Digital Markets Act: A New Era for Online Search

Source: Pexels.com

When searching for some information on the Internet, you will most likely use an “Online Search Engine”, which is a web-based platform provided with an immense database used to retrieve the requested information. You have surely heard of Google, Bing or Yahoo, but the amount of available search engines is much wider, although it may be difficult to learn about their existence or relevance.

According to StatCounter, Google owns almost 89.4% of the search engine market, and this is considered a major concern by the European Commission, as the prevalence of a single engine can give it enough power to dictate the way in which web pages are indexed and websites are placed in the Search Engine Result Page (SERP), which is the page that appears right after submitting the query.

For this reason, digital markets have been widely targeted by European Regulations, due to the threat of abuse of dominant position by these Search Engines, also named Very Large Operating Search Engines (VLOSE). Ultimately, the European Commission set provisions against Google’s illegal practices, resulting in infringement proceedings and numerous fines to pay. The latest and most known intervention is the Digital Markets Act (DMA), published in 2022 and enforced in March 2024.

Damien Geradin, Professor of competition law at Tilburg University, has stressed the strength of this new regulation, which, unlike the previous lighter ones, is intended to establish a “new regime” on the Internet, which we are going to cover in the next paragraphs.

An Overview of the Digital Markets Act

The European Commission has stated that “The Digital Markets Act aims to ensure that these platforms behave fairly online”. Fairness and transparency are therefore the key objectives of this new regulation and the European Union is in particular trying to force these search engines to bilaterally make a deal with them to support equality of ranking and growth for all kinds of businesses. As an example, one purpose of the DMA is to minimize the “no click search”, that is, the tendency of users not to click on one of the webpages shown in the SERP as they get the solution to their problem without accessing any links.

The Digital Markets Act was announced in 2022 with the main purpose of preventing the “gatekeepers”, which are companies with an established and enduring dominance in a field of the digital market, from abusing their market power and hindering the entrance of potential innovators. Google, Meta and Amazon have already been sanctioned for averting fair competition, as happened in 2006 when Google prioritized its own results of Google Shopping in the SERP, pushing down competitors in its search results. Negotiations kept going on for years after what occurred in 2006, but the asymmetric information between the EU and the search engines, with their top-secret algorithms, led to a final regulation only in these recent years, and without the guarantee that it would be effective.

Now, coming to the technicalities: specialists noted that the focus of the DMA entails, among others, the sectors of travel and tourism. Broadly speaking, search engines and online platforms like Google and Amazon will no longer be able to prioritize their own products in search results, and this will lead to a meaningful impact on digital marketing practices, as organic traffic distribution and metrics like click-through rates will shift considerably. More concretely, the DMA has forced Google to make user interaction with Google Maps more difficult, so that users would be encouraged to scroll through the SERPs to find the correct product. Moreover, other products like Google Flights and Google Hotels have now been removed or consistently pushed down in favor of a “Places Sites”, which is a carousel result for suppliers of local, travel and shopping queries.

While in theory these interventions have been taken with the hope of changing users’ attitude towards Google’s own products, first empirical results show that there is still a significant “no click search” area as the user keeps scrolling to the Local Pack (Local Search), where Google shows its ranked geographical results, instead of stopping at the Places Sites. Near Media (2024) confirms that a higher visibility of “fair products” is not correlated with a higher engagement by the users, but it is difficult to make assessments now as the act has just been formally introduced.

Figure 1. Different users’ engagement with SERP’s results. The figure shows that users are still not interacting with the new Places Sites section, thus tending to scroll to the Local Pack or to the organic results. Source: Near Media.

Therefore, though Google’s “self-preferencing” behavior has been reduced, it would take time to see the first effects of these interventions from the user-side. With regards to the supplier-side, conversely, online markets will start to give more opportunities to newcomers without the burdensome control of the incumbents.

Does the DMA ensure Fair Competition?

Irrespective of the contested future effectiveness of the Digital Markets Act, marketing specialists agree that the search engine market would notably benefit from a fairer competition, especially in the present era when innovation is spreading without interruption, as an effect of the famous Moore’s Law.

Moore’s law entails the empirical relationship between the introduction of miniaturized chips and the reduction of the cost of the information flow. As a result, Moore showed that it was possible to deliver more content to the final user without a burdensome expenditure for the company and this conclusion has triggered the growth of the Internet since its first extrapolation in 1965 (Hanson, 2001).

Although further assessment is needed, this legislation would be an essential tool to mitigate Google’s dominant power and its tendency to take unjustified actions against emerging competitors, a situation that was feasible when there was no such restriction in place previously. For instance, in January 2020 the travel search engine Hipmunk shut down after years of lost battles against its competitor in the travel market, Google Flights. As it happened with other domain pages, Google would place its competitors far from the first results and put its products on top of the SERP, and EU found that it often pushed down its competitors to the page 4 of the ranking for no particular reason (Tagliaferro, 2024). Therefore, despite its former motto, “Don’t be evil”, it is apparent that Google has come to its peak point of maturity and now has to kill the innovation regardless of its nature, and this significant risk has to be limited through a strict control of policy makers and EU authorities.

Furthermore, it is widely believed that mitigating Google’s authority would not be possible just by resorting to sanctions and fines, but the next step would be to inject innovation in the European market hoping that a new and fair competition would support their growth until they can capture a share of the market and become a new tech giant. However, given that the dominant companies are located in the US and that European legislation is typically followed by American one, albeit with many differences, future investigations will likely involve the possibility of a political conflict between these two institutional powers, with the US attempting to maintain its dominance and the EU seeking for the optimal innovator in the Big Tech Market.

Final Considerations

The European Union is optimistic that the act would be effective and that European innovation is feasible. However, in the attempt of bilaterally finding an agreement with Google, general interests have to be met as well, and this could push the Commission back from taking serious action against this apparent monopoly. This would imply much more challenges for digital startups to find their place in the market and take over the traditional search engines. 

Moreover, the DMA should not be analyzed alone as it is a segment of a wide legal reform adopted by the EU with the Digital Services Act (DSA), which is also addressed to market operators in Europe in order to protect users, and the AI Act, that deals with the potential disruptive nature of AI throughout search engines.

In an overlapping system dominated by few major players, Olivier Guersent, General Director of the Directorate General for Competition (DG COMP) concludes that the DMA is indifferent to the origin of competition as long as it is strengthened. Therefore, there is a realistic possibility that in the future a new entrant will make use of their innovation to gradually capture Google’s market share. Within this prediction, the EU’s goal is to ensure that this innovation is properly integrated into the digital ecosystem in order not to be disrupted by the incumbents.