This analysis was first published in SvD Näringsliv, in Swedish, on March 25th, 2022.

A smorgasbord of new legislation for the tech giants has now been voted through in the EU. But trying to micromanage with regulation can lead to unintended consequences.

“Never, ever underestimate the European Parliament!”

That was a triumphant and self-assured Andreas Schwab presenting the Digital Markets Act (DMA), the new European law for tech companies. On Thursday evening, the European Council, the European Commission, and the European Parliament finished negotiating the proposal, which is expected to pass in October of this year.

The line that followed, however, revealed a bit of self-criticism.

“It has taken seven years, but now we’re here.”

Schwab is a German member of the European Parliament, and the person who led the negotiations from their side. The seven years he mentions refer to the last major competition question concerning digital companies in the EU, when in 2014 they wanted to separate Google’s search business from the rest of the company. That can be seen as a kind of starting gun for what we’re seeing today.

Timing is central here. The question is whether the law arrives too late to have the intended effect.

The DMA aims to regulate the biggest tech companies in the market — and they are the ones who have benefited most from the unregulated environment of recent years. Now that legislation is trying to get at them, it needs a long list of criteria to hit the right targets — without limiting competition from new entrants.

There are formal requirements around market cap, revenue, and user numbers — but regardless of the figures, this is legislation aimed at regulating companies like Apple, Google, Amazon, and Meta (formerly Facebook). So it’s primarily American companies that are affected. The law itself doesn’t specify the companies’ nationality, but Europe doesn’t have many tech companies that can qualify here.

Collectively, the tech giants in question are called “gatekeepers” — those who keep others out. The competition, in this case.

In practice, the law means, among other things, that messaging services like WhatsApp and Apple’s iMessage will need to be able to talk to each other. A bit like SMS, which works regardless of which phone brand you have.

Other parts of the law concern app stores and their payment systems — an issue Apple has pushed back on very hard. When the law takes effect, they will no longer be able to force users and developers to use the platform’s own payment systems. Other parts of the legislative package cover various data and competition questions.

You can think of the DMA as a smorgasbord of all the big questions that have come up about tech companies in recent years. Instead of tailoring a law to fix a single problem, here you have a whole package covering a range of issues — but only for a handful of tech giants. The stated purpose is to correct a distorted competitive landscape in the European market.

It’s hard not to also see it as a power play, where the tech giants won the first rounds because of the lack of regulation. That particular point is now being addressed, and the EU is soon in a position to hit back. That’s a chance the decision-makers in Brussels will probably want to take.

Unsurprisingly, the tech giants are not overly fond of the DMA. Meta’s policy chief, and former UK deputy prime minister, Nick Clegg, says there’s a risk of “creating fossils” for how digital services are used and developed.

At the same time, some of the tech giants will likely benefit from parts of the legislation, even if the purpose is the direct opposite. Apple’s iMessage is rarely seen as a social network, but in practice works as one among close friends. That segment has been notoriously hard for Meta — Facebook’s owner — to crack. If the law now forces Apple to open up iMessage, Facebook could stand as a big winner.

The example shows how hard it is to legislate digital services with precision. But now, for the first time, there is at least a toolbox of legislation to work with. The next problem will be making sure the laws are actually followed.