Regulatory pressure is only heating up for the internet’s tech giants as the Digital Markets Act (DMA) comes into effect this week in the European Union.
On November 1, the DMA, aimed at reeling in dominant “gatekeeper” platforms, officially became law. The Digital Services Act (DSA), geared toward tackling illegal content, such as hate speech and abusive material on online platforms and marketplaces, is close behind, going into regulation by November 16.
The new laws, approved by the European Parliament in July, are expected to have wide implications for marketers around the world, with experts saying they will ultimately be advantageous, likely leading to interoperable ad experiences as well as more transparency and trust in online advertising and, at the same time, making first-party data even more valuable.
“The objective of these laws is to create a safer and more competitive online environment, for both businesses as well as for consumers, so the DSA and the DMA should help make the internet a more open environment,” Gabrielle Robitaille, the senior digital policy manager at the World Federation of Advertisers, tells The Current.
The new DMA law introduces new data-sharing obligations that are meant to enhance the competitiveness of the market and are aimed at addressing concerns regarding ad measurement, ad pricing, and transparency around consumer data. EU official Gerard de Graaf, who helped pass the DMA, explained to Wired that the law will also compel platforms like Amazon, Google, and Meta to break down their walled gardens and allow competing apps and platforms to partake in their environments. “If you have an iPhone, you should be able to download apps not just from the App Store but from other app stores or from the internet,” he told Wired.
The tech giants, especially those that rely on the buying and selling of ads, have pushed back against these and other regulations, as The Wall Street Journal recently reported.
“As it stands, large online platforms have a quasi-monopoly of the data economy, especially online advertising,” explains Chris Combemale, co-chair of the Federation of European Data and Marketing (FEDMA) and CEO of the Data and Marketing Association U.K. “We believe the DMA’s current proposals should tackle the current asymmetric access to data and establish stronger relationships between advertisers and consumers founded on transparency and trust.” FEDMA will also be working with the European Commission (EC) to develop an industry code of conduct by February 2025.
Overall, advertisers and marketers should benefit from the new laws. “With the right checks in place, advertisers will be able to independently verify the performance of the advertising services they purchase and better audit ad spend,” says Robitaille. “We believe this is a crucial step toward lifting the lid on some of the transparency challenges advertisers have been facing for several years and creating a more balanced digital advertising market.”
The DSA law, meanwhile, bans certain types of targeted advertising, such as ads aimed at children and ads based on sensitive data. Very large online platforms (VLOPs) and very large online search engines (VLOSEs) will be required to make public any ads that have been exposed by the new law. “This added transparency will be essential for building consumer trust in advertising,” says Combemale.
With even more regulatory pressure zeroed in on the use of third-party data from these new laws, Robitaille predicts that first-party data, already in high demand with advertisers, will only continue to gain value.
“Many of the regulatory developments happening across the world, whether DSA or privacy and data protection regulations more broadly, limit to some extent the use of third-party data for advertising,” she says. “This, together with market developments, such as the deprecation of third-party cookies, highlights the pressures mounting on third-party data, and the value of first-party data.”
Burden falls on platforms
Since the EU approved both pieces of legislation this past July, more details have emerged about how the EC plans to enforce them. The antitrust regulators will be forming a 40-person team, along with a chief technology officer for the directorate, Reuters has reported. The unit will be spearheaded by antitrust veteran Thomas Kramler, who is already handling the Apple and Amazon antitrust investigations.
Essentially, the new laws require the tech platforms to make sure they’re compliant with the DMA by specific deadlines in the middle of 2023. Companies that don’t comply face hefty fines of “up to 10 percent of global turnover” that only increase over time. Similarly, for the DSA laws, online platforms will be obliged to comply by specific dates, depending on their size. This will be overseen by each EU member state.
Robitaille emphasizes that all obligations will fall on online platforms, not the advertisers appearing on those sites: “Even though there will be repercussions for [advertisers] and the advertising ecosystem at large, the obligations, and therefore the responsibility to comply and potential repercussions for noncompliance, are on the tech platforms, not on marketers.”
The Interactive Advertising Bureau (IAB) Europe says it’s ready to support platforms and companies preparing to apply the DSA rules, and DSA ad transparency requirements, Greg Mroczkowski, director of public policy at IAB Europe, tells The Current. “Now is the time to think about compliance,” he says.
Combemale does not expect gatekeeper tech platforms to give up the fight that easily. He points to the “substantial lobbying efforts against both pieces of legislation by large online tech platforms until now.” “Some of the obligations set out in the DMA will require further discussions between the large online platforms and the commission, especially the obligation to give all advertisers access to performance data,” he says. “This ongoing dialogue represents an opportunity for gatekeepers to work on the technicalities of these provisions to try delaying their implementation.”