper means the true EU vs Big Tech reckoning starts early March 2024. Of course, the Commission reports that some obligations already apply from designation — including the obligation to inform it of any "intended concentration" (a.k.a., M&A).

"It is for the designated companies to ensure and demonstrate effective compliance. To this end, they have  6 months to submit a detailed compliance report in which they outline how they comply with each of the obligations of the DMA," it added.

The Commission is the sole DMA enforcer so gearing up to take on such a gargantuan add-on oversight role all at once is also no small ask for the EU's executive.

The bloc's unit in charge of competition has, of course lorded over tech behemoths for decades. Including, most notably, a series of major enforcements against Google, as well as numerous probes of Apple, Amazon, Meta and Microsoft. But the DMA represents a step change from just doing traditional ex post antitrust investigation and after-the-fact enforcement — to bolting on ongoing ex ante surveillance and coming up with preventative measures too. So EU regulators are also having to step up several gears. Albeit, at least in theory, the DMA may reduce the number of (classic) competition investigations the EU undertakes on Big Tech - if it proves effective at proactively curbing a broad range of unfair tactics.

Meanwhile, there are early signs designated gatekeepers may not take the EU's new playbook lying down. And formal challenges look likely as the new rules bed in.

Apple and Microsoft were filing lawsuits against the Commission's designations of iMessage and Bing, respectively, as core platform services in scope of the DMA, with the pair arguing that the services didn't have enough popularity to be caught by the regulation. Bing has a very small regional marketshare of just 3 percent, as Google's search engine continues to massively dominate Europe. When, so the FT reported, Apple had contended that iMessage does not have the 45M+ users threshold that qualifies it as a core platform service, which would oblige it to interoperate with rival messaging services. The newspaper further reported that the Commission was still debating to include Bing and iMessage.

This case appears to be an example of the EU adopting a conservative approach regarding the initial backlash — since, as mentioned above, both Bing and iMessage are not part of the initial list of 22 core platform services. As consolation, the Commission has agreed to delve further into Apple and Microsoft's argument that these services should be exempt.

The commission has opened four market investigations to "further assess" submissions from Microsoft and Apple that argue, despite crossing the thresholds of the DMA, the following four core platform services do not qualify as "gateways": Microsoft's search engine Bing, browser Edge, and Microsoft Advertising; and Apple's iMessage.

"Under the DMA, these investigations are designed to determine whether adequately supported arguments by the undertakings show that the services in question do not be classified. The investigation must be finalized within at most 5 months," the Commission stated.

With the removal of iMessage, Apple has escaped one threat of the DMA because it will not, at least not yet, be obliged to comply with an interoperability requirement that applies to designated messaging services which would have seen it enable users of messaging services, like WhatsApp and Messenger, to send messages to people with iMessage from within the latter service.

And while Microsoft cautioned that, in fact forcing Bing to comply with the DMA and display choice screens for users could—ironically—have permitted Google's utterly dominant search engine to increase its regional share.

Apart from this first push against designations, the tech leaders used to determining their rules and terms of service are likely to be facing formal legal challenge as they push against the EU's rule-making muscle.

Commenting in a statement, Miranda Cole, partner, antitrust and competition, at the law firm at Norton Rose Fulbright said: "The identities of the gatekeepers aren't a surprise but it is now about to get interesting in terms of who appeals the designations, who makes Article 10 requests for exemptions, and the outcomes of the Article 16 market investigations opened today".

The exemptions and interim reports that will arise from the market investigations are pivotal because the DMA's quantitative thresholds hardly reflect a market presence in terms of frequency of use, and so on. The fact that the European Commission opened market investigations today into Microsoft's Bing, Edge, and online advertising services, which have de minimis market shares under or around 5%, indicates that it is cognizant of this issue. One thing is for sure, though: the designations today are only the 'starters for ten'.

The bloc may also continue to designate (more) gatekeepers as market circumstances change. More tech giants and platform services could, therefore be added to the list in the months and years ahead. The Commission has also committed itself to review existing designations at least every three years to see whether the platforms continue to fulfill the qualification criteria.

Some of today's gatekeepers were already obligated to conform to the DMA's sister regulation, the Digital Services Act, since they have been designated as either VLOPs or VLOSE under that broader pan-EU digital governance regime-and the DSA's compliance deadline for larger platforms was late last month. Inhouse policy teams at some of the world's most valuable tech companies are surely kept busy.

This update includes supplementary comment from the Commission as no webmail or cloud storage designations have been made

Update: Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft have all been contacted for comment on their DMA designations.

Alphabet/Google has published a blog post about its response to the news today, which reads in part:

We have believed for a long time that people and companies deserve and want choice and control, and to be able to compete on merits of service. The DMA requires Google and other companies to change many things about the way their products and services operate. For instance, for us, it will mean building on the work we have done to inform consumers and enable them to change platforms or control their data (like Google Takeout and our Google Transparency Reports) and remind people of their choices (like choice screens we now offer in Europe).

We will keep closer proximity with the European Commission and others as we push the improvements of our compliance solutions ahead of the deadline next year. Changes must respect new requirements while still protecting the user experience in order to deliver useful, innovative, and safe products for people in Europe, which means working with research and engineering and product design teams to balance this well.

We appreciate open dialogue people have offered as we work through preparation for the compliance date and beyond. Meanwhile, we will review our designation decision and assess its implications.

An Amazon spokesperson forwarded us this statement: "We take note of the designations that the European Commission has made and will continue to deliver services that serve our customers' needs within the evolving European regulatory environment. We will continue working constructively with the European Commission as we move toward finalising our implementation plans."

In addition, the company received a response from Apple spokesperson to whether it has any concerns about the DMA through its designations: "We remain very concerned about the privacy and data security risks the DMA poses for our users. Our focus will be on how we mitigate these impacts and continue to deliver the very best products and services to our European customers."

In another statement, the firm revealed that a market investigation in iMessage is now open.

iMessage is a great service that Apple customers get to enjoy due to easy communication with friends and family while offering world-leading privacy and security protections. Today, consumers have choices about many messaging apps through which they often simultaneously use multiple apps, in turn reflecting just how effortless it is to switch between them. iMessage is a product of design and marketing for personal consumer communications, and we look forward to explaining to the commission why iMessage is outside the scope of the DMA.

Apple also points out that it offers a bespoke messaging service for business users — literally called Messages for Business — though that might not stop SMEs using iMessage to reach customers.

We have also been sent this statement by Microsoft:

We accept our gatekeeper designation under the Digital Markets Act and will continue to work with the European Commission to meet the obligations imposed on Windows and LinkedIn under the DMA. We welcome the Commission's decision to open a market investigation to consider our application to exempt Bing, Edge, and Microsoft Ads — which operate as challengers in the market — from the DMA.

Whereas a Meta spokesperson said: "We are reviewing the Commission's classifications and will provide further details in due course as we work to comply with the DMA."

A TikTok spokesperson also responded with a statement in which it writes: "We welcome the EU DMA's ambition to provide a level playing field in Europe but fundamentally disagree with this decision.". TikTok has brought choice to a space largely controlled by incumbents and this decision risks undermining the DMA’s stated goal by protecting actual gatekeepers from newer competitors like TikTok. We’re extremely disappointed that no market investigation was conducted prior to this decision and are evaluating our next steps.”

Further comment from the video sharing platform expands on why it is so particularly disappointed, arguing that it is a relative new comer that brought competition and choice to a market dominated by incumbent giants which have multiple, highly used products and services, whereas it has just one core platform service that's popular in the region.

TikTok further notes that it has never been investigated in the EU on concerns of competition and believes the list of 'dos and don'ts' under the DMA reflects the abuses committed by rival platforms in the past. It also rebuts the contention its video-sharing platform is entrenched or durable as it says it has been extensively cloned by rivals. Besides, it claims not to be running a lock-in scheme, as TikTok videos can easily be posted on other platforms and shared from different third-party accounts.