The European Union's Digital Markets Act (DMA) is making headlines as it aggressively targets Big Tech companies in an effort to foster competition. Notably, Microsoft faces antitrust charges for bundling its Teams software with its Office 365 suite, while Apple has hinted at potential delays in rolling out new AI features in Europe due to the same regulation. Although the DMA aims to curtail monopolistic practices, its stringent measures could backfire, negatively impacting the very consumers it seeks to protect.

The Digital Markets Act (DMA) is the EU's latest antitrust venture, claiming to ensure fairness and contestability in the digital sector. It introduces criteria to identify "gatekeepers" — large digital platforms providing essential services like search engines, app stores, and messaging services.

These gatekeepers face a slew of obligations and prohibitions, with the goal of preventing them from misusing their market dominance. The DMA, which was adopted in September 2022 and came into effect in May 2023, insists these gatekeepers must allow interoperability with third-party services, offer fair access to data, and avoid self-preferencing their products.

In September 2023, the European Commission identified six tech giants as gatekeepers — Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft, requiring them to comply with new regulations for 22 core platform services within six months. While this regulation is presented as a major step forwards in reining in the unchecked power of ‘big tech,’ it is important to scrutinise whether these assumptions hold water and if the DMA's heavy-handed approach genuinely benefits consumers.

The DMA's noble intentions are clashing with practical challenges which could disrupt consumer experiences. Apple, for one, has flagged the DMA's interoperability mandates as potential threats to its products' privacy and security. Apple's concerns stem from the requirement to make its products interoperable with third-party software.

On paper, interoperability ought to foster competition. The practical reality is very different. It opens the door to potential security risks as third-party integrations might not uphold the same stringent security standards. This trade-off between competition and security could inadvertently compromise user data and privacy, contrary to the DMA's consumer protection goals.

As a result, Apple is contemplating delaying the release of several features in the EU, including iPhone mirroring, enhanced SharePlay screen sharing, and the Apple Intelligence generative AI tools. These innovations are poised to boost user interactivity and productivity. When tech companies hold their products back from Europe thanks to overzealous regulators, European consumers risk falling behind the rest of the world.

Similarly, the European Union's recent antitrust charges against Microsoft accusing the tech giant of stifling competition by packaging Teams with other productivity tools like Word, Excel, and Outlook, included in the Office 365 and Microsoft 365 business suites, resulted in a forced unbundling of Teams. Regulators argue this bundling gives Microsoft an unfair advantage, effectively forcing businesses to adopt Teams if they want access to other essential software.

Major competitors such as Zoom and Slack, which initially raised these concerns during the pandemic, face significant barriers in competing with Teams due to its deep integration with Microsoft's ecosystem. The European Commission made clear its position that this practice restricts innovation and harms consumers by reducing choice in the market.

However, this unbundling of Teams from Microsoft’s Office suite could drive up costs and complicate workflows for both consumers and businesses. The seamless integration of Teams within Office 365 delivers a unified user experience, facilitating effortless communication and collaboration in a familiar setting.

By unbundling these services, users may face higher subscription fees and a more cumbersome setup process, undermining the efficiency that the integrated suite offers. Small and medium-sized enterprises (SMEs), which depend on affordable, integrated solutions to stay competitive, could be disproportionately affected by this regulatory move.

Despite Microsoft's attempts to address issues raised by regulators by selling Teams separately from Office products and enhancing interoperability, the Commission deemed these efforts insufficient. If no resolution is reached, Microsoft could face fines of up to 10 percent of its annual global revenue.

These scenarios illustrate a significant oversight in the DMA’s framework: its potential to disrupt the user experience and delay the adoption of innovative technologies. By imposing heavy-handed regulations, the DMA risks creating a technological lag in the EU, as companies may deprioritise Europe or alter feature rollouts to comply with stringent requirements.

Margrethe Vestager, the EU’s competition chief, emphasises the need for fair competition to foster innovation. However, innovation also thrives on the ability to seamlessly integrate and deploy new technologies. The DMA’s current approach may inadvertently stifle this by creating an environment where companies are cautious and reactive, rather than proactive and innovative.

Moreover, these regulations may inadvertently push tech companies to develop different versions of their products for different regions, leading to a fractured global tech landscape. This "regional bifurcation" could mean that European consumers receive a diluted version of global technological advancements, perpetuating a cycle of technological lag.

The EU market is indeed attractive and open, as EU spokesperson Thomas Regnier suggests, but attractiveness also hinges on the availability of cutting-edge technologies. The DMA's restrictive measures could deter companies from prioritising their most advanced features in the EU, knowing the regulatory hurdles they must overcome.

For the DMA to truly benefit European consumers, it must balance regulation and innovation. This means re-evaluating aspects of the act that inadvertently impede technological progress and user experience. By creating a regulatory environment that promotes both competition and innovation, the EU can ensure its citizens enjoy protection from monopolistic practices and access to the latest technological advancements.

Ultimately, while the Digital Markets Act is well-intentioned, it needs a more nuanced approach. It must protect against anti-competitive behaviour without hindering the innovation that drives technological progress. Only by striking this balance can it genuinely serve European consumers, ensuring they remain at the forefront of the rapidly evolving digital landscape.

This article was written by Martyna Smółka. Martyna is a graduate of the Warsaw School of Economics and Bocconi University and an author in the area of social policy, healthcare, and economics. She has worked at the Mercatus Center and she is a policy fellow with Young Voices Europe.