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Key Takeaways:

  • The European Commission has designated six tech giants as “gatekeepers” under the Digital Markets Act, with the aim of ensuring fair and open digital markets, and an aggressive enforcement timeline of just six months.
  • The DMA will apply a new set of pro-competition rules on how these gatekeepers can operate designated “core platform services”, which is likely to impact fashion brands and retailers through the inclusion of Google Search and Google Shopping – both of which have come to dominate online product discovery.
  • The recent premiere of the Future Front Row holographic fashion catwalk at Amsterdam Fashion Week could herald more in the way of hybrid physical / digital events.

This week, the European Commission designated, for the first time, six “gatekeepers” – Alphabet, Amazon, Apple, ByteDance, Meta, Microsoft – under the Digital Markets Act (DMA). The DMA, whose aim it is to “ensure fair and open digital markets”, intends to rein in the market dominance of these six tech giants by applying a new set of pro-competition rules on how these gatekeepers can operate designated “core platform services”. Together with the Digital Services Act (DSA), the DMA is one of the centrepieces of the European strategy for enforcing competitive digital spaces and enshrining consumer protections.

In his keynote speech at the Tallinn Digital Summit, Internal Market Commissioner Thierry Breton explained: “Digital transformation is a huge opportunity for citizens and businesses in Europe. We know that some tech giants have used their market power to give their own products and services an unfair advantage and hold back competitors from doing business and creating added value and jobs. These practices distort competition, undermine free consumer choice and hold back SMEs’ innovation potential notably arising from Web 4.0 and virtual worlds.

The last part of that is a little… whatever. But broadly speaking the driving principle is clear: the EU believes that large technology companies have ringfenced particular areas of consumer interaction with technology and services, and that they’re using that commanding market position to preferentially push their own products. A modern and more comprehensive face on established antitrust regulations, and one that goes at least some of the way to recognising just how wound up the average person’s lives have become in platforms and ecosystems that are designed to keep them there.

These laws, notably, are not the European Union’s first actions against big tech. The extensive General Data Protection Regulation (GDPR), implemented in 2018, led to substantial fines totalling billions for major players like Meta, and increased scrutiny of their user data access. In the longer term, many (including some folks here at The Interline) would argue that GDPR has not achieved anything close to its stated objectives, and that it has, in fact, made the web a worse place for everyone. But that’s more of a gap between idea and execution than it a matter of any congenital fault in the initial vision behind the regulations.

The DMA, then, is also encouraging at the “vision” level, although time will tell how the execution shapes up. And it’s important to point out that the timeline given for “compliance” is short: just six months from now.

How the vision will mesh with that short window for delivery is a very open question, since disentangling Google Search and Google Shopping from the act of searching for something to buy, and pointing users towards alternatives on an equal footing, feels like a gigantic task given how enmeshed both of those platforms have become in the way people find products online.

But that is precisely what DMA requires for end users:

  • Gatekeeper platforms may no longer treat services and products offered by the gatekeeper itself more favourably in ranking than similar services or products offered by third parties on the gatekeeper’s platform.
  • They can no longer prevent consumers from linking up to businesses outside their platforms, or prevent users from uninstalling any pre-installed software or app if they wish.
  • And they can’t track end users outside of the gatekeepers’ core platform service for the purpose of targeted advertising, without effective consent having been granted.

From an enterprise perspective, gatekeepers will also be forced to allow third parties to inter-operate with the gatekeeper’s own services, permit their business users to access the data that they generate in their use of the gatekeeper’s platform – providing companies advertising on their platform with the tools and information necessary for advertisers and publishers to carry out their own independent verification of their advertisements.

And, crucially for fashion brands and retailers, gatekeepers like Alphabet (the parent of Google, and therefore the direct beneficiary of the current arrangements that have allowed Google Search and Google Shopping to ascend to the status of gatekeeper services) allow their business users to promote their offer and conclude contracts with their customers outside the gatekeeper’s platform.

While the gatekeepers’ identities may not be a surprise, what will be intriguing to see is just who will challenge these designations. Amazon and German clothing retailer Zalando have already launched legal challenges regarding their classification as “very large” under the DSA. Which is an amusing prospect when we consider that these and other businesses are very keen to tout their size and reach in other circumstances.

It sounds obvious, but it’s worth spelling out: search engines play a pivotal role in product and brand discovery on the web. With over one trillion web pages online and new ones added daily, search is the primary way consumers discover online businesses, and businesses connect with consumers in a vast and complex online environment. Google has unambiguously established a monopoly in internet search and search advertising, effectively controlling around 97% of the rapidly expanding mobile search sector, and 86% of desktop searches, making its status as the gatekeeper of search pretty much impossible to argue against.

Every second of every day, users rely on Google for information, and businesses rely on it to drive traffic to their websites and their eCommerce frontends, generating the revenue necessary for innovation and delivering the online services and purchasing experiences their users want.

However, where Google once aimed to guide users to websites that best matched their queries, now, it answers those queries using its own products, such as Google Places (for hotels, restaurants, and destinations), Google Product Search (for product details and price comparisons), Google Finance (for investment and financial matters), Google Maps (for location and directions), and YouTube (for video content).

Interestingly, not all of these merit inclusion in the DMA as drafted. But the ones that do are hard to disagree with: YouTube, Search, and Maps are all effectively synonymous with the tasks and experiences they were created for. The default mode, for most people, is to search on Google, watch online videos on YouTube, and find things through Google Maps – not least since Google has, according to the creators of the DMA, achieved those positions for its products because they are presented to end users as the default.

And the European Commission aims to argue that this has translated into damage to economic growth, reduction in consumer choice, higher prices, reduced innovation from businesses, and a significant reduction in competition. All of which are probably true, and all of which also coincide with Google being called into court in the US very soon to argue against the same allegations in what’s being called the “first major antitrust trial against a tech giant in a generation” by Silicon Valley analyst Casey Newton.

But what of Google Shopping? This is a weird inclusion on the face of things. Perhaps The Interline’s team are not representative of the broader consumer demographic, but none of us can remember explicitly looking for or buying something through Google’s “Shop” tab. Has it happened implicitly? Maybe. The fact that the Commission considers Shopping to be a gatekeeper service certainly suggests so, but we’re surprised to see that Google wasn’t able to argue for its exclusion. The data behind the scenes must be compelling.

So how will fashion brands, retailers, and consumers be affected? On the surface, taking online product discovery out of one platform’s hands would seem to be a net benefit to all but the brands that have heavily optimised for discovery and position through Shopping. But there’s more to the DMA than just a wider variety of frontend options.

Although these regulations primarily target tech giants themselves, their impact will be felt by fashion businesses – particularly those utilising cookies or that own significant first-party data from various sources, including Google’s suite of services like YouTube, Search, Ads, Analytics, or Chrome. The new regulations also bring changes for brands and retailers that use these platforms for advertising purposes, as they prohibit advertising based on personal attributes and targeting ads toward younger audiences will no longer be permitted. This means that brands and retailers will need to rethink their strategies on how to create effective online advertising campaigns, at precisely the same time that Google itself is attempting to move away from cookie-based tracking and towards a new method of targeted ad tracking.

There may also be more costs involved to comply with the new laws, as businesses will have to revamp their platform interfaces, ensuring user-friendliness and easy compliance mechanisms. Also, online users will need to be presented with the choice to decline tracking and personalised advertising must be as straightforward as the option to accept. Websites that manipulate user experiences are, in fact, explicitly banned under the DMA – although what that means for personalisation, A/B testing, dynamic pricing and other eCommerce staples is hard to parse.

One major drawback of the DMA is its potential to further limit the data available to smaller businesses and escalate costs, as bigger brands and retailers may continue spending on advertising even without precise targeting. Paradoxically, this could raise customer acquisition expenses for smaller brands since they can no longer concentrate their efforts on a single channel, shrinking their current economic presence. And smaller companies lack the financial resilience to weather such shifts. But, on the plus side, brands and retailers can find comfort in the fact that the regulatory landscape has been levelled, allowing for the possibility of acquiring new customers through innovative online strategies, rather than being subject to the whims of Google.

For consumers, how the future of e-commerce will play out is harder to predict, but at the moment it’s looking like a mixed bag. If brands and retailers successfully embrace first-party data strategies in response to the decline of cookies, they will gain access to more consumer data than ever before. In turn, customers may anticipate brands using this personal information meaningfully, resulting in a more relevant and valuable experience. But brands will need to deliver on the benefits to customers through unique offers, personalization, and loyalty programs.

And although the DMA has the potential to enhance the user experience by improving data interoperability, it won’t eliminate all consumer inconveniences. Since the act encourages cross-platform data sharing, consumers may encounter a more fragmented user experience. Brands might also incur higher costs in implementing first-party data strategies, potentially leading to increased prices for goods and services, which is an often-overlooked consequence of antitrust legislation.

As with most policies at play in the EU at the moment that affect the fashion industry, the effectiveness of this particular regulatory framework in reestablishing a level digital playing field will be one to watch. This is an area that Big Tech has long dominated and shaped in its favour, so disrupting its influence will be a gradual process. Nonetheless, innovative and determined startups can anticipate improved opportunities to challenge the dominance of tech giants in the newly regulated landscape for entrepreneurs launching services in the EU. And by understanding the implications of the DMA, fashion can adopt a strategy centred on first-party data, prioritising privacy, exploring media diversification, and enhancing the consumer experience – all of which will ensure they not only keep up, but stay ahead.

image courtesy of Future Front Row

On a different note this week, there was activity taking place on yet another digital frontier: Future Front Row premiered as a holographic fashion catwalk at Amsterdam Fashion week. Hosted at the Felix Meritis and preserving a traditional catwalk, the show mixed digital elements within a physical venue – showcasing entirely virtual models and 3D clothing. The show featured digital fashion designers like Augmented Weaving, DressX, and The Fabricant.

As fashion month kicks off – first with New York which officially began on the 6th of September – more events like Future Front Row are happening. Something that up until now has remained on the fringes of the main events. This year, Digital Fashion Week has been extended to three locations – New York City, London and Paris – and combines a hybrid fashion show and immersive exhibitions.

The hybrid nature of these events highlights the shifting realities of fashion for designers, brands, and consumers. While not completely digital, the overlaying of the physical and the digital allow for a reimagining of the traditional ways of doing fashion week, with all of the buzz and excitement of putting on an in-person show, but at the same time incorporating technology in a thoughtful and creative way. We saw this earlier this month with Ganni’s AI-infused runway show at Copenhagen Fashion Week.

image courtesy of Future Front Row

Digital shows are in the zeitgeist of fashion, as the industry strives to make the fashion show experience more accessible and inclusive. These digital shows offer a novel experience for viewers who haven’t had the opportunity to attend a traditional runway show, who make up the bulk of customers (and potential customers) for any brand.

It’s only a matter of time until we see more digital elements in the mainstream fashion weeks, until it becomes part of the fabric of every fashion show and presentation staged, and where not including these elements will be what makes a statement.

The best from The Interline:

We kicked off this week with a collaboration with PlatformE – who is tackling overproduction and wastage in the industry, and working to revolutionise product design and development – asking if fashion is ready for a foundational change?

Chris Govier, Kornit Digital’s EMEA President, asks whether fashion has fallen out of lockstep with the pace of change, and whether digital production methods can bring it back in line?

Originally published in our PLM Report 2023, Jonathan McCormack of Coats Digital urges us to prepare for a near-term future where their creative and commercial talents are supported by AI.

Also from our PLM Report 2023, Mark Charlton asks how much more possibility space fashion can unlock by treating 3D assets as the source of product data?

The team at Reed Smith LLP close off this week by discussing the legal implications and risks to consider with regards to copyright and data privacy, when determining whether and how to utilise AI tools.