Antitrust Law Daily Wrap Up, ANTITRUST NEWS: European Commission opens Digital Markets Act investigations of Alphabet, Apple, and Meta, (Mar 25, 2024)

By Thomas K. Lauletta, J.D.

The EC is concerned that the three gatekeepers ran afoul of the Act with their steering, self-preferencing, and user choice practices.

On March 25, 2024, the European Commission (EC) announced the opening of non-compliance investigations under the Digital Markets Act (DMA) into Alphabet’s rules on steering in Google Play and self-preferencing on Google Search, Apple‘s rules on steering in the App Store and its choice screen, and Meta’s “pay or consent model.” The DMA was created to ensure fair markets in the digital sector. It regulates gatekeepers Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft, which are large digital platforms that provide an important gateway between business users and consumers, whose position can grant them the power to create a bottleneck in the digital economy. The allegations against the gatekeepers were detailed in remarks by EC Executive Vice-President in charge of competition policy Margrethe Vestager, and Commissioner Thierry Breton.

Alphabet’s and Apple’s steering rules. Article 5(4) of the DMA requires gatekeepers to allow app developers to “steer” consumers to offers outside the gatekeepers’ app stores, fee of charge. Because, among other things, Alphabet and Apple limit developers’ ability to freely communicate and promote offers and directly conclude contracts, including by imposing various charges, the EC is concerned that their measures may not be fully compliant with the DMA.

Alphabet’s measures to prevent self-preferencing. The EC opened proceedings against Alphabet to determine whether Alphabet's display of Google search results may lead to self-preferencing in relation to Google's vertical search services over similar rival services. The Commission is concerned that Alphabet may not be in compliance with DMA Article 6(5) requiring that third-party services on Google’s search results page are treated in a fair and non-discriminatory manner when compared with Alphabet’s own services.

Apple’s compliance under user choice obligations. The EC opened proceedings against Apple regarding their measures to comply with obligations under DMA Article 6(3) to: (1) enable end users to easily uninstall any software applications on iOS; (2) easily change default settings on iOS; and (3) prompt users with choice screens that must easily allow them to select an alternative default service, such as a browser or search engine on their iPhones.

Meta’s “pay or consent” model. The Commission also opened an investigation against Meta to determine whether its recently introduced “pay or consent” model for users in the EU complies with Article 5(2) of the DMA, which 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 this 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.

Further investigations. The EC is also investigating: whether Amazon may be preferencing its own brand products on the Amazon Store in violation of Article 6(4) of the DMA, and whether Apple’s new fee structure and other terms and conditions for alternative app stores and distribution of apps from the web (sideloading) may be defeating the purpose of its obligations under Article 6(4) of the DMA.

Next steps. The Commission intends to conclude its investigations within 12 months and inform the concerned gatekeepers of its preliminary findings, with explanations of the measures the Commission is considering taking, or those that the gatekeeper should take to effectively address the Commission’s concerns.

Possible penalties. In detailed remarks, Margrethe Vestager, Executive Vice-President in charge of competition policy, and Thierry Breton, Commissioner for Internal Market of the European Union, both expressed doubts that the solutions of Alphabet, Apple and Meta currently meet their obligations under the DMA. As Commissioner Breton stated: “Should our investigation conclude that there is lack of full compliance with the DMA, gatekeepers could face heavy fines.”

Where infringement of the DMA is determined, the Commission noted that it can impose fines up to 10 percent of the company’s “total worldwide turnover.” These fines can go up to 20 percent in cases of repeated infringement.

Companies: Alphabet; Apple; Meta

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