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Tech giants balk at competition bill, Digital Markets Act

The EU has already reached an agreement on their Digital Markets Act, which would open tech giants' tightly controlled app stores and platforms to third parties.

Big tech companies are pushing back against competition legislation, especially the European Union's Digital Markets Act, that could negatively affect their business operations.

At a privacy conference in Washington this week, Apple CEO Tim Cook said the company is "deeply concerned" about competition legislation that would force Apple to allow users to download apps outside of the App Store, thus circumventing Apple's privacy and security protections.

"Proponents of these regulations argue that no harm would be done by giving people a choice," Cook said during the International Association of Privacy Professionals summit. "But taking away a more secure option will leave users with less choice, not more."

Cook was referring to legislation such as the Open App Markets Act, introduced by Sen. Richard Blumenthal, D-Conn., and approved by the Senate Judiciary Committee in a 20-2 vote in February. The Open App Markets Act aims to "reduce gatekeeper power in the app economy" by allowing users to download apps outside of the app stores controlled by companies like Apple. It would also remove a company's ability to promote its own apps over third-party apps.

The U.S. isn't the only nation targeting the control large tech companies like Apple, Google and Amazon wield over app stores and online marketplaces. Indeed, while such legislation has only been proposed in the U.S., lawmakers within the European Union have already reached an agreement on the Digital Markets Act (DMA) -- legislation that specifically targets "large platforms acting as 'gatekeepers,'" according to a European Parliament statement.

Thomas Husson, analyst, Forrester ResearchThomas Husson

As companies like Apple speak against competition regulations, Forrester Research analyst Thomas Husson said the DMA likely stands to negatively affect their businesses. However, while tech giants argue that the legislation will kill innovation and make their platforms less secure, Husson said what the legislation is doing is forcing the companies to be more interoperable.

"The simple fact that the largest digital platforms are concerned and actively lobbying [against it] and that media, advertisers, developers and startups see the legislation as favorable is a clear sign that the DMA could have a significant impact," he said.

The Digital Markets Act's impact on tech giants

The DMA will require large tech companies to interoperate with third-party businesses, as well as provide consumers choice when it comes to apps, search engines, virtual assistants and data usage.

The legislation will apply to "gatekeeper" companies, designated as such through having an annual turnover of at least $7.5 billion and providing services such as browsers or social media that have at least 45 million monthly users.

The chokeholds on key bottlenecks in many cases have been removed, and I do think that will foster some competition.
Marshall Van AlstyneProfessor of information systems, Boston University Questrom School of Business

Once the legal text of the DMA is finalized, it will need to be approved by both the European Parliament and European Council -- the EU's core decision-making bodies -- before going into effect. After the DMA is approved, the legislation will come into force 20 days after it's published in the EU's Official Journal. Companies will then have six months to comply with the new rules.

"App developers will get completely new opportunities, small businesses will get more access to business-relevant data, and the online advertising market will become fairer," said Andreas Schwab, a member of the European Parliament, in the statement.

Husson said the legislation represents a significant change in how large tech companies will do business. Apple, for example, could be forced to open its near-field communication stack to payment developers outside of the Apple ecosystem, he said.

"It means investment in the infrastructure and changes in business practices to facilitate access to data and interoperability," he said.

Marshall Van Alstyne, professor of information systems, Boston University Questrom School of BusinessMarshall Van Alstyne

The DMA proposals will ultimately benefit smaller companies through promoting app store competition, allowing third-party payments and increasing interoperability across platforms like messaging apps, said Marshall Van Alstyne, professor of information systems at the Boston University Questrom School of Business.

The DMA also stops tech giants from preventing third parties from offering their products sold on large platforms for better prices on their own websites, he said.

"The chokeholds on key bottlenecks in many cases have been removed, and I do think that will foster some competition," he said.

Makenzie Holland is a news writer covering big tech and federal regulation. Prior to joining TechTarget, she was a general reporter for the Wilmington StarNews and a crime and education reporter at the Wabash Plain Dealer.

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