- The European Union just agreed to pass the Digital Markets Act, a law designed to limit tech giants’ dominance in the digital economy.
- Experts say the law could help advertisers by forcing more transparency in data sharing, analytics, and pricing.
- Others, however, said it might create a slippery slope or benefit the very companies it seeks to regulate.
Earlier this month, the European Union followed the landmark 2018 data privacy law GDPR by agreeing to pass the Digital Markets Act, a sweeping plan to limit the ability of tech giants to dominate the digital economy — including the online advertising market.
The law applies only to companies that operate “core platform services” with more than $8.2 billion in annual global revenue or market valuations above $82 billion, such as Alphabet, Meta, Apple, and Amazon. Core platform services include search engines, social networks, cloud computing — and any related advertising capabilities.
The law regulates big tech behaviors, from how they use personal data collected from consumers to the interoperability of their services. The EU says the law should be finalized by October and must go into effect within six months of that date.
Some industry watchers, like Gary Kibel, partner at ad industry law firm Davis+Gilbert, believe the law will provide new opportunities for advertisers to better understand how their campaigns performed. But others like Gerard Stegmaier, partner in the tech and data practice of law firm Reed Smith, sounded a note of caution.
“More and better regulation may be desirable because privacy is important,” he said. “But that doesn’t mean it won’t have severe effects on markets and competition.”
Advertisers can grab more data from giants like Meta and Google
The DMA’s most significant effect may be allowing advertisers to do things like demand all the data gathered by their Facebook pages, said Kibel. Under the law, Facebook’s parent company Meta would have to put a process in place to deliver that data.
This could ultimately provide advertisers with more information about their own customers and help them fill gaps in the selective — and sometimes inaccurate — summaries they receive from the big platforms, Kibel added.
The law could also strengthen ad campaign measurement by allowing advertisers to take the raw data that Google, Amazon, and others gather and use third-party companies to process it, thereby conducting objective assessments of the big platforms’ analytics capabilities, said Stephan Loerke, CEO of trade group the World Federation of Advertisers.
Advertisers could also get more transparency around pricing. Many currently don’t know how platforms decide what to charge for inventory, and they can’t tell exactly how their budgets are distributed across the ad tech supply chain, said Loerke.
This access to data could also inspire advertisers to wean themselves off the big platforms. Advertisers traditionally have felt “completely attached” to the big platforms since they were the only sources for this campaign and user data, said Johnny Ryan, senior fellow at regulatory agency the Irish Council for Civil Liberties, which sued the tech giants in 2021 over data privacy practices. By separating the platforms from the data they collect, the DMA could create more space in the market for alternatives like TikTok and Snap, Ryan added.
But experts worry what will happen if the DMA’s purview expands beyond big tech
Some industry players are worried about a slippery slope effect.
“This law only applies to large platforms, but what if the greater transparency approach takes hold and they apply it beyond the portals to large advertisers?” said Kibel.
Or instead of releasing more data, the big tech platforms could respond by restricting its use entirely by opting to collect less data overall, so they can avoid sharing trade secrets, he said.
Others said the law could end up strengthening the giants it’s looking to regulate.
“The intention appears to be to negatively impact the US-based tech giants; unfortunately, the impact probably benefits them collectively,” said Brian Weiser, global head of business intelligence at WPP’s GroupM.
For example, Alphabet and Meta saw their profit margins and share prices rise significantly after the passage of GDPR, as many analysts had predicted. The law led to less choice for advertisers, analysts said, because the tech giants had plenty of resources to dedicate to compliance — and once they cleared the new regulatory bar, their market positions only grew more entrenched.
Some experts, citing that precedent, believe the DMA could have a similar effect.
“The law is a very imprecise tool, and when you’re seeking to regulate dynamic markets, there are often significant unintended consequences,” said Reed Smith’s Stegmaier. “In areas of ad tech and in respect to advertising, often well-intentioned laws have benefited precisely the people who were intended to be limited.”