Why Big Tech is fighting European regulators like never before

Lawmakers in Europe are within striking distance of passing a sweeping set of regulations that would limit how the largest digital platforms can use their immense power for their own commercial advantage.

The Digital Markets Act would introduce new rules for how companies like Amazon, Apple, Meta (formerly Facebook), and Alphabet (Google’s parent company) operate their app stores, digital advertising programs, messaging platforms, and other services.

“The idea is to say that you’re more than welcome to be successful in the European market, but if you grow in market power, you should also grow in responsibility,” says European Commission executive vice president Margrethe Vestager.

Corporations facing this significant change to the regulatory landscape are investing a lot of money to influence the regulations. Apple, Amazon, Meta, and Alphabet have all increased the amount they spend on lobbying in Europe, with Apple more than doubling its expenditures between October 2020 and September 2021.

European regulators want to promote competition

The European Union has long led the way in regulating the major digital platforms. In 2018, it began enforcing the General Data Protection Regulation (GDPR), which forced organizations across the world to change how they handle user data. (You might remember receiving an avalanche of privacy policy updates that spring.)

Now, the E.U. is trying to do something similar with anti-competitive business practices on the web.

European Commissioner Thierry Breton said at a meeting on Thursday that “[w]e are putting an end to the so-called ‘Wild West’ dominating our information space.” He hopes the legislation will be “[a] new framework that can become a reference for democracies worldwide.”

The wide-ranging law takes aim at a complex array of tactics tech companies have devised to stifle competition and keep users on their platforms.

For example, the law would likely compel Apple to let iPhone users download apps from digital marketplaces that compete with its App Store. The company would also be required to allow third-party apps to collect payments directly from consumers, depriving the $2.5 trillion company of the 30 percent cut it currently takes from most in-app purchases.

The law would likely limit how Google is allowed to collect and combine user data from across its wide range of services, significantly changing its digital advertising model. The company would probably be forced to let Android users decide which search engines and email services they use on their smartphones.

It's not just consumers that stand to benefit from the changes, Vestager says.

“[I]f you are [a company doing business] in the gatekeeper’s marketplace, you would actually get data that your own business is generating, for yourself and for the development of your business," she says.

Big Tech spends big to push back

Tech companies have recently increased their efforts to shape regulations that could threaten their highly profitable business models.

Senior Meta executive Nick Clegg laid out several reasons for his company's opposition to the bill in a blog post published last year. For example, he says its "fine print" could put policymakers in the role of product designers. 

"Some of the DMA’s fine print" suggests policymakers could find themselves deep in the weeds of product design "in a way which risks fossilizing how products work and preventing the constant iteration and experimentation that drives technological progress," he writes.

He also calls for "a consumer benefit test to ensure" that rules preventing large platforms from giving their own services preferential treatment "don’t shut out newcomers who would deliver cheaper and better services," pointing to "broadband companies offering TV services to compete with broadcasters" as an example.

Meta and other companies have invested tens of millions of euros to circulate arguments like these to the highest levels of the European government. Alphabet is the most prolific company in Europe when it comes to lobbying. Its budget of nearly six million euros funded 21 lobbyists who collectively attended 249 meetings with regulators in a fiscal year spanning 2020 and 2021. 

Facebook and Microsoft each spent more than five billion euros on lobbying efforts during the same period, according to the Financial Times. Energy companies Shell and BP and pharmaceutical manufacturer Bayer were the next-highest spenders.

The Digital Markets Act has already spent 16 months winding its way through the E.U.'s complex lawmaking process. It could receive final approval as early as next month.