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November 24, 2021

New EU antitrust rules will further restrict tech companies in 2022

By GlobalData Thematic Research

EU lawmakers have reached an agreement on rules targeting anticompetitive practices by tech companies in 2022. These rules will apply to tech companies with a market capitalization of EUR80 billion or more and offering at least one internet service, bringing more than just the big tech companies within the scope of the EU’s planned Digital Markets Act (DMA). An ex-ante (before the event) regulation bringing more tech companies within EU regulators’ remit will be a more effective way to restrict anticompetitive practices by tech companies, allowing regulators to address structural competition problems without finding a breach of antitrust rules.

According to GlobalData’s deals database, GAFAM (Google, Amazon, Facebook, Apple, and Microsoft) completed a total of 168 M&A deals between 2018 and 2020, the vast majority of which were not investigated, nor were competition authorities notified.

Fines have been ineffective

This latest agreement comes following greater discussion around the tightening of rules for big tech companies and the European Commission’s victory over Google last week in a EUR2.42 billion antitrust case, which found Google to be abusing its dominant position in ecommerce. In its press release on November 10, 2021, the Court stated that “by favoring its own comparison shopping service on its general results pages through more favorable display and positioning, while relegating the results from competing comparison services in those pages by means of ranking algorithms, Google departed from competition on the merits.”

However, fines have been unsuccessful in deterring anticompetitive practices by large tech companies. Big tech companies have been fined billions of dollars for their anticompetitive practices over the last decade, yet this has not disincentivized such behavior. Between 2017 and 2019, the EU has fined Google a total of EUR8.2 billion ($9.9 billion) for violating competition around its search engine, the Android operating system, and advertising. The total fines amount to roughly 6% of Google’s total revenue in 2019 ($160.7 billion).

EU antitrust action will spur digital competition

Big tech companies abusing their market power to trample the competition has been significant in accelerating discourse for regulation in the digital field. This has been the case with Facebook, Apple, Amazon, and Google, all of whom have made huge sums of money by being data monopolies with a fair degree of unaccountability until now. In 2020, the European Commission accused Amazon of using its dual role as both a retailer and a marketplace for other retailers to gain third-party seller data about its competitors’ products to use to its own advantage.

Likewise, Apple’s practice of forcing companies to sell using its own in-app payments system and taking a 30% commission on every subscription purchased through its App Store was deemed to breach EU competition rules by the European Commission. Nonetheless, despite such scrutiny, these large tech companies have continued to engage in anticompetitive behavior.

Greater antitrust action will spur digital competition, particularly favoring smaller tech companies and startups providing internet services such as Shopify, Spotify, Etsy, and Telegram, as outlined in GlobalData’s thematic report on Antitrust. As legislators turn their focus upon Facebook and Google’s duopoly in online advertising, big tech will have to reconsider their business models, which have previously relied on the lack of transparency around data collection and unaccountability to regulators.