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have optimized their marketing strategy and drive more revenue with Clavio AI. Clavio powers smarter digital relationships. Visit clavio.com-slash-vox to learn more. That's klavio.com-slash-vox. Hello and welcome to Decoder. I'm Neil Appetel, Editor and Chief of the Verge and Decoder is my show about big ideas and other problems. Today, we're going to talk about Europe. In particular, the collision between the European Union and Big Tech in the form of something
called the Digital Markets Act. The DMA was signed into law in 2022, but it went into effect earlier this month and it's the most consequential European tech regulation in a long time. The short version is that the DMA classifies companies of a certain size as gatekeepers and those gatekeepers now have to follow a whole bunch of new rules. The goal is to try and rein in the dominance of existing huge platforms in their products so that new competitors can
get a foothold in various markets. But it's also to give European regulators the tools they might need to prevent Big Tech's market power from getting this out of hand ever again in the future. To figure this all out, I talked to Verge reporter John Porter, who I have forced to cover you regulation for many years now. I'm very sorry, John. John, we should note, does not currently live in the EU because of Brexit,
but as a UK citizen, he used to. Like I said, I'm sorry, John. John has a unique perspective as someone who lives in Europe, but also as someone who lives in close proximity to the immediate effects of EU regulations. For example, the UK, even though it is not part of the EU anymore, has already proposed new rules that feel very similar to the DMA. That's not the case here in the United States, where some of the biggest ideas in the DMA feel like
total non-starters in Congress. So what are those ideas? How does the DMA work and what companies does it affect? John helped me break down the definition of gatekeepers and also something known as core platform services, which gatekeepers run. And we went over some
of the biggest changes the DMA forces on gatekeepers like Apple and Google. John and I also talked about the history of European tech regulation, including the GDPR, which most people blame for those cookie banners, and how the DMA feels like an evolution of what
regulators overseas have been experimenting with for years. It's a little early to say whether the DMA will level the playing field between big tech and smaller competitors, but John and I got into the ways in which we're already seeing major policy and product changes on things like iOS that felt impossible just a few years ago. First, we had to start at the beginning and we had to zoom out as far as we possibly could to help set the stage.
John Porter, welcome to the coder. Thank you for having me. I'm going to start with a very silly question, but I think it's important to just recognize the answer to this question is actually somewhat complicated. John, what is the EU? Neely, I really hope you wouldn't ask me that question.
Like, fundamentally, the EU is a collection of European countries with strong economic ties, but it's a huge mess of overlapping agreements and treaties, which is why you have stuff like the EU and then the European economic area, because there's not one overriding thing
the EU does. My take on the EU has always been that it's a group of countries based around the idea of having one big single market to deepen trade relations between these countries, and through having a single market, hopefully you have one regulatory regime for the whole market to reduce those barriers that might crop up if you have different regulatory regimes between different national markets, if that makes sense.
It does. The way it was always described to me was that the United States is a huge market, so you can start a company in United States, so you get access to 300 million some people. You start a company in some European country, you have to fight to get access to that many people to sell things to, we'll just make one big mark. And then it's very complicated underneath it, just like briefly for people, how is the EU expressed for the average person
in Europe? Is it something you can feel? Is it other European bureaucrats wandering the streets making sure you're not buying the wrong cheese? Like, how does this actually work for people? Well, the first time I've experienced I can give is someone who lives in the UK and is only
ever lived in the UK, where the EU is kind of a bogie man. You kind of have national politicians going like, this is how we would like to run our country, but then through their obligations as an EU member state, what they can do is always limited by these international obligations.
And so you would never feel the EU on a daily basis, but then when you, for example, decide to leave the EU, it's only then that you would kind of realise that a bunch of stuff that you thought was coming from your own government is actually due to EU funding or regulations that came through national avenues, or actually kind of EU directives that your national government
were kind of implying in its own country. When the UK was still a member of the EU, I, for example, couldn't tell you who my representative was in the European Parliament. There kind of wasn't that direct relationship, which you would kind of expect from a national parliament. I think that makes the average citizens relationship with the EU complicated, because it's always mediated through a kind of a national layer that always seems to take
primal sake. This is a loaded question to ask someone in the UK, but how do people in the EU feel about the EU? I promise to audience, we will get to like the actual regulations, but just the fact that talking about the existence of the EU prompts this many size, I think is important to get out. Well, yeah, I mean, it's, it's difficult to say because,
like, no other EU country has gone through the process of leaving the EU. So, you know, I live in a country that was so fed up with the EU that 52% of us voted to leave, then spent four years debating exactly how we wanted to leave, deciding whether to, you know, shoot ourselves in the photo, shoot ourselves in the kneecap, and eventually we decided to just hack off the whole leg. I basically don't know how to answer that question, because I think the, I think Europe is
just such a huge, diverse continent. But certainly from the UK perspective, I think that the view of the EU was one of kind of putting unfair restrictions on what government can and can't do. And because, as, well, I wasn't a EU citizen, not having that relationship with the law makers,
it felt less democratic than I think the EU actually is. I think the EU is a very democratic organisation, but it kind of lacks that, that personal touch with citizens that makes it feel a little bit removed and bureaucratic as opposed to democratic and directly accountable. The EU is a political body, has political characters. The two who keep coming up when we talk about tech are Margaret Festegger and Tiri Breton. Tiri Breton is committed for the internal market,
so he's leaving the charge on a lot of these, this new wave of like EU regulations. So, obviously, the digital markets act that we're talking about today, the Digital Services Act, and a lot of those kind of like interrelated attempts to kind of reign in big tech, whereas Festegger, I think, is a lot clearer cut because she's become the face of the European Commission's anti-trust
regulation. She's effectively referred to as the, of the EU's anti-trust czar. A full job title is Executive Vice President of the European Commission for a Europe fit for the digital age, which is the most EU job title I think I have ever heard. But she is the one. It's very good. It's amazing. It's like it's almost a troll. You're almost like, this is really... But yes, she's the one that kind of like fronts a lot of the specifically anti-trust decisions that the EU has been making.
Anti-trust regulation, I don't know if you've heard it, it is not the sexiest piece of legislation around. And so you definitely get the sense from both of them they're kind of trying to put their own, like put a personal face on front of these things. Breton is often tweeting pictures of his own face, Festegger. She's kind of trying to humanize these kind of big grand anti-trust decisions that the EU is making by saying playing Fortnite on a phone to kind of symbolize how the
DMA might bring Fortnite back to iOS. And so yeah, I think there's like certainly a sense that these two are kind of as well as spearheading these regulations are kind of also using them to build personal platforms. To what end I think is less, less clear. But yeah, there's like certainly there's a kind of like brand building element to this with both of them. So that's the EU stage set. The EU has its political actors and their passing laws. And the big one that just recently went into effect
is the Digital Market Act. The Digital Market Act is an EU regulation that's basically trying to make digital markets fairer and more competitive and kind of stop big, largely American tech companies from kind of being able to put their thumb on the scale and tip things in their favor. Really, the easiest way of looking at it is in this context of a decade plus of kind of EU regulatory anti-trust scrutiny, where the EU has made like past a bunch of decisions about things that these
big tech giants can and can't do. And the DMA, you can kind of look at it as a way of codifying a lot of those decisions into a kind of, okay, we've looked at all these various complaints, we've identified a bunch of behavior that we believed be anti-competitive. And now we're going to codify that in a law so that when anti-competitive stuff comes up in the future, we don't have to spend
seven years working out if Google Shopping breaks anti-trust law. Next to the DMA is another law called the Digital Services Act, which is also changing how a bunch of these companies operate in the EU. What is the DSA? How is that different than the DMA? So the Digital Services Act is kind of more about services and moderation. So the big impact of the Digital Services Act so far, which applies to very large online platforms and very large online search engines, is about
kind of moderation decisions. So it's stopping X, the platform for me knows Twitter, from being able to disseminate illegal and interiors content, and kind of make sure that risk assessments are in place and to make sure appropriate moderation strategies are in place to make sure that that stuff doesn't
spread. There's also another element of it where a platform such as the App Store is allowed to moderate but kind of has to be more consistent in how it moderates and give users the right to appeal and that sort of thing. So the DSA and the DMA are very closely related, but they do kind of target separate areas. We have to take a quick break. When we're back, John and I will dive into how Apple, one of the six gatekeepers under the Digital Markets Act, has started lashing out.
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We're back with Virgil Porter, John Porter, talking with the EU's Digital Market Sack, and how Apple is bringing new meaning to the word compliance. Right now, the big tech companies are reacting loudly and fervently to the DMA, which mandates some pretty big changes in how they do business. The law identifies and targets companies by defining them as something called gatekeepers. A gatekeeper is a company that basically owns and operates a core platform service.
There was kind of 10 categories or so of core platform service, and that needs to have over 45 million monthly active users in the EU, 10,000 yearly active business users, and then the company itself needs to have a turnover in the European economic area of 7.5 billion euros in the last three financial years, or a market cap, at least 75 billion. That's quantitatively what it's
looking for. In simple terms, it's companies with significant market power that operate, core platform services that are essential to the digital economy, really, whether that's a search engine, or an app store, or a browser. Something that is an important gateway between businesses and their customers, that the EU is like, okay, it is important that this abide by antitrust rules. So that's alphabet, Google, Amazon, Apple, bydance, meta, and Microsoft.
I think I'll have within those, there's like, over a dozen or so, individual core platform services, and the rules themselves apply to the services. So as an example, the DMA applies to messaging apps and app stores, but even though Apple operates both a messaging service in the form of iMessage and an app store in the form of the app store, only the app store has been designated as a core platform service, and so the DMA's rules do not apply
to iMessage. So there are some gatekeepers, they operate some core platform services that are now regulated in specific ways. What do they have to start doing? There's like a whole bunch of staff at a high level, it's kind of rules against being able to self-preference their own services. So for example, they need to let users be able to uninstall pre-installed apps. So if you're on iOS,
the DMA says you should be able to uninstall Safari. If you're running Windows, the DMA says you should be able to uninstall Edge, and then you should also be able to change defaults, so whether that's like a navigation app on iOS or like a search engine on Windows, they also need to be able to allow third-party apps and app stores, so they can't just say, the app store is the exclusive way you can get apps onto your iPhone, and then there's a
kind of interoperability element there as well. And so the most significant aspect of that is probably with messaging apps, whether DMA says that messaging apps that are defined as core platform services need to offer interoperability with competitors. There's something you see a lot in tech called the network effect. People use a service because the people they know are also using that service. That's how Facebook got really big, for example. Everyone wanted to be on Facebook,
because everyone else was on Facebook. There's a related idea called Switching Costs, products that have big network effects are really sticky, and it's really hard to switch away from them to a competitor. After all, you don't want to be the one to leave an entrenched platform and go try something new, because all your friends aren't all there. And nobody wants to be the first one to make the jump, so the whole network just kind of stays where it is, and the platforms
just keep getting bigger and bigger. So the idea behind interoperability provision is to give competitors a chance to break into the market. WhatsApp is the biggest messaging platform in the EU, and the theory is that if a new startup can interoperate with WhatsApp and you don't lose
your contacts or your chats, maybe that new business stands a chance. But there's a real tension there with real trade-offs, especially when it comes to chat platforms like WhatsApp, privacy and security are real things that real people really value. The whole way it markets itself is as a secure and private messaging service, so it has very
strongly pushed back against this idea that it should be asked to interoperate. The DMA does kind of contain provisions saying that, oh, you shouldn't weaken encryption via interoperating, but I'm not convinced, personally, whether just because you can receive messages from
a third-party messaging service, whether people will actually want to, because any third-party messaging service needs to kind of maintain parity with what WhatsApp already does, its ability to offer something new and different and actually entice users over is, I think that's going to be a difficult balance to hit. One of the biggest changes the DMA is bringing to the European market is around app stores. Apple in particular has fought very hard for a very long time
to be the only distributor of apps on iOS and the iPhone. If you're using Android phone, you can install apps without using the Google Play Store, and if you're using Windows PC or Mac, you can install apps from basically anywhere you want. If you're on an iPhone or an iPad, by design, your options are extremely limited, but the DMA is going to change that in theory.
It says that gatekeepers like Apple need to offer a framework through which alternative app stores can exist on iOS, and users need to actually be able to use them. You need to decide as a developer, am I going to stick with the old way of Apple doing things on the app store, or am I going to opt into its new business terms, which in some ways give you a
lot more freedom. Means you can go through alternative app stores, means you can use your own payment processes, means you can link out to your own website, but it also carries with it the Apple's new Core technology fee, which is a 50 cent per download charge that applies after the first
a million downloads. Apple's argument is that, you know, like whatever high percentage of developers won't pay anything more under the new terms as the old terms, but the kind of the unsaid bit is, but if you're a really big developer like, say, Spotify, you probably will, if you have millions and millions of downloads in the EU, and particularly when that Core technology fee kind of is an annual charge. That Core technology fee exists because another part of the DMA is allowing developers to
use alternative payment platforms. That's what Epic and Apple had their long court battle over. Apple only allowed app developers like Epic to take payments from people if those payments went through Apple's platform, making sure Apple got a cut of the money. The DMA says Apple has to allow app developers to use alternative payment platforms. Additionally, the DMA says Apple has to allow third party browser engines in iOS. Right now you can download Chrome on the iPhone,
but it's just a wrapper around Apple's browser engine, the thing that actually does the work. Now Google has to let Apple and others build the entire browser, introducing more competition into the mobile web, and Apple has to allow its customers to choose their defaults, which is a new idea for Apple customers, but it's not new for the whole category of phones and computers. In the EU, Android, and Windows users get something called choice screens when they set up a new device,
asking what they'd like their default browser and search engine to be. The developers of smaller browsers like Brave and Opera say they've seen downloads spike significantly in the day since the DMA went into effect, but historically those choice screens have been all about reducing the market share of Chrome, which has been the dominant browser on Windows and Android phones for a very long time. The question is whether putting Chrome into direct competition with Safari on the iPhone
will have any impact at all. Most people, when faced with that browser choice screen, immediately go, I'm going to click on Chrome. I think when it's a choice between Chrome and Safari on a platform that has historically been based around Safari, where Safari has been a very important figure within that platform, I think the brand recognition of those two browsers is way
more equivalent than Chrome versus Brave. I tried to be optimistic about this sort of thing. My hope is that it will be the alternative browser engines on iOS that the DMA asks for that will kind of give third party browsers a foothold and allow them to give users an argument for why they should switch away from Safari or Chrome that's based on WebKit because they can actually do something original and new rather than just going, oh, we just have a different wrapper around
the same old WebKit browser engine. But I think in the short term, it's still going to be caramel the way down. Apple has not been a fan of these regulations to put it mildly. Their press releases announcing developer changes to comply with the DMA is full of passive aggressive and frankly just aggressive aggressive language about how the new law is creating privacy
and security risk for iOS users. And even Apple is technically playing ball with the DMA, it's approach to it has been characterized by the phrase malicious compliance, which basically means Apple is making it as annoying and expensive as possible for developers to not use the app store. John's already mentioned Apple's core technology fee, which is the company's way of making sure it's still gets paid even if an appmaker goes through a third party store or payment system.
Spotify in particular called that core technology fee quote extortion. Epic has already somewhat inevitably begun to butt heads with Apple over the DMA, Apple Band, and an unbanded Epic's EU developer account this month. It's getting really messy for Apple, and there's still a lot of unknowns about how the company's approach to DMA compliance will actually play out. Apple's been the most vocal about its opposition to the DMA, but there are five
other gatekeeper companies in the mix. Meta, Amazon, Microsoft, Google, and Byte Dance, which runs TikTok, that also have to comply. While these companies may not particularly love the changes, they are being slightly less dramatic about it all.
Google certainly put out a press release when it was saying how it plans to comply with the DMA, where it kind of said what it was doing, but then very diplomatically at the bottom said like, we were a bit concerned that some of these things will lead to less choice, which I take to mean that none of these companies are happy, but a lot of them have made that calculation that it's better for us to comply. I think for Apple, this open warfare is kind of new
territory. Google got fined billions in antitrust fines by the EU over the last decade, so it's already been sparring and it's already been like having to work with the EU to find
resolutions to the EU's issues with the way it operates. Whereas Apple's first big antitrust fines from the EU came this year, basically just on the eve of the DMA coming in and it was in the Spotify case, I think in effect, Google's attempt to comply with the DMA basically started like five years ago because it was already having to put in Android choice screens about a browser
selection stuff. And so there's this kind of sense from the likes of Google and Amazon that the compliance has already started and the battle is, I don't want to say lost because that implies it's a zero-sum game, but they've already had to kind of make those sorts of concessions. We have to take another quick break. When we're back, John and I discuss the history of EU tech regulation and what we can learn from the GDPR.
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which is, well, it actually work. There's some history for us to look at. This is not the first time the EU has adopted a big sweeping piece of tech regulation. The general data protection regulation or GDPR went into effect back in 2018. Here in the US, the GDPR is pretty much just the cookie banner regulation. It's the thing that made all those except all cookie boxes pop up all over the web. But the GDPR isn't for Americans. It's for Europeans. And its impact in Europe has been
mixed. So much of GDPR enforcement has had to go through Ireland's data protection regulator because so many of these tech giants have their European headquarters in Ireland. That's kind of created this bottleneck where at times there have been like over a dozen different data protection issues being examined by Ireland's data protection regulator. That's left us with the most tangible impact of GDPR being like having to click through an annoying cookie banner every single time we want
to use a website. And so even though it does contain provisions like being able to request the data accompanying has on you and stuff, it's been hamstrung by this very prominent annoyance. I get sucks. And I don't think it will be quite the same with the DMA. The fact that the DMA applies to relatively limited number of companies should help with that. It's in some ways even broader, but in others kind of much more narrow because of the kinds of gatekeepers and core platform services,
it's designed to target. And so hopefully that means that when a company isn't in compliance with the DMA, like action can be taken. And it's not going to get caught up in this like long running like regulatory action that means that people don't see the impact of it. Data protection regulation, you just you don't feel it in your day to day life very much apart from when you do want to share your personal data with a company or you do want to just browse the internet and it's fine if they
use first party cookies. What do you think this goes from here? What happens next? What has already changed and what changes do you think are to come? I could go either way on whether it's actually going to be effective, but suddenly from my perspective, it doesn't feel like the DMA is kind of as disruptive as a bunch of cookie banners. And even if some people don't like choice screens, like ultimately they don't kind of come up that often. And so the user experience aspect of it,
I don't think is damaged quite as much. But yeah, I mean, is your average person going to jump through the hoops to install a third party app store on iOS? I don't think so. I can't imagine saying my like both my iPhone and parents doing it, but is like a younger person who wants to install an emulator on their iOS device prepared to jump through a couple of hoops to get a third party
app store up and running. Maybe that like that feels like a more a more likely scenario. And so I think when you kind of have these aspects where you know, yes, there are kind of hoops to jump through. And yes, you'd have to pick some of those not the default, but they're actually going to be real tangible benefits in terms of there are these apps that you can now install that will do things that are not allowed on Apple standard app store. I think then the argument for will this
actually move the dial becomes a lot stronger. Just change defaults. I think is is one of those things that feels like a very small issue, but if you're a kind of a died in the wall like Google Maps user and you just want to make that your default, I think that's just going to be one of those small things that is going to happen. So Apple has kind of like quietly set it in one of their compliance
reports. This would be a setting that you can change in a future future iOS update. I imagine when that does roll out that will be pitched as a, oh hey, like here is a nice feature for our users. And I don't even know that people will associate it with the DMA when that actually like finally comes out, but stuff like that stuff like being able to change your default search provider wrong windows. I think is a nice like small change. I think being able to uninstall the browser
wrong windows that you never use is a nice change. So I think I think those are the things that will end up having a kind of a small but measurable impact. The thing that I think might take a while to kind of to hash out is the is Apple's business, like alternative business terms. I haven't been able to see that there's been anything official from the EU saying that they're not happy with how it's how to roll out, but suddenly a bunch of Apple's critics are very unhappy with how
it's rolled out and there's been like big open letters written and stuff. And so I would not be surprised if there is like more back and forth to come on that point. I would not be surprised if Apple's position changes again in the not too distant future, hopefully not before this episode goes out. That to my mind is probably where the big the big fight is going to happen. Yeah, it also seems that Europe is not quite done regulating the tech industry as we are speaking.
Pretty sweeping AI act is being approved. Is there more desire to continue regulating? Is is this the big set of regulations that's in place? And now we're going to enforce them and do the back and forth or is there more to come? I think the regulations will continue until morale improves. No, I yeah, like it has been this big this big wave. And I think the criticism with regulations like these is the oh, well, you're regulating for the last 10 years and really
you should be regulating for the next 10 years. And I think the EU's response to that has been we have designed these regulations to be updateable. We've already received with the Digital Services Act. They announced their kind of initial set of very large online platforms and search engines and they've already kind of like added added a few more to that as time has gone on. I was looking
through the DMA FAQ on the EU's website today. And although there are kind of eight categories of core platform services that have already been defined, there are two categories they actually haven't used yet. Virtual assistance and cloud service providers. And so like clearly they kind of design this in such a way so that they can slot in more core platform services over time. I think
the hope is that future action can kind of be structured into this existing framework. And that they can tweak the framework rather than having to completely make things a new every single time. John, thank you so much for coming on the show. This was great. Thank you so much. My pleasure. I'd like to thank John Porter for taking the time to join me under Coder and thank you for listening. I hope you enjoyed it. If you have big ideas on what we should cover or who we should have in the
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