EU’s Digital Market Act: Impending Consequences for Global Consumers

Digital Market Act
Jan van Kessel the Elder: Fruit and Vegetable Market with a Young Fruit Seller // Public domain

March 7, 2024, marks a significant date for the European Union and, potentially, the global digital landscape. A completely new set of rules for controlling competition will be fully applied. The Digital Market Act (DMA) reaches its final implementation milestone, aiming to create “fair digital markets” within the EU by curbing the influence of major tech companies. While the EU celebrates these goals, it is crucial to acknowledge the substantial and potentially adverse consequences that may unfold for consumers worldwide.

The DMA targets “gatekeepers” like Google, Amazon, Apple, and others arguing their dominance stifles competition and innovation. Designated gatekeepers had a six-month window to demonstrate their compliance, yet legal challenges from Apple, Meta, and ByteDance suggest a turbulent path ahead. March 7, 2024, marks the day when the EU will be able to place fines of up to 10 % of the gatekeeper’s annual turnover. The battleground is set, and the question of the hour is whether EU consumers will emerge as winners or casualties.

While the intended goals of fairer competition might appeal to some, the consequences for consumers could be far-reaching.

The DMA is not a usual regulation. It targets the very core idea of competition – provide better products, get an edge over your competition and more consumers, grow and dominate the market, invest further, provide better products, and stay on top as long as possible. Rather than rewarding, success will be punished in the EU, so that even less competitive products could participate in competition. While the users in the European Union are the ones to pay for it.

Our recent study on DMA emphasizes that even if gatekeepers adapt to the DMA’s requirements, consumers may bear the brunt of negative effects. Changes in prices, service quality, and reduced choices are on the horizon, increasing consumers’ time costs and distorting competitive conditions in the market. The long-term consequence of creating a protected market may render it vulnerable, with companies born in such environments struggling to keep pace with global competition.

Firstly, the DMA may lead to price hikes and reduced choice, a decline in quality, and an increase in both financial and alternative costs. This will become evident when gatekeepers might be forced to pass increased compliance costs onto consumers through price increases or reductions of service, features, and functionalities of platforms, thus narrowing consumer choices.

Secondly, the DMA might lead to increased complexity and inconvenience. Consumers may face an overwhelming amount of new terms and conditions, consent requests, and data management choices due to the DMA’s compliance requirements. This could increase the time and effort consumers need to navigate the digital world, potentially hindering their online experience.

Thirdly, the DMA’s long-term implications for global competition are unclear. The isolated environment created by the DMA might inadvertently interfere with the competitiveness of EU-based companies in the global market. Companies born and operating under the regulations of this “protected market” might lack the resilience to compete effectively on the international stage.

The EU’s DMA is an attempt to address concerns about Big Tech dominance. Although it is tempting to hold the overseas gatekeepers accountable for the lack of European competitiveness, unfortunately, they are the outcome of the problem and not the root. Lack of investment, lack of innovations, over-restrictive internal market could start the list of possible root causes. By failing to acknowledge that the EU dangerously risks earning a reputation of a market that punishes success and celebrates solidarity.

The looming implementation of the Digital Market Act begs a critical evaluation of its potential global ramifications. As the EU navigates the fine line between fostering fair competition and inadvertently stifling it, the world watches with bated breath. The time has come to acknowledge the far-reaching consequences for consumers.

Written by Martynas Gruodis – an expert at the Lithuanian Free Market Institute.

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