Apple, Google and Meta face their first formal investigation under the EU’s DMA

What is the collective noun for Big Tech investigations? Because the European Union has just announced the launch of an investigation into the gatekeepers appointed under the Digital Markets Act (DMA). Alphabet/Google, Apple and Meta face their first formal non-compliance investigations under the bloc’s revamped set of ex-ante competition rules.

The box shows Alphabet/Google’s Google Play control policy and its approach to custom preferences in search results. For Apple, the EU can be considering its rules on App Store controls and the design of selection screens for alternatives to the Safari web browser. The Commission will examine Meta’s ‘pay or consent’ model.

Three watchdogs appointed under the EU-wide regulation last autumn will face formal investigations into these areas to find out whether, as the Commission suspects, they’re breaching the rulebook. Confirmed DMA violations can lead to financial penalties of as much as 10% of worldwide annual turnover, and as much as 20% for repeat offenses.

The EU could have as much as 12 months to finish the investigations. The initial report may be accomplished inside six months.

The bloc’s enforcement motion comes as antitrust scrutiny continues to accentuate against the three U.S. corporations, including at home.

Since the three corporations unveiled their DMA compliance plans, there was a series of criticism that the proposals will not be compliant with the latest EU law.

For example, Google was accused of attempting to avoid the regulation’s ban on preferring its own services by launching latest, wealthy features in search results that unfairly compete with competitors. Although Apple’s use of notifications for users warning them of the risks of venturing outside the walled garden has been attacked by developers as “intimidating screens”. Meta’s “pay or be tracked” tactics have been roundly condemned by privacy and consumer rights groups as exploitative. (Earlier this month, the Commission sent Meta questions on this matter also under the DMA’s sister regulation, the Digital Services Act).

“The Commission has initiated proceedings to evaluate whether the measures implemented by Alphabet and Apple in reference to their app store obligations violate the DMA. Article 5(1) 4 DMA requires gatekeepers to permit app developers to “target” consumers freed from charge to offers outside gatekeepers’ app stores,” the Commission wrote, expressing concern about the pair’s control measures “will not be fully compliant because they impose various restrictions and limitations,” pointing out, for example, limitations on developers’ ability to “freely communicate and promote offers and directly conclude contracts.”

Following concerns about Google’s preferences, the EU said the investigation would give attention to Google’s vertical search services (e.g. Google Shopping, Google Flights, Google Hotels) and the impact these activities can have on similar competing services.

“The Commission is anxious that the measures Alphabet has implemented to make sure compliance with the DMA may not make sure that third-party services presented on the Google search results page are treated in a good and non-discriminatory manner in comparison with Alphabet’s own services, as required by Article 6 (5) DMA,” it said.

For Apple, the EU may also check whether it meets quite a few user selection obligations in iOS, including allowing end users to simply uninstall apps; easy to alter default settings; and prompts users with selection screens that it says “must effectively and easily allow them to select an alternative default service, such as the browser or search engine on their iPhones.”

“The Commission is concerned that Apple’s measures, including the design of the web browser selection screen, may prevent users from actually exercising the selection of services in the Apple ecosystem, which is contrary to Article 6 section 3 DMA,” she added. .

In the case of Meta, the EU said the investigation would examine whether its recently introduced ‘pay or consent’ model for EU users complies with Article 5 section 2 DMA, noting that this a part of the regulation “requires gatekeepers to obtain users’ consent 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 viable alternative in the event that users do not consent, thereby failing to achieve the objective of preventing gatekeepers from collecting personal data,” it said.

Commenting in a press release, Margrethe Vestager, Commission Vice President accountable for competition policy, said: “We suspect that the solutions proposed by the three corporations will not be fully compliant with the DMA. We will now examine whether corporations are complying with the DMA to make sure open and competitive digital markets in Europe.

“The Digital Markets Act came into force on March 7. We have been talking to gatekeepers for months to help them adapt and we are already seeing changes taking place in the market. However, we are not convinced that Alphabet, Apple and Meta’s solutions deliver on their commitments to a fairer and more open digital space for European citizens and businesses,” added Thierry Breton, Commissioner for the Internal Market, in another follow-up statement. “If our investigation found a lack of full compliance with the DMA, guards would face significant fines.”

In response to the Commission’s announcement of the initiation of non-compliance proceedings, Apple sent us the following statement:

We are confident that our plan is consistent with the DMA and we are going to proceed to cooperate constructively with the European Commission because it conducts its investigations. Teams at Apple have created a wide selection of latest capabilities, features and tools for developers to make sure regulatory compliance. At the same time, we now have implemented safeguards to assist mitigate latest risks to the privacy, quality and security of our EU users. Throughout, we now have demonstrated flexibility and responsiveness towards the European Commission and developers, listening and considering their comments.

Google also sent a press release — attributed to Oliver Bethell, its chief competition officer:

To comply with the Digital Markets Act, we now have made significant changes to the way our services operate in Europe. Over the past yr, we now have engaged with the European Commission, stakeholders and third parties on dozens of events to receive and reply to feedback and balance conflicting needs in the ecosystem. We will proceed to defend our approach in the coming months.

Here is a press release from Meta defending this approach:

Subscriptions as a substitute for promoting is a longtime business model across many industries, and we designed Ad-Free Subscription to handle several overlapping regulatory obligations, including DMA. We will proceed to cooperate constructively with the Commission.

The loudest critics of Apple’s approach to DMA compliance are prone to be disillusioned by Monday’s EU announcement, as the bloc has yet to formally examine Apple’s latest fee structure for iOS, which the iPhone maker has made contingent on developers’ willingness to exercise DMA permissions. Although the Commission has announced what it’s press release couches as “investigative steps” on this area. Therefore, on this case too, a couple of steps away from taking formal motion could also be enough.

In particular, the Commission says it’s Apple’s conditions regarding alternative app stores and the distribution of applications from the Internet (so-called sideloading) – arguing that the conditions imposed by Apple “could also be contrary to the purpose of its obligations under Article 6 section 4 of the DMA Act. . However, I repeat, to be clear, this will not be yet a formal non-compliance procedure.

The cited section of the DMA requires gatekeepers to “enable and technically enable the installation and effective use of third-party applications or application stores… and enable access to those applications or application stores by means other than the applicable underlying platform of that gatekeeper’s services,” and containing provisions designed to stop gatekeepers from interfering with third-party stores and sideloaded applications (e.g. by stopping users from setting them as default).

The Commission too signaled expects gatekeepers to stick to the spirit of the law, which suggests it should see regulatory impact as a key measure of compliance.

Also today, the EU announced “investigative actions” against Amazon, saying it’s looking into Amazon’s rating practices in its marketplace because the Commission suspects it “may” itself favor its own brand products, in breach of the DMA. Again, this motion will not be a formal non-compliance procedure.

In response to the statement, an Amazon spokesperson said: “Amazon complies with the Digital Markets Act and has been engaging constructively with the European Commission on our plans since the designation of two of our services. We work hard every day to meet all of our customers’ high standards in the changing regulatory environment in Europe.”

Elsewhere, the EU told five guards to preserve documents it believed may very well be used to evaluate their compliance.

These “stop orders” are aimed toward Alphabet, Amazon, Apple, Meta and Microsoft – so clearly the EU is casting a wider, perhaps preemptive net, as Microsoft will not be on the list of those under formal or investigative investigation today. The commission said the orders aim to make sure that tech giants “preserve available evidence and ensure effective enforcement.”

Only ByteDance — the six appointed guardians of social network TikTok — avoided any DMA motion today.

Extension for Facebook Messenger interoperability

Finally, there may be some consolation for Meta – the Commission has granted it an extra 6 months to satisfy the DMA’s interoperability obligations for Facebook Messenger.

The regulation requires messaging applications designated as core platform services to divulge heart’s contents to competitors to enable cross-platform messaging. This element of DMA allows for a phased approach, with only basic text messages required in the first phase. The regulation also allows – “exceptionally” – extensions of deadlines in the case of a “justified request” and the Commission says this has been accepted by Meta.

“The decision relies on a selected provision of Art. 7 section 3 of the DMA and follows an affordable request submitted by Meta,” it wrote, adding: “Facebook Messenger stays subject to all other obligations under the DMA.”

Under the DMA, a gatekeeper’s request for an extension of compliance deadlines must reveal that it’s “necessary to ensure effective interoperability and maintain the necessary level of security, including end-to-end encryption.”