8 months ago
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What’s the collective noun for investigations on Big Tech? Because the European Union has just announced a pile of probes on gatekeepers designated under the Digital Markets Act (DMA). Alphabet/Google, Apple and Meta are facing the first formal non-compliance investigations under the bloc’s rebooted ex ante competition rulebook.
Alphabet/Google’s rules on steering in Google Play and its approach to self-preferencing in search results are in the frame. For Apple, the EU is also looking at its rules on steering in the App Store and the design of choice screens for alternatives to its Safari web browser. While Meta’s “pay or consent” model will be scrutinized by the Commission.
The three gatekeepers, which were designated under the pan-EU regulation last fall, face formal investigation in these areas to determine whether they are breaching the rulebook, as the Commission suspects. Confirmed violations of the DMA can results in fines of up to 10% of global annual turnover, or even 20% for repeat offences.
The EU will have up to 12 months to conclude the investigations. A preliminary report can be produced within six months.
The enforcement action by the bloc comes as antitrust scrutiny continues to dial up on the three US firms on home turf, too.
Since the three companies unveiled their DMA compliance plans there has a range of criticism that the proposals do not comply with the new EU law.
For example Google has been accused of seeking to avoid the regulation’s ban on self preferencing by launching new rich features in search results that compete unfairly with rivals. While Apple’s use of notifications to users warning them of risks of stepping outside its walled garden have been attacked by developers as “scare screens”. And Meta’s ‘pay or be tracked’ tactic has been roundly condemned as exploitative abuse by privacy and consumer rights groups. (Earlier this month the Commission sent Meta questions about this under the DMA’s sister regulation, the Digital Services Act, too.)
“The Commission has opened proceedings to assess whether the measures implemented by Alphabet and Apple in relation to their obligations pertaining to app stores are in breach of the DMA. Article 5(4) of the DMA requires gatekeepers to allow app developers to “steer” consumers to offers outside the gatekeepers’ app stores, free of charge,” the Commission wrote, saying it’s concerned the pair’s steering measures “may not be fully compliant as they impose various restrictions and limitations”, pointing for example to constraints on developers’ ability to “freely communicate and promote offers and directly conclude contracts”.
On concerns about Google self preferencing the EU said the investigation will focus on Google’s vertical search services (e.g., Google Shopping; Google Flights; Google Hotels) and the impact its action may have on similar rival services.
“The Commission is concerned that Alphabet’s measures implemented to comply with the DMA may not ensure that third-party services featuring on Google’s search results page are treated in a fair and non-discriminatory manner in comparison with Alphabet’s own services, as required by Article 6(5) of the DMA,” it wrote.
On Apple, the EU will also look at whether it’s complying with a range of user choice obligations on iOS — including enabling end users to easily uninstall apps; easily change default settings; and prompt users with choice screens which it says “must effectively and easily allow them to select an alternative default service, such as a browser or search engine on their iPhones”.
“The Commission is concerned that Apple’s measures, including the design of the web browser choice screen, may be preventing users from truly exercising their choice of services within the Apple ecosystem, in contravention of Article 6(3) of the DMA,” it added.
On Meta, the EU said the proceedings will investigate whether its recently introduced “pay or consent” model for EU users complies with Article 5(2) of the DMA, noting that this portion of the regulation “requires gatekeepers to obtain consent from users when they intend to combine or cross-use their personal data across different core platform services”.
“The Commission is concerned that the binary choice imposed by Meta’s ‘pay or consent’ model may not provide a real alternative in case users do not consent, thereby not achieving the objective of preventing the accumulation of personal data by gatekeepers,” it said.
Commenting in a statement, Margrethe Vestager, the Commission EVP in charge of competition policy, said: “We suspect that the suggested solutions put forward by the three companies do not fully comply with the DMA. We will now investigate the companies’ compliance with the DMA, to ensure open and contestable digital markets in Europe.”
“The Digital Markets Act became applicable on 7 March. We have been in discussions with gatekeepers for months to help them adapt, and we can already see changes happening on the market. But we are not convinced that the solutions by Alphabet, Apple and Meta respect their obligations for a fairer and more open digital space for European citizens and businesses,” added Thierry Breton, internal market commissioner, in another supporting statement. “Should our investigation conclude that there is lack of full compliance with the DMA, gatekeepers could face heavy fines.”
Responding to the Commission’s announcement of a non-compliance procedure, Apple sent us this statement:
We’re confident our plan complies with the DMA, and we’ll continue to constructively engage with the European Commission as they conduct their investigations. Teams across Apple have created a wide range of new developer capabilities, features, and tools to comply with the regulation. At the same time, we’ve introduced protections to help reduce new risks to the privacy, quality, and security of our EU users’ experience. Throughout, we’ve demonstrated flexibility and responsiveness to the European Commission and developers, listening and incorporating their feedback.
Google also sent a statement — attributed to Oliver Bethell, director, competition:
To comply with the Digital Markets Act, we have made significant changes to the way our services operate in Europe. We have engaged with the European Commission, stakeholders and third parties in dozens of events over the past year to receive and respond to feedback, and to balance conflicting needs within the ecosystem. We will continue to defend our approach in the coming months.
Here’s Meta’s statement defending its approach:
Subscriptions as an alternative to advertising are a well-established business model across many industries, and we designed Subscription for No Ads to address several overlapping regulatory obligations, including the DMA. We will continue to engage constructively with the Commission.
The loudest critics of Apple’s approach to DMA compliance are likely to be disappointed with the EU’s announcement Monday as the bloc has yet to formally investigate Apple’s new fee structure on iOS, which the iPhone maker has made contingent on developers wanting to tap into DMA entitlements. Although the Commission has announced what its press release couches as “investigatory steps” in this area. So it could be a few steps out from taking formal action here too.
Specifically, the Commission says it’s looking at Apple’s T&Cs for alternative app stores and distribution of apps from the web (aka sideloading) — saying the conditions Apple imposes “may be defeating the purpose of its obligations under Article 6(4) of the DMA”. But — again, to be clear — this is not yet a formal non-compliance procedure.
The citied section of the DMA requires gatekeepers to “allow and technically enable the installation and effective use of third-party software applications or software application stores… and allow those software applications or software application stores to be accessed by means other than the relevant core platform services of that gatekeeper”, as well as containing provisions intended to prevent gatekeepers from injecting friction into the experience of third party stores and sideloaded apps (such as by preventing users setting them as their default).
The Commission has also signalled it expects gatekeepers to comply with the spirit of the law — meaning it will be looking at the effect the regulation is having as a key measure for compliance.
Also today, the EU has announced “investigatory steps” in relation to Amazon — saying it’s looking at Amazon’s ranking practices on its marketplace as the Commission suspects it “may” be self-preferencing its own brand products in breach of the DMA. Again, this action is not a formal non-compliance procedure.
Responding in a statement, an Amazon spokesperson said: “Amazon is compliant with the Digital Markets Act and has engaged constructively with the European Commission on our plans since the designation of two of our services. We continue to work hard every day to meet all of our customers’ high standards within Europe’s changing regulatory environment.”
Elsewhere, the EU has instructed five gatekeepers to retain documents which it says may be used to assess their compliance.
These “retention orders” are addressed to Alphabet, Amazon, Apple, Meta, and Microsoft — so, evidently, the EU is casting a wider, perhaps precautionary net since Microsoft isn’t on today’s list for formal or investigatory investigation. The Commission said the orders are intended to ensure the tech giants “preserve available evidence and ensure effective enforcement”.
Only ByteDance — the six designated gatekeeper, for its social network TikTok — has avoided any DMA action today.
Extension for Facebook Messenger interoperability
Finally, there’s a silver lining for Meta — as the Commission has granted it an extra 6 months to comply with the DMA’s interoperability obligation for Facebook Messenger.
The regulation makes it mandatory for messaging apps that are designated as core platform services to open up to rivals to enable cross-platform messaging. This element of the DMA allows for a phased approach — with only basic texting requirement in the first phase. The regulation also — “exceptionally” — allows for extensions to timelines in the case of a “reasoned request” and that’s what the Commission says it’s accepted from Meta.
“The decision is based on a specific provision in Article 7(3)DMA and follows a reasoned request submitted by Meta,” it wrote, adding: “Facebook Messenger remains subject to all other DMA obligations.”
Per the DMA, a gatekeeper’s request to extend compliance time limits must demonstrate it is “necessary to ensure effective interoperability and to maintain the necessary level of security, including end-to-end encryption”.
