EU prepared for legal challenges to Big Tech regulations

As member states grow more worried about how the new regulations will be applied, European regulators are ready for judicial challenges to landmark legislation intended to address Big Tech.

The Digital Markets Act, which will go into effect the next year and is anticipated to establish a global standard for how major online platforms like Google, Amazon, and Facebook must function, was applauded by EU legislators.

However, since the act was passed earlier this year, a number of concerns have surfaced, according to EU officials and business leaders who have been studying the legislation.

Big tech companies attempting to challenge the provisions through the courts, member states vying for attention with their own national cases outside the purview of the new rules, and a lack of staffing at the European Commission to handle the enormous task of enforcing the laws are among the worries.

A few of the new requirements in the DMA prohibit businesses from placing their own products ahead of competitors on their online platforms and encourage data sharing with smaller rivals.

One person who anticipates a judicial battle over the restrictions is Gerard de Graaf, a senior EU official who will take the helm of the bloc's new office in Silicon Valley starting next month.

Without a doubt, there will be legal action [from tech corporations], according to de Graaf. "We are prepared for litigation but we would like a constructive discussion with the platforms rather than an adversarial discussion," he said continued.

However, there are signs that Big Tech's resentment of the DMA may manifest itself in court. Despite working "constructivly" with Brussels, Amazon warned last month that it still had "serious concerns about the [DMA] unfairly targeting Amazon and a few other US companies."

Amazon also stated in July that it disagreed with the Federal Cartel Office of Germany's choice to classify it as a strong online platform, a designation that has additional legal obligations akin to the DMA. Two sources with direct knowledge of the situation predict that the business will formally appeal the ruling.

We are focused on finding solutions [over the DMA]. We are looking to make positive changes. Litigation is our last resort," according to an executive at a large tech platform.

In addition to judicial action, the EU is dealing with opposition from within the union. Many of the member states want to play a bigger part in going after Big Tech by starting legal investigations and fining businesses severely.

This desire has resulted in disagreements over how much authority Brussels will have in comparison to national competition authorities to examine the dominance of corporations like Facebook owner Meta and Alphabet, the parent company of Google.

The European Commission is the "sole authority empowered" under the DMA to decide when to launch antitrust investigations and against which corporations, as well as to implement the rule.

Even when member states opt to investigate violations at the national level, Brussels must be notified of the results. Without Margrethe Vestager's approval, the EU's main competition commissioner, member states are unable to launch independent investigations.

Senior EU officials and regulators claim that the "differences of opinions" between the commission and European capitals stem from how involved national regulators should be in addressing Big Tech.

One source in Brussels claimed that "we are seeing a land grab of cases as member states seek the limelight. The DMA leaves no gap for member states to enforce their own rules and the window of opportunity for them to do [so] is closing."

That did not stop Germany from passing its own DMA in 2021, though. The fact that his nation's law is already in place is an advantage, according to Andreas Mundt, head of the country's competition authority.

"It’s too early to say that once the DMA is in place we cannot pursue these [cases against tech companies] anymore. I am pretty sure that we will see lots of conducts that are not caught by the DMA," he said.

After opening a case against Apple for the lack of alternate payment options for customers on its platforms, Martijn Snoep, the chairman of the Dutch competition authority, claimed that his organization was attempting to establish a European example of how to address illegal behavior by Big Tech.

He acknowledged that centralizing DMA enforcement in Brussels was a "political decision and that is OK," but he cautioned that this would make his nation less inclined to cooperate with the commission on tech matters.

According to Snoep, "I am not sure how many investigations we will actually launch and I’m not sure it will be an efficient allocation of resources. It will incentivise the national competition authorities to focus on the non-DMA matters — or against companies not considered gatekeepers under the DMA but who have a dominant position."

A firm must also have 10,000 annual business users or at least 45 million monthly active users to be considered a "gatekeeper." This requirement is met by companies like Google, Amazon, Facebook, Apple, and Microsoft, as well as others like travel website Booking.com and e-commerce giant Alibaba.

A flood of additional cases brought on by the DMA are anticipated, which will boost the demand for skilled enforcement personnel to combat the well-funded legal departments of major tech companies.

The MEP who oversaw the DMA discussion in the European Parliament, Andreas Schwab, is one of many who worries that the objectives of Brussels are not matched by adequate funding. While the commission only anticipated hiring 80 additional personnel, he has been arguing for a greater budget to hire 150 more.

Schwab recently emphasized that rule enforcement needs to be "our common priority" in a letter to the Czech Republic, which is now holding the rotating EU presidency. Otherwise, he said, "ttheir fulfilment will be seriously jeopardised”, causing “irreversible damage to the digital single market."

By fLEXI tEAM