The Digital Markets Act sets out the criteria used when defining an online platform as a gatekeeper. If a company meets the required criteria to be defined as a gatekeeper, then, under the proposed legislation, they would be subject to stricter regulation in the EU. Failure to comply would inflict a fine of up 10% of the company’s global turnover or structural diversification; both potentially terminal penalties.
For a company to be defined as a gatekeeper, there are three criteria that must be met. These are
- A strong economic position, significant impact on the internal market and active in multiple EU countries
- Links a large user base to a large number of businesses
- Has, or is about to have, an entrenched and durable position in the market i.e., stability.
These are broad criteria and, taking Alphabet Inc (the parent company of Google) as a a case study, it is easy to see how they might be applied. Working through each of the three criteria, it is unquestionable that Alphabet have a strong economic position ranking 21st in Fortune 500 list of companies by revenue. Nearly 4 billion people use Google search engine and it is widely acknowledged that this data is repackaged and sold to advertisers, so that is a big tick in the second criteria. Finally, Alphabet is in an incredibly stable position with a market capitalisation value of $1.92 trillion and a strong economic moat.
For proponents of a free market system, a rebuttal at this point may be that the additional “red tape”, or regulation on companies, will stifle the companies' growth and in turn harm the free market’s dynamics. Now, this article is not the place for a debate on coordinate markets vs. free markets, however, the EU has a mixed economy and is therefore not adverse to imposing regulatory measures on markets. For the big tech market, the EU’s position towards regulation is becoming increasingly apparent with Thierry Breton, the EU commissioner for internal markets stating that online platforms have become “too big to care”.
The proposed legislation has moved swiftly through through European systems. However, it is likely to face some resistance from the US who, despite the appointment of Lina Khan, feel these new laws unfairly target the US economy.