Apple, Meta among tech titans facing landmark European regulation

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Apple (NASDAQ:AAPL), Meta Platforms (NASDAQ:FB), Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOG, GOOGL) are set to face new landmark legislation after the European Union agreed to the Digital Markets Act late Thursday, a new law that could reshape how these companies do business on the continent.

The new regulations, which could come into play as early as October, are aimed at what the EU calls “gatekeepers”–tech companies that have market caps of more than $75 billion, or revenue in Europe of at least 7.5 billion euros or $8.26 billion over the past three years. Another requirement is that the companies have 45 million monthly active users and at least 10,000 business users on the continent, as well as the “control [of] one or more core platform services in at least three member states.”

The legislation has not yet been passed, and is subject to approval by the Council and the European Parliament. Once it gets through those gateways, it will be implemented within six months after it is signed into law.

Apple (AAPL), Amazon (AMZN), Meta (FB) and Alphabet (GOOG) shares were all higher in premarket trading, led by Meta’s 0.5% gain.

As defined by the act, these so-called “gatekeepers” will have to:

  • Ensure that users have the right to unsubscribe from core platform services under similar conditions to subscription
  • For the most important software [such as] web browsers, [the companies may] not require this software by default upon installation of the operating system
  • Ensure the interoperability of their instant messaging services’ basic functionalities
  • Allow app developers fair access to the supplementary functionalities of smartphones [such as NFC chips]
  • Give sellers access to their marketing or advertising performance data on the platform
  • Inform the European Commission of their acquisitions and mergers

The companies will also not be allowed to:

  • Rank their own products or services higher than those of others [a process called “self-preferencing”]
  • Reuse private data collected during a service for the purposes of another service
  • Establish unfair conditions for business users
  • Pre-install certain software applications
  • Require app developers to use certain services [for exam payment systems or identity providers] in order to be listed in app stores

If the tech companies do not adhere to the rules put forth in the act, there could be some serious financial penalties, including a fine of “up to 10% of its total worldwide turnover [revenue].”

A second fine could result in up to 20% of its worldwide revenue and if the company “systematically fails to comply with the DMA,” defined as at least three times in eight years, the European Commission is able to open an investigation and impose “behavioral or structural remedies.”

Apple (AAPL), Meta (FB), Amazon (AMZN) and Google (GOOG) did not immediately respond to a request for comment from Seeking Alpha.

On Wednesday, Google (GOOG) announced a pilot program that would let app developers offer their users a separate billing system instead of Google’s, starting with Spotify (SPOT).

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