MDE#07 The Digital Markets Act
And why it matters for the metaverse 🇪🇺
⏳ 6 min read
The metaverse is at the center of discussions in the European Commission.
“We have certainly not been too quick to act—and this can be an important lesson for us in the future. We need to anticipate and plan for change, given the obvious fact that our enforcement and legislative process will always be slower than the markets themselves. For example, it is already time for us to start asking what healthy competition should look like in the Metaverse.” Margrethe Vestager, Executive Vice-President of the European Commission.
I am proud to see how the European Commission is taking the lead in regulating the digital space amidst all the confusion, hype, and chaos. With the Data Governance Act, the Data Act, the Digital Services Act, the Digital Markets Act, and the AI Act in the pipeline, the EU is setting the bar for data protection and citizen welfare. 🇪🇺
Even if you read this outside of the EU, let's be informed: Europe is a model for the rest of the world for protecting its citizens’ civil rights and welfare system.
What originates in Europe inspires the rest of the world. For example, California Consumer Privacy Act was inspired by the EU’s General Data Protection Regulation.
Today, I will address the European Digital Markets Act (DMA) that has been discussed since 2020 and will be applicable as of the beginning of May 2023.
Let’s dive into it! 🚀
Ensuring fair and open digital markets
The DMA establishes rules to ensure open and fair markets among more and more powerful tech companies that exploit the digital market to their advantage. These powerful tech companies are referred to as gatekeepers.
The term gatekeeper is just another word for the tech giants. The law targets companies of at least 75 billion euros and an annual turnover of 7.5 billion euros. Indirectly, the law addresses MAMAA (Meta, Alphabet, Microsoft, Amazon, and Apple) and Chinese companies such as ByteDance or Alibaba.
But why is the EU “punishing” tech giants that have pushed innovation forward?
For a straightforward reason: given their privileged positions in the digital market, they are eliminating any potential competition (for example, by bundling or self-preferencing) and making it increasingly difficult for smaller companies to innovate.
In simple terms, the DMA aims to ensure a fairer and more open digital marketplace for businesses, innovators, and consumers.
Let’s look at how DMA will affect the AR/VR space and the so-called metaverse. In this newsletter, I define the metaverse as a vision for the next wave of computing that is ubiquitous, seamless, and immersive—making use of AR and VR technologies.
The DMA & the metaverse
Data doesn’t lie: in 2022, 84% of the European AR/VR market revenue was generated by the top 10 players. In the top three positions were Oculus (Meta) cumulating 52.1% of the market, Sony with 9.6%, and Microsoft with 8.0%. None of these top 10 players are EU-based, despite monopolizing the EU market.
DMA sets the basis for healthier competition and a healthier metaverse. With the DMA, gatekeepers will still hold the position of market leaders while following a new set of rules that guarantee that the competition remains open and fair.
DMA brings three main advantages to the metaverse: fairer competition, data privacy, and messaging interoperability.
1) Fairer Competition
DMA sets the basis for healthier competition and a healthier metaverse. Both gatekeepers and businesses will now know what to expect when using gatekeepers’ platforms.
According to a survey conducted by the European Commission, 88% of businesses and business users experienced unfair trading conditions on large platforms.
Remember the lawsuit Epic Games lost against Apple? In August 2020, Epic Games, a popular gaming company, sued Apple in the US for their 30% fee on every purchase made through the Apple store. Epic Games wanted fairer conditions for in-app purchases in their game, Fortnite, which sells coins to users. They asked Apple to either lower the fee or allow them to use their own in-app purchasing methods, which Apple prohibits. However, the court ruled in favor of Apple, stating that while its enforcement of anti-steering restrictions is anti-competitive, Apple is not a monopoly.
Starting in May 2023, this won´t be a problem in the EU anymore. Companies and developers will have the freedom to choose the platform to sell their products and services. Yay! This is a huge step towards more fair competition. 🤝
This historical decision will have major implications for creating a more open and competitive metaverse not subject to gatekeepers’ restrictions.
Other aspects of DMA include that gatekeepers can’t create uninstallable apps and can’t self-preference their own products in search results. For example, in the Quest store, Meta will not be allowed to put their own apps in the first positions.
2) Data Privacy
DMA states that gatekeepers should not merge data from different services used by the gatekeeper without prior consent from the user.
Gatekeepers often bury important information in long and complicated legal texts when they ask for consent from users. In theory, Meta will not be allowed to use data from Oculus with a Facebook account unless the user explicitly consents to it.
However, since August 2022, there has been a new Meta account for Oculus. To me, it's unclear if this is allowed under the DMA without prior consent from the user. It's possible that Meta created this "umbrella" account to englobe several of Meta’s services to comply with the DMA. Using a Meta account might allow cross-referencing user data from several of Meta’s services for targeted advertising without requiring explicit consent. 🤔
3) Messaging Interoperability
DMA opens the door to messaging interoperability in the metaverse.
This is interesting as it may open the door for interchannel communication in the metaverse. What do I mean? For example, you could send a message in a virtual world that your friend could receive on their phone.
DMA allows entrepreneurs and businesses to innovate in this direction and avoid being stuck using only one service (called "lock-in" effect) controlled by gatekeepers. There are some hints that interoperability for social media may come in the near future.
For now, what matters is that this act is a step forward towards interoperability between metaverse platforms. Hats off to DMA! 👏👏
So what can we do?
To all the innovators and business owners out there, don't miss out on the opportunity to see how the DMA can benefit your company.
👉 Head over to the European Commission's official website to get an overview of this new policy.
Keep in mind that it will take some months until we see how gatekeepers adapt to the DMA (or exit the EU market; they don’t have much choice after all, given the importance of the EU market globally), and smaller companies start to offer new services beyond the ones offered by gatekeepers.
In the end, gatekeepers hold a dominant position in the market and provide a path of “least resistance” for most users. We can expect them to continue leading the EU market alongside new emergent platforms that may inspire the rest of the world. ✨
That’s all for today.
See you next time! 😎
Many thanks to Serena Faccio, lawyer specializing in privacy & data protection, for pointing me toward valuable resources for this article.
News of the past month: I had a great time participating in the recording of a metaverse course for BitLab. Such creative production sets remind me of the time when I was doing photography in Paris years ago…
I also participated in Digital Dip XR, an event organized by Berlin Partner and VRBB. We explained how to ground expectations for XR in an ever-increasing momentum of instability and hype for the metaverse.
Thanks for reading until the end! Just click below 👇 to keep updated on the next ones. I am looking forward to having you as part of this expanding community.