EU Digital Rules Must Cover Software Platforms, Tech Groups Say

(Bloomberg) -- Legacy software platforms like SAP, Oracle and Microsoft should be designated as unfair digital “gatekeepers” in new European Union rules to address anti-competitive behavior by big technology companies, four groups are urging.

In a letter to EU lawmakers seen by Bloomberg News, the technology groups said the bloc’s Digital Markets Act -- being debated before it becomes law sometime next year -- “falls short” of addressing software providers’ “unfair” licensing practices. The companies are locking in customers and self-preferencing when offering cloud services, according to the letter addressed to MEPs and the Commission. 

“Those ‘software gatekeepers’ should not use their market power to reduce contestability in the cloud infrastructure services market,” Belgium’s Beltug, France’s Cigref, the Netherlands’ CIO Platform and Germany’s Voice e.V. wrote. “Software is as critical as search engines or social media in the digital economy.”

The Digital Markets Act currently focuses on anti-competitive behaviors by social media and online marketplace companies like Meta Platforms Inc.’s Facebook; Alphabet Inc.’s Google and Amazon.com Inc.. While that has prompted criticism that European lawmakers are targeting U.S.-based companies, some parliamentarians are trying to broaden the rules to include more companies like software providers. 

The groups seeking the inclusion of software platforms represent more than 2,500 chief innovation officers and almost 700 businesses organizations in the four EU countries, including L’Oreal SA, Zalando SE and Volkswagen AG.

Their concerns about anti-competitive behavior are based on research from Frédéric Jenny, an economics professor at ESSEC Paris Business, who detailed how software providers could “leverage their strong, sometimes dominant, position in adjacent products in order to distort competition for cloud infrastructure services.” 

These practices often don’t fall under the EU’s current competition laws and “could necessitate the recourse to new legal instruments,” Jenny wrote in October in a report commissioned by CISPE, a nonprofit trade group representing cloud service providers. 

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