Tech giants facing EU scrutiny
What are the main reasons behind the European Commission’s initiation of noncompliance investigations against tech giants like Apple, Meta, Google’s parent Alphabet, and Amazon? How does the Digital Markets Act (DMA) aim to regulate ‘gatekeepers’ and ens
The story so far:
In a slew of measures to ensure “contestable and fair markets in the digital sector” in line with the provisions of the Digital Markets Act (DMA), the European Commission on March 25 initiated ‘noncompliance investigations’ against Apple, Meta and Google’s parent Alphabet. It will also investigate Amazon’s ranking practices in its marketplace.
Where is the context of these non-compliance investigations?
The noncompliance investigations concern Alphabet’s alleged rules on steering or directing its customers to its inhouse services over those of its competitors. Apple will be investigated for allegedly similar practices in its App Store, as well as the way it positions its Safari browser. Lastly, Meta will be investigated for its “pay or consent model.”
The investigations fall in with the primary objective of the DMA to better regulate ‘gatekeepers’ and ensure fairer competitive practices in the digital market space. The idea is to mitigate paradigms that may create a “bottleneck” in the digital economy and fairness in competition and consumer access.
Alphabet, Amazon, Apple, TikTok’s parent company ByteDance, and Microsoft were designated as ‘gatekeepers’ in September 2023. They were expected to fully comply with obligations under the DMA by March 7 this year. The Commission assessed the mandatory compliance reports submitted by these companies and gathered feedback from stakeholders, including in the context of workshops, before launching the investigation.
“We have been in discussions with gatekeepers for months to help them adapt, and we can already see changes happening in the market,” Margrethe
Vestager, Executive VicePresident in charge of competition policy at the Commission said in a press statement, adding, “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”.
How are the steering rules non-compliant?
DMA provisions stipulate that app developers be allowed to steer consumers to offers (and services) outside the gatekeeper’s app store, free of charge.
The Commission aired its concerns about Alphabet and Apple not being fully compliant “as they impose various restrictions and limitations.” Apple has maintained that the tight integration associated with its App Store is essential to provide a “uniquely secure and seamless user experience.”
“It (DMA provisions) equates size with harm, and then imposes a onelistfitsall set of regulatory obligations without providing an opportunity for the platform to explain, and the regulator to assess, whether — on balance — there are broader benefits to consumers or businesses,” Apple had said in an unrelated January 2020 submission.
In a blog published this January, Spotify, however, had the following to say: “For years, even in our own app, Apple had these rules where we couldn’t tell you about offers, how much something costs, or even where to buy it.” It added that with the DMA, it would be able to share details about Spotify promotions, deals and bettervalue payment options with consumers in the EU.
Further, the Competition Commission of India (CCI) on March 15 also ordered a detailed probe against Google for alleged discriminatory practices on its Play Store pricing policy after having discovered a prima facie violation of competition law.
What about Alphabet engaging in self-preferencing?
The Commission wants to determine whether Google search results are discriminatory; in other words, whether the search giant engages in selfpreferencing for its verticals over rival services. It has stated that Alphabet’s measures to comply with the DMA may not have ensured that thirdparty services featured on Google’s search results page are treated in a “fair and nondiscriminatory manner” in comparison to their own services.
In October 2020, the U.S. Department of Justice (DoJ) accused Google of “unlawfully maintaining monopolies through anticompetitive and exclusionary practices in the search and search advertising markets” and sought it “remedy the competitive harms.” According to the DoJ, the conduct harmed consumers by reducing the quality of their search, lowering choices, and impeding innovation. The case is ongoing.
Amazon too is facing heat for similarly tailoring the listings on its marketplace.
What about Apple enabling choice?
The Commission is looking to assess if Apple enables users to easily uninstall any preinstalled (or presently default) software applications on iOS, change default settings, and if prompts users with choice screens that allow them to effectively and easily select alternatives to the default service. The investigation emanates from the Commission’s concern that Apple’s measures may be preventing users from “truly exercising their choice of services with the Apple ecosystem.” In other words, concerns over ecosystem captivity.
What are the concerns about Meta’s model?
Meta introduced a subscription model that offered people in EU, EEA and Switzerland the choice to use Facebook and Instagram without any ads. Alternatively, they could continue using these services for free while seeing ads relevant to them; in other words, consenting to personalised advertising.
The model, however, did not convince the Commission. It held that the model’s “binary choice” may not provide “a real alternative in case users do not consent, thereby not attaining the objective of preventing the accumulation of personal data by gatekeepers.”
How will non-compliant companies be penalised?
The companies face the prospect of being fined up to 10% of their global turnover or 20% in case of repeated infringement(s). Additionally, should the investigation come across any “systematic infringement,” the companies may be asked to sell a business or parts of it. A ban from acquiring related additional services could also be possible. The announcement of the investigation has not enthused the ecosystem’s participants or stakeholders. Concerns continue to exist if overlapping prerogatives can be addressed.