Analysis-Google’s court setback is good news for landmark EU tech rules

Google’s court defeat on Wednesday is set to strengthen EU antitrust regulators’ hand against Big Tech as they roll out landmark rules next year to rein in their powers and force them to play fair with rivals.

Critics and rivals of Alphabet (NASDAQ:) unit Google, Amazon (NASDAQ:), Apple (NASDAQ:) and Meta fear the deep-pocketed tech giants may challenge the new rules known as the Digital Markets Act (DMA) in court, tying up regulators and jamming the process.

The DMA sets out a list of dos and don’ts for gatekeepers, companies that control data and access to their platforms, targeting U.S. tech giants’ core businesses and practices which regulators say are aimed at reinforcing their dominance.

To make it easy for users to switch to rivals, the companies will have to allow users to remove pre-installed apps, change default settings, install third-party apps and app stores and unsubscribe from core platform services.

Smaller competitors will be allowed to inter-operate with the dominant company’s own services and promote their offers and conclude contracts with their customers outside the gatekeeper’s platform.

Under the rules, gatekeepers are banned from using the data of business users with whom they compete, unfairly rank their services and products above rivals, or require apps developers to use their payment systems.

“The judgment strengthens the hand of the Commission. It confirms the Commission can use antitrust proceedings as a backstop threat to enforce rapid compliance with digital regulation also known as the DMA,” said Nicolas Petit, professor at European University Institute.

A two-pronged approach will help regulators, said Thomas Hoppner, a partner at law firm Hausfeld.

“Without effective antitrust enforcement and targeted legislation, Google’s core platforms will remain unassailable and a major source of distortions of the competitive process online. This case was just the beginning, but a very important first step,” he said.

EU lawmaker Andreas Schwab said the judgment underscores the rationale for the DMA.

“Although this judgment comes many years late, I welcome the decision of the General Court that today confirms the need to ban such practices through specific ex ante obligations,” he said.

“This is the second strike that Google has received almost a year after its sister judgment on the Google Shopping case, and on the same day that the DMA Regulation is officially signed, we can definitely declare ‘game over’,” Schwab said.

The Commission should take note of the court’s disagreement with its argument on one point, said Ioannis Kokkoris, professor at Queen Mary University of London.

“The reasoning behind annulling part of the decision is based on the evidence submitted and the AEC (as efficient competitor) test while the Court explicitly accepts the conduct being abusive in itself,” he said.

An AEC test allows regulators to examine a dominant company’s costs and sales prices to see whether it is charging below-cost prices.

“This will be a good lesson on the quality of assessment the Commission will need to conduct in enforcing the DMA when it comes to investigating exclusivity conducts in pre-installation cases,” he said.