EU’s Digital Markets Act Goes Into Effect

The European Union’s Digital Markets Act went into effect today (November 1, 2022). The terms of the Digital Markets Act will become enforceable in May 2023. It will compel online “gatekeepers” like Google and Meta to overhaul some of their businesses practices.

The act includes provisions for data handling that includes forbidding businesses from using data collected on one platform for another service. For instance, Meta wouldn’t be allowed to use data collected on Instagram for advertising on WhatsApp. Gatekeepers would also be required to get permission from users to use their private data for targeted advertising.

A discussion of the Digital Markets Act at Stanford Digital Economy Lab

Gatekeepers would also not be allowed to give preference to their own offerings or require the default installation of their own web browsers. Google would not be permitted to require the default installation of the Chrome app on Android devices, for instance. If you’ve ever searched for videos on Google.com, you may have noticed that it shows a lot of YouTube videos and not very many videos from competing video hosting platforms. The Digital Markets Act aims to prevent that sort of preferential behavior.

The Digital Markets Act will bar platforms like the Apple App Store and Google Play from requiring that app developers use their built-in payment processing services. These services can charge as much of 30% of revenue from purchases. There are many online payment processors like Square, or even Coinbase Commerce if an app developer would prefer to accept cryptocurrency payments, that charge a far lower percentage.

The EU intends to increase competition in the online world with the Digital Markets Act. The act allows it to levy fines as high as 10% of a gatekeeper’s worldwide turnover for an initial violation and 20% for repeat violations.

What are gatekeepers, anyway?

The Free Dictionary defines “gatekeeper” this way:

1. One that is in charge of passage through a gate.

2. One who monitors or over sees the actions of others.

3. One who controls access to something, such as information or services: publishers as gatekeepers.

The Digital Markets Act defines a “gatekeeper” as a platform that has at least 45 million users and 10,000 active business users. Gatekeepers also offer a “core platform” service like video sharing, virtual assistants, or cloud computing in at least three EU member nations. The European Union will provide a full list of businesses that it considers “gatekeepers” as early as 2023.

Gatekeepers play an important role in what information people see on the Internet. SEO is an important and ever-changing industry as Google makes tweaks to its search engine algorithms. These algorithms determine which web pages people see when they plug a search phrase into Google. (DuckDuckGo and Bing use similar algorithms.) Google has been accused of favoring not only the websites that can afford to pay the most for SEO, but also ones that are most likely to support its users’ opinions.

Facebook actually got caught manipulating its algorithms to show users more negative content for a study that it didn’t inform its users about. The study found that users who are shown mostly negative content are more likely to post something negative.

More recently, Facebook was accused of blacklisting the German research group, AlgorithmWatch, on Instagram. It forced AlgorithmWatch to stop a study of the algorithms on Instagram.

Twitter also has an algorithm for sorting tweets based on what it thinks Twitter users want to see. Even at its best, it might miss showing you a piece of news that you might have been very interested in, though. Elon Musk recommended sorting the tweets in their feed by “new” to avoid the trap of only seeing tweets that Twitter’s algorithms show them and helpfully provided instructions on how to do it.

Twitter founder Jack Dorsey denied that he initially meant the algorithm to manipulate users, though naturally, he wouldn’t know what changes would have been made since he left the company. However, he IS working on his own, separate, blockchain-based social media platform now.

The European Union’s lawmakers may be right to express concern about the power that gatekeepers have. It would be easy for users of those gatekeepers to miss important information or get stuck in their own “confirmation bias” silos because algorithms decided what to show them or favored the services that would make the gatekeepers the most money.