European Lawmakers Reach Deal on Sweeping Digital-Competition Law

Widely known as the DMA, the legislation could affect many corners of the tech world. It is aimed broadly at limiting the ability of the biggest tech companies from taking advantage of their powerful presence in digital markets—including the app ecosystem, online shopping and online advertising. Provisions in the text, if agreed upon, would allow developers to make their apps available to iPhone users without going through Apple Inc.’s App Store and could limit how sites such as Alphabet Inc.’s Google and Amazon.com Inc. can rank their own products and services ahead of those offered by smaller competitors in search results.

It also could have global reach. The EU has for years been at the forefront of creating regulation for a number of major tech markets. Moves by Brussels often have been mirrored by other countries. At the same time, many big tech firms—forced to change practices by European rules—have made those changes global.

Tech-industry lobbyists say the law is discriminatory because it focuses largely on big U.S. companies, and unworkable because of its breadth—something they say will hobble tech innovation in Europe. Apple has previously said the legislation’s “one-size-fits all” approach could undermine consumer protections and choice, while Meta Platforms Inc., parent of Facebook, has warned about unintended consequences, such as stifling European innovation.

Which companies count as so-called gatekeepers has been the subject of much debate. In early drafts of the legislation, criteria based on the number of consumer and business users, as well as market capitalization and revenue thresholds, suggested services from Apple, Google, Amazon, Meta CASH 0.47% and Microsoft Corp. all would be affected, possibly among several others.

Apple issued a statement Thursday night saying it remained concerned that some of the DMA’s provisions “will create unnecessary privacy and security vulnerabilities for our users, while others will prohibit us from charging for intellectual property in which we invest a great deal.” It said it would work with others to mitigate what it saw as vulnerabilities.

Google said it supported many of the DMA’s ambitions on consumer choice and interoperability, but worries that the new rules could reduce innovation and the choice available to Europeans. The company said it would review the final text and work out what it needs to do to comply.

Representatives from Amazon, Meta and Microsoft didn’t immediately respond to requests for comment after the agreement was reached late Thursday.

Tech giants’ smaller rivals and other tech-company critics say they hope the legislation could become a global standard as lawmakers in other countries, including the U.S., look for ways to rein in the power of global tech giants and make it easier for smaller players to compete. The U.K. government is working on a code of conduct that could be applied to tech companies with substantial and entrenched market power, and U.S. lawmakers have proposed legislation aimed at curbing dominant tech companies’ market power.

“This will be the first comprehensive attempt at making digital markets more competitive,” said Zach Meyers, a senior research fellow with the Centre for European Reform think tank. “And when you look at what the U.K. and the U.S. and other countries are doing, even if they’re not replicating the DMA, they’re certainly inspired and influenced by it.”

Negotiators held discussions Thursday to iron out remaining disagreements on the main points of the legislation. Now that a political agreement on the text has been reached, it is unlikely to undergo further substantial changes, though it will still need final approval from parliamentarians and representatives from EU countries.

The goal of the legislation, according to the European Commission (the EU’s executive body), is to create a clear set of rules that would prohibit the world’s biggest tech companies from engaging in certain behaviors that officials view as harmful to competition. Proponents hope it can cut down on the need to open lengthy investigations into a company’s alleged anticompetitive behaviors, a process that often goes to the courts and can in some cases take years to resolve. Rivals have complained that EU antitrust cases have so far had limited impact on big tech companies’ revenue and market share.

“What this law is about is changing the burden of proof so that these companies will need to prove that their conduct is fair,” and not regulators who until now have needed to prove violations of antitrust laws, said Andreas Schwab, a member of the European Parliament from Germany who has been the body’s lead negotiator for the DMA.

Mr. Schwab issued a statement late Thursday confirming that an agreement on the legislation had been reached.

The DMA is part of a pipeline of recent EU regulations aimed at tech companies. Legislators also are negotiating over the final text of another piece of legislation aimed at forcing tech platforms and social media companies to do more to prevent the spread of a range of illegal or potentially harmful material, or face similarly big fines. Another bill governing the way companies share industrial data was proposed last month.

Elements of the DMA have been strongly opposed by Apple, Google, Amazon and Facebook, and could lead to court challenges. Penalties for failing to comply with the rules can go up to 10% of a company’s global annual revenue, but repeated infringements raise the ceiling to 20% and open the way to other penalties such as a ban on some acquisitions, Mr. Schwab said.

Based on recent drafts of the legislation, gatekeeper companies would be limited in how they can privilege their own products or services in rankings compared with those offered by third parties. Such a provision could limit the possibilities for Google to push its services, such as its internet browser, flight search or email, to the top of a user’s search results. It also could make it more difficult for Amazon to place priority on its products to the detriment of a third-party seller.

The rules also could block gatekeeper companies from tying access to some of their services to the purchase or use of another service, and require companies to make it easier for users to move their data from one service to another. In practice, the rules could prevent Meta from requiring a user to get a Facebook account to use its Messenger app, for example.

Another provision could require Apple to allow software makers access to the iPhone without having to go through the company’s App Store. That rule could have a significant impact on the company, which charges up to a 30% commission on in-app purchases, a major source of revenue. Apple has defended its practices, saying it is giving consumers a choice of a digital platform that has proven popular, and that changes would create security and privacy risks.

One point of contention in the negotiations was over which companies, specifically, would be defined as gatekeepers and need to comply with the new rules.

The initial proposal defined gatekeepers as companies whose European revenue was at least €6.5 billion, equivalent to about $7.2 billion, or those with a market capitalization of at least €65 billion. Gatekeepers also had to serve more than 10,000 active business consumers and 45 million active end users in the European Union. The original proposal said the threshold needed to be met over the past three years. The final text increased those thresholds to €7.5 billion in revenue and a market capitalization of at least €75 billion.

Even though an agreement has been reached, experts have cautioned that questions remain about how the commission will implement the new rules and ensure compliance. “The adoption of the text is the easy part,” said Alexandre de Streel, academic director at the Centre on Regulation in Europe. “The difficult part will be the enforcement of that text.”

Write to Kim Mackrael at [email protected] and Sam Schechner at [email protected]