In response to the growing recognition of the dominance of Big Tech, governments have pushed for new regulations and increased antitrust efforts. While the U.S. has targeted individual companies including Google, Amazon, Apple and Meta via antitrust litigation, the European Union (EU) has led efforts to enact new legislation aimed at shaping the current – and future – digital landscape. The EU’s Digital Markets Act (DMA) is a broad regulation targeting large companies designated as “online gatekeepers” – and the legislation is already shaking things up.
Booking Holdings – namely Booking.com – will be added to the initial six tech companies designated as gatekeepers in May 2024. This will give the OTA an additional six months to comply. The DMA aims to promote competition and protect consumer rights – but critics argue the regulation could have unintended consequences, including stifled innovation and negative impacts on small and medium-sized enterprises (SMEs) and consumers.
While DMA implementation is still in its early stages, the changes made to respond to the regulation have already disrupted the status quo in travel businesses, including in some European hotels. This is a sample of Phocuswright’s report on How the EU Digital Markets Act will impact travel.
Digital Markets Act: Inside the Act
The Digital Markets Act establishes a set of criteria for identifying large platforms (i.e. gatekeepers) that operate in the EU.
It focuses primarily on:
- Size based on revenue or market capitalization;
- Control of a core service platform used as a Gateway for business users accessing end consumers
- A firm and durable position
Companies can be designated as gatekeepers of one or more platform services in any of the 10 categories:
- Online intermediation service
- Search engines
- Online social networking services
- Video-sharing platform services
- Messaging apps (i.e. services of interpersonal communication without a phone number)
- Operating systems
- Cloud computing services
- Advertising services
- Web browsers
- Virtual assistants
Companies designated as “gatekeepers” are subject to specific requirements. Gatekeepers must, for example:
- Allow third parties interoperation with the gatekeeper service
- Access to data generated by the platform for business users
- Advertisers can access performance metrics and verification data
- Allow business users to promote and contract with their customers their own offers outside of the gatekeeper’s platform
- Get consent from users prior to combining and sharing user data across platform services. If the user does NOT consent, offer an alternative that is less personalized but still equivalent.
Gatekeepers cannot:
- When gatekeepers compete on their own platform, they can leverage the data of business users to gain a competitive advantage.
- Self-preferencing is the practice of ranking gatekeepers’ own products or services as more favorable than those offered by third parties.
- App stores require app developers to use gatekeeper services, such as payment methods, in order to be listed.
- Tracking users outside the core platform of the gatekeeper for targeted advertising without consent
The gatekeepers
The European Commission initially designated six tech companies as gatekeepers for 22 services (Alphabet.com, Amazon.com, Apple, ByteDance.com, Meta.com, and Microsoft), and these services had to comply with DMA regulations starting March 7, 2024. In April 2024, the Commission added Apple’s iPad OS and Booking.com to the list. Each had six months after the date of designation before they were required to comply.
Since the March deadline, the Commission opened non-compliance investigation into Alphabet Apple and Meta. More are likely to follow. If a company is found in violation of the DMA it could face fines up to 10% of their global annual revenue. This can increase to up to 20% if they commit the same offense twice.
While ongoing investigations may require additional modifications, the gatekeepers who were initially in charge have already implemented numerous changes. ByteDance, for example, has a TikTok. Apple launched a Data Portability API, while Apple made changes to iOS, Safari, and the Apple App Store. Google made changes in search results, launched consent messages for sharing data between Google services, and introduced search engine/browser selection screens, just to name a couple.
Impacts and implications
The DMA is still a few years away from being fully implemented, but the structure of the DMA, the identity of the gatekeepers, and the changes that have been made so far can be analyzed. The full report focuses on two categories.
- The Law of Unintended Concomitants
- The Competitive Landscape
How to predict winners and losers
The DMA is intended to curb anti-competitive behaviors and improve access to digital market. The practices that are required or forbidden by gatekeepers would, in principle, benefit the gatekeepers’ customers, such as SMEs and consumers. While both groups are likely to benefit in the short-term, the DMA’s long-term effects will be more complicated.
Listed below are some key factors to be considered, as well as the full report:
- Gatekeepers will promote competitive interests
- Gatekeepers might think locally but act globally
- Copycat regulation could increase the impact of the DMA
- Gatekeepers in Europe may ban some tech
- The DMA’s impact may not be as expected
To better understand how DMA might play out, this full report looks at each of the following:
Stay tuned
Travel companies may experience additional changes as gatekeepers refine and establish their response to the Digital Markets Act. These changes can be unexpected. Gatekeepers will have to balance their own competitive needs against the regulatory requirements. This may cause short-term disruptions for travel suppliers, advertisers, and end users.
In the long run, however, gatekeepers, such as Google or Booking, have a vested stake in maintaining strong relationships with their business customers and optimizing user experience.
Over time, the advocacy of hotels and other stakeholder groups will likely create a new balance. In the next five to ten years, we will likely see some of DMA’s benefits come to fruition. However, the negative impacts of the DMA will also be evident.
In spite of the threat, we could see new gatekeepers emerge and additional regulations modelled after the DMA on other markets. Ultimately, it is innovation and new technology – not regulation – that has the greatest potential to disrupt the status quo.
