Amid growing recognition of the power wielded by the Big
Tech players, governments worldwide have pushed to enact new regulations and
increase 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. 

In addition to the six tech companies initially designated
as gatekeepers (Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft), in May
2024 the European Commission added Booking Holdings, namely Booking.com, as an
additional gatekeeper, giving the OTA 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 enforcement is in its very early stages, changes made in response to
the regulation are already disrupting the status quo for travel businesses,
including some European hotels. This is a preview of Phocuswright’s full report How the EU Digital Markets Act (DMA) Will Impact Travel.  

Inside the
Digital Markets Act

The Digital Markets Act establishes criteria
for identifying large digital platforms (i.e., gatekeepers) operating in the
EU, focusing primarily on: 

• Size, based on annual revenue or market
  capitalization;
• Control of a core platform service used as a
  gateway for business users to access end consumers; 
• An entrenched and durable position

Companies can be designated as gatekeepers for one or more
platform services across any of 10 categories: 

• Online intermediation services
• Online search engines
• Online social networking services
• Video-sharing platform services
• Number-independent interpersonal communication
  services (i.e., messaging apps)
• Operating systems
• Cloud computing services
• Advertising services
• Web browsers
• Virtual assistants

Companies designated as gatekeepers are subject to specific
requirements and restrictions. For example, gatekeepers are required to: 

• Allow third parties to interoperate with the
  gatekeeper’s services
• Allow business users to access the data
  generated by using the platform
• Provide advertisers access to performance
  metrics and verification information
• Allow business users to promote their own offers
  and conclude contracts with their customers outside the gatekeeper’s platform
• Receive consent from users before combining or
  sharing user data between platform services; if user does not consent, provide
  a less personalized but equivalent alternative

Gatekeepers are prohibited from: 

• Leveraging the data of business users for
  competitive advantage when gatekeepers compete with them on their own platform
• Ranking the gatekeeper’s own products or
  services more favorably than those of third parties (i.e., self-preferencing)
• Requiring app developers to use the gatekeeper’s
  services, such as payment systems, in order to appear in app stores
• Tracking end users outside of the gatekeeper’s
  core platform for targeted advertising without consent

The
gatekeepers

Initially, the European Commission designated six tech
companies (Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft) as
gatekeepers across 22 services, and these services were required to comply with
DMA regulations beginning March 7, 2024. Subsequently, the Commission added
Apple’s iPad OS on April 29, 2024 and Booking.com on May 13, 2024, with each
having six months from the date of designation to comply. 

Since the initial
March compliance deadline, the Commission has already opened non-compliance
investigations into Alphabet, Apple and Meta, with more likely to come. If
a company is found to be in violation
of the DMA, it could be subject to fines of up to 10% of its global annual
revenue, increasing to up to 20% for repeat offenses. 

While the ongoing investigations may mandate additional
modifications, the initial gatekeepers have already enacted numerous changes.
For example, ByteDance’s TikTok
launched a Data
Portability API for developers; Apple
added over 600 new APIs, added distribution and payment options for developers,
and made changes to iOS, Safari and the Apple App Store in the EU; Google
has made changes to search results, launched consent banners for sharing data
across Google services, and added search engine/browser choice screens, to name
a few.

Impacts
and implications

While it will be years before the real-life benefits and
consequences of the DMA will be fully known, the structure of the law,
identities of the gatekeepers and the changes made to date are open to
analysis. The full report delves into the two categories:

• The Law of Unintended Consequences
• The Competitive Landscape

Anticipating
winners and losers

The DMA is designed to curb anti-competitive practices and
improve access to digital markets. The practices that gatekeepers are required
and forbidden to do would, in theory, benefit gatekeepers’ business customers,
including SMEs, and consumers. While both groups will certainly see some
benefits, the long-term impact of the DMA is likely to be complicated.

Some key factors to consider, which are outlined fully in
the full report:

• Gatekeepers will promote their competitive
  interests
• Gatekeepers may think locally, act globally
• The DMA’s impact could be amplified via copycat
  regulation
• Gatekeepers may scrap some tech in Europe
  altogether
• The impacts of the DMA may not match
  expectations

To better understand the complexity of how the DMA may play
out, the full report takes a closer look at each of these:

Stay
tuned

As existing gatekeepers establish and refine their response
to the Digital Markets Act, there are likely to be additional changes that
impact travel companies, sometimes in unanticipated ways. As gatekeepers
balance their own competitive interests against regulatory requirements,
short-term disruptions are likely for travel suppliers, advertisers and end
users.

In the longer term, however, gatekeepers like Google and Booking have a
vested interest in maintaining strong relationships with business customers and
in optimizing the user experience. 

Over
time, advocacy from hotels and other stakeholders will likely forge a new
equilibrium. During the next five years, we are likely to see some of the
benefits of the DMA come to fruition, but the negative impacts will also become
evident.

Despite the threat of regulation, new gatekeepers could emerge, and we
may see additional regulations modeled after the DMA in other markets.
Ultimately, it is innovation and new technology – not regulation – that has the
greatest potential to disrupt the status quo.