‘Thread’-ing the Needle: ‘Gatekeepers’ and the DMA
On 6 July 2023 (or 5 July 2023 in the US), Meta launched ‘Threads’—a text-based social media platform that is linked to users’ Instagram accounts.1 The launch of Threads closely followed the announcement by the European Commission (EC) on 4 July 2023 that Meta and six other Big Tech companies have identified themselves as meeting the thresholds to qualify as potential gatekeepers under the Digital Markets Act (the “Act”).2 Threads attracted over 30 million users on the first day of its launch and has now surpassed the 100 million user mark. However, despite its initial success globally, Threads has not been launched in the European Union (EU). Meta has not provided any official reasons for this but has referred to the complexities of complying with upcoming EU regulations in public statements.3 These statements from Instagram and Meta officials have been interpreted by third party media outlets as referring to the Digital Markets Act (DMA) and privacy rules as the cause.
The EC established the DMA with the aim of ensuring more fairness and innovation among online platforms and to seek to foster innovation in the digital sector in the EU. Key benefits of the DMA include its potential capacity to enhance the ability of start-up technologies and smaller, more dynamic, market participants to compete with and innovate on a more equal footing with Big Tech. The DMA aims to achieve these benefits by limiting the ability of gatekeepers to impose unfair/anticompetitive terms and conditions on market participants, with the aim that this will result in consumers having more services to choose from, more opportunities to switch providers, and the benefit of better prices and higher quality experiences.
As such, to the extent the complexities of the DMA (as well as privacy rules) in fact do contribute to Meta’s current decision not to launch Threads in the EU, this demonstrates an important potential downside of the DMA—that is, the risk that gatekeepers may seek to limit the compliance burden that the DMA imposes on them by restricting the nature and types of services they offer in the EU going forward. The result being that somewhat perversely the DMA could in fact result in consumers in the EU being left with fewer choices and innovations than consumers elsewhere in the world.
The EC will now check the submissions of Meta and the other companies that notified the EC that they meet the thresholds to qualify as gatekeepers and designate gatekeepers for specific platform services by 6 September 2023. These gatekeepers will then have six months to comply with the obligations under DMA, that prescribe more generally that certain conduct is to be complied with or avoided (e.g. gatekeepers will no longer be able to lock in users in their ecosystem nor will they be able to “self-preference” by exploiting the advantage associated with being the gatekeeper to treat their own products and services more favourably). In practical terms, this means that gatekeepers will more broadly no longer be able to engage in certain conduct that includes concerns such as tying (i.e. requiring users to subscribe for one core platform service as a condition to accessing another service) as well as non-traditional concerns related to issues such as data collection (in particular refraining from combining users’ data collected on a core platform with personal data collected through another service operated by the gatekeeper) and transparency.
Entities designated as gatekeepers are already working hard to ensure that the services they currently offer in the EU will comply with the DMA obligations that may begin to apply as early as Q1 2024. Against this backdrop, instead of seeking to determine and comply with the additional burdens that could come with launching a new product or service in the EU, an alternative approach these entities may undertake would be to refrain from (or at least delay) launching new products/services in the EU while the real world impact of the stringent and growing regulatory burdens imposed by the EC are fully analysed. Meta’s public comments beg the question as to whether other tech entities (in particular potential gatekeepers) may adopt a similar approach in the future and, if so, if this could result in EU consumers being left behind when compared to their global counterparts.
Being a market of c. 450 million users (almost 271 million of which are already on Instagram), the EU is likely to remain a key market for digital platforms going forward as they seek to benefit from the network effects that can flow from reaching as many consumers as possible. While the EC is likely to take great comfort in this, and view Meta’s approach with Threads to be an anomaly, it would be prudent for the EC to see this as a potential catalyst for taking stock and assessing whether the growing regulatory burden Big Tech (and the digital sector more generally) is facing in the EU could be reaching a tipping point. After all, it is not just the DMA that has attracted this type of scrutiny from those that fall within its ambit - certain AI companies are reportedly considering quitting the EU in order to avoid being caught by the EC’s proposed AI Act. 4
1 According to Instagram help pages, when you start an account with Threads, it will be connected to the Instagram account you logged in with. Deleting your threads app causes a user to lose access to Instagram as well (although Meta is allegedly working to stop this from happening).
2 The others being Alphabet, Amazon, Apply, ByteDance, Microsoft and Samsung. See here: https://ec.europa.eu/commission/presscorner/detail/en/STATEMENT_23_3674. These are all companies that are deemed to have a significant impact on the internal market (shown by annual EEA revenue of at least EUR 7.5 billion in each of the last three financials years or an average market capitalization of at least EUR 75 billion) and have a “core platform service” that has served more than 45 million monthly active end users and more than 10,000 yearly active business users in the EU during the last three years.
3 See: CNN, “Threads, Meta’s Twitter competitor, is not yet available in the EU due to regulatory concerns” available here https://www.cnbc.com/2023/07/06/metas-threads-not-available-in-the-eu-due-to-legal-complexity.html; and The Verge: “ Here’s why Threads is delayed in Europe” available here: https://www.theverge.com/23789754/threads-meta-twitter-eu-dma-digital-markets.
4Akin publications and insights regarding AI and Machine Learning are available here: https://www.akingump.com/en/insights?in=1053282.
