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European Commission scrutinizes Alphabet, Apple and Meta’s walled gardens under DMA

The European Commission announced an investigation into Alphabet, Apple and Meta on March 25, accusing them of alleged gatekeeping (that is, promoting their own services over competitors) in their applications and browsers. The investigation is the first major action taken under the European Digital Markets Act since the DMA’s “gatekeeper” rules came into effect in early March. DMA was established in 2022 to promote fairness and competition among digital products and services.

What is the European Commission investigating?

The European Commission is investigating possible anti-competitive behavior by Alphabet, Apple and Meta, and is separately looking into Amazon’s self-promotion in its stores.

“We suspect that the proposed solutions proposed by the three companies are not fully compliant with the DMA,” Margrethe Vestager, the European Commission’s executive vice-president for competition policy, wrote in a press release.

Overall, the Commission hopes to use the DMA to force tech giants to allow customers to choose providers when it comes to online services.

SEE: Everything you need to know about the EU Artificial Intelligence Bill passed in March. (Technology Republic)

Apple and Alphabet app stores

The European Commission found some overlap in how Alphabet and Apple handle app stores. A major goal of the DMA is to ensure that customers are aware of alternative app stores, rather than encouraging customers to go solely through the Apple App Store or Google Play. A new investigation shows that the steps Apple and Alphabet are taking to loosen the “doors” of their app stores may not be appropriate.

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The European Commission said the way Alphabet presents Google search results could steer customers back to Google services, such as shopping, flights or hotels. (Google temporarily removed the “Flights” unit from search results after the DMA took effect in early March.)

apple

The European Commission filed a lawsuit against Apple to address three main elements of its mobile design:

  • Web browser selection screen.
  • Ability to uninstall software applications on iOS.
  • Ability to change default settings on iOS.

The Commission is taking separate additional steps to investigate Apple’s fee structure for third-party app stores in response to the DMA.

Apple responded to the DMA’s request in January, saying that accessing third-party apps on Apple devices poses security risks, including “malware, fraud and scams, and illegal and harmful content.”

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In November 2023, Meta launched paid ad-free versions of Facebook and Instagram in the EU, anticipating increased regulation on the extent to which organizations can track users of their sites for advertising purposes. Now, the Commission is investigating whether the “pay or consent” model does comply with the DMA’s privacy rules. The committee said the model “may not provide a real alternative if users do not agree”.

Amazon

The commission announced a separate investigation into whether Amazon unfairly promotes its own products on its shopping marketplace.

What happens next for the DMA investigation?

The committee expects the investigation to last less than 12 months. The committee will then notify Alphabet, Apple and Meta of its ruling and possible actions.

The primary “gatekeepers” designated by the DMA – Alphabet, Amazon, Apple, Meta and Microsoft – must retain certain documents that the Commission deems relevant to their DMA obligations. (Microsoft is technically a gatekeeper, but it was not named in the investigation announced on March 25.)

Meta’s negotiations with the European Commission are likely to last longer than others. Meta has been granted a six-month extension to bring Facebook Messenger into compliance with the DMA’s interoperability obligations.

Fines for non-compliance with the DMA can be up to 10% of a company’s total global turnover, and fines for repeated violations can be up to 20%. In more extreme cases, the Commission may order an organization to sell all or part of its business, or bar the organization from accessing related services.

“We have been having discussions with gatekeepers for several months to help them adapt and we can already see what is happening on the market,” Thierry Breton, the European Commission’s internal market commissioner, wrote in a press release. “But we do not believe that Alphabet, Apple and Meta’s solutions respect their obligations to provide a fairer and more open digital space for European citizens and businesses.”

Other national and international legislative groups are likely to keep a close eye on the European Commission’s dealings with tech giants, which could lead to more regulation of the software ecosystem. Tech giants operating in the EU will need to figure out new ways of operating under the DMA, and there may be back-and-forth between the European Commission and major tech companies in the coming years.

Other large companies could also be called gatekeepers: Booking, ByteDance (owner of TikTok) and X have notified the commission that their services may be considered. It’s too early to tell whether the commission will actually exert influence by forcing the gatekeepers to sell parts of their businesses.

U.S. Department of Justice and Attorney General sue Apple for “monopolizing” mobile phones

The DMA is not the only government regulatory initiative aimed at breaking out of the walled gardens of tech giants. Last week, the U.S. Department of Justice and 16 state and territory attorneys general sued Apple for “monopolizing or attempting to monopolize the smartphone market.”

“Apple undermines apps, products, and services that would have reduced users’ dependence on iPhone, promoted interoperability, and lowered costs for consumers and developers,” the Justice Department wrote.

The plaintiffs will seek to break some of Apple’s anti-competitive practices, including loosening Apple’s control over app distribution, blocking Apple’s use of APIs to restrict cross-platform technologies such as iMessage, and forcing Apple to change its terms and conditions with Apple . Its contractors may create or increase monopolies.

The case will be heard by the U.S. District Court for the District of New Jersey.

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