Following the European Union’s adoption of the Digital Markets Act (DMA), which seeks to impose restrictions on the largest digital platforms in an attempt to increase competition, jurisdictions around the world have begun considering whether to adopt a similar approach. In Brazil, both the legislature and the Administrative Council for Economic Defense (Conselho Administrativo de Defesa Econômica or CADE) are currently considering whether and how to regulate digital platforms within its borders. As the competition regulator of one of the most populous nations in the world, Brazil’s decision will shape the future of digital economy innovation domestically and will also be highly influential on the future of global digital competition.
Our July 5 “Digital Platforms Competition Regulation in Brazil” webinar, co-hosted with the Legal Grounds Institute, featured three experts in the areas of product development, platform competition, and innovation to discuss recent developments in digital competition regulation around the world, focusing on the potential paths Brazil may take in particular, and the impact DMA-style regulation of digital platforms may have in Brazil and beyond.
Our panel highlighted the different roles platforms, developers, and regulators all play in keeping a thriving, healthy digital ecosystem. As more countries begin contemplating competition regulations on digital platforms, what are countries trying to regulate? Where does this appetite for regulation come from? Rafael Parisi, senior fellow at the GW Competition & Innovation Lab, set the stage by saying this:
“If authorities in Brazil or other countries believe that an ex-ante regulation like the DMA should be in place, then they should question what type of problem there is. Then, identify the problem and design a proper plan to address it. However, it is important to identify the specificities of the jurisdictions, which I think is of the utmost importance because countries have their economy and their level of economic development. So we have to be very careful about the ‘inspiration’ that the DMA can cause worldwide.”
The role that platforms play for developers and consumers is often overlooked. Platforms compete on the trust of developers and consumers. The business models of differing digital platforms are the means for competition and innovation within the Internet of Things (IoT) sector. A more known consequence of competition between multiple app stores is that simply increasing the number of platforms will neither increase the market size nor help smaller developers. On the contrary, multiple app stores will only increase small developers’ overhead, deplete their resources further, and decrease the consumer base they can reach instantly by being present in one store.
Mitchel Volkering of ACT | The App Association member company vaic.at, said:
“There are many protections in place for me [as an app developer], such as IP [intellectual property] protection, app distribution, and adaptability. These benefits are made easier through a market that is not a fragmented platform, so I can reach everyone on the planet with an iPhone or an iPad, which makes it easier for me with a very small budget. I want to be able to focus on building the app or idea. I want to focus on building the experience and offerings and not deal with all the legal protection that Apple does for me… fundamentally we are living in an age where people [consumers] actually trust their devices, their Apple or Google devices to protect them through security features like the app store. So trust in those platforms from consumers thus creates trust in me as a third-party developer which makes it more novel to be an app developer and bring those innovative ideas to life.”
The DMA will significantly impact the EU’s digital ecosystem, particularly for small app developers and tech small to mid-sized businesses (SMBs). By imposing new obligations on “gatekeeper” platforms, the DMA aims to reshape how digital platforms operate in the EU. However, this could have unintended consequences for smaller players who rely on these platforms. Morgan Reed, president of the App Association, highlights the crucial role large platforms play in supporting smaller developers. He argued that disrupting the current model could divert resources away from innovation, forcing smaller players to focus on navigating new regulations instead of developing their products. This shift may inadvertently create barriers to market access, contrary to the DMA’s intended goals.
“Right now, there are 1.7 million apps on the Apple App Store and roughly 2 million apps on Google’s Play store. There are hundreds of thousands of developers from around the world. I remember the days when you made software that came in a box and you had to go to a store to buy it, and . . . it took a year to get it on the store shelf. Now these competing, bigger curated online marketplaces are providing me services that allow me, as a very small business, to put a product into the hands of millions of people without me having to pay for printing, hiring an attorney to do my taxes in 52 countries, handling my intellectual property, and spending millions on branding. We have never had more opportunity than what we have now.”
In understanding the important relationships between developers, consumers, and curated online marketplaces, the panelists then moved on to the discussion of balancing these fundamental rights with the policy objectives outlined within the DMA. The panelists emphasized the importance of user safety, privacy, security, and data protection, along with device functionality. The policy goals must balance the fundamental objectives of growing innovation and include appropriate safeguards to ensure that overly rigid legislation like the DMA does not undermine them. The DMA’s approach fails to consider predictability in the digital economy, which offers more comfort for developers and consumers because they know what they are getting. The rigid design of the DMA does not mean it will be the right fit everywhere, as Rafael outlined:
“Notably, implementing this type of regulation without taking into account a country’s specificities may be even more troublesome. For instance, Brazil has been a developing and vibrant digital ecosystem through public and private sector initiatives. So I think it is a risk for Brazil to adopt and implement these kinds of troublesome regulations will undermine all the work they have done to foster this kind of economy. Adopting a regulation without thinking through it clearly may be very bad for businesses and economies more broadly, and at the end of the day for consumers. As we all know public policy, such as competition policies, should aim to protect consumers.”
As a voice for small app developers around the world, the App Association appreciates the European institutions’ dedication and commitment to improving the app economy. The DMA outlines an important step in making gatekeepers accountable for their business practices and in setting the first set of rules to formally govern relations in this rapidly evolving ecosystem. However, the DMA fails to take a balanced approach to fostering innovation and supporting small developer voices. Regarding the European Commission (EC) Commissioner for Competition Margrethe Vestager’s statement that the DMA was designed to support and amplify the voices of SMBs, Mitchel argued that the EC’s statement does not truly consider the concerns and perspectives of SMBs:
“It is very hard for a small business to get our voice in, which is something I want to thank the App Association for. Because of them, we are able to talk about these issues. But something like this Brazil has to be careful for [they are] listening to only 1 percent of businesses that are in Latin America, but it is hard to just make policy when you only listen to 1 percent of the businesses as the EU did. It is very big market players who are complaining about certain things when they already own the majority of a certain industry… It makes me feel weird as a small business owner because they [the EC] are pushing these policies in the name of small business, but we’re again talking about very big corporations looking to take on other big corporations.”
To conclude the webinar, Morgan clarified the potential drawbacks of implementing legislation like the DMA. He highlighted how such laws could have far-reaching consequences for competition and innovation, particularly affecting small developers in the tech ecosystem:
“The problem with DMA and laws like it is [that it’s] too big of a weapon; it’s a giant brick instead of something small. My concern is if you get the DMA world, you get companies competing to comply, so their focus will be on ‘How do I comply with the law?’ However, right now, they are thinking, ‘How do I make the better AI tool? Or product that will win customers?’ As a small business, this is very important because if I have Meta and Apple and Amazon and OpenAI, Perplexity, and everybody is offering different spins or ideas, and I get to choose ‘How do I build a product using those services?’ If the focus of the companies is now, ‘How do I comply with the law rather than how do I build great products?’…We know what that looks like. When people focus on complying, they hire lawyers. When people help focus on competing, they hire developers.”
To gain more insights into the roles of developers, innovators, and regulators concerning the DMA within the digital ecosystem, you can watch the full video of our webinar discussion below or on our YouTube channel in English or Portuguese.