European Commission Opens DMA Non-Compliance Investigations Against Google, Apple, and Meta

Monday, 25 March 2024

[See update below, regarding the EC’s threats.]

European Commission press release today:

Today, the Commission has opened 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 the choice screen for Safari and Meta’s “pay or consent model”.

The Commission suspects that the measures put in place by these gatekeepers fall short of effective compliance of their obligations under the DMA.

You could have set your watch by this announcement dropping the week after the EC held compliance “workshops”. There was no way any of these companies weren’t going to be “investigated” and I doubt there’s any way they won’t eventually get fined. Whether any of them will ever need to pay those fines, that I wouldn’t bet on.

Alphabet’s and Apple’s steering rules

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 is concerned that Alphabet’s and Apple’s measures may not be fully compliant as they impose various restrictions and limitations. These constrain, among other things, developers’ ability to freely communicate and promote offers and directly conclude contracts, including by imposing various charges.

The EC is edging closer and closer to saying that successful platforms have no right to monetize their IP on those platforms. That’s exactly what a lot of anti-capitalist critics of these companies have been rooting for, but it would be a radical step.

The Commission has 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 (e.g., Google Shopping; Google Flights; Google Hotels) over 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.

Google is already sacrificing results quality, and promoting results from some low-quality comparison sites in the name of compliance. And I don’t even know why this announcement from the EC mentions Google Flights, given that Google has removed Google Flights results from web search results in the EU.

Apple’s compliance with user choice obligations

The Commission has opened proceedings against Apple regarding their measures to comply with obligations to (i) enable end users to easily uninstall any software applications on iOS, (ii) easily change default settings on iOS and (iii) prompt users with choice screens which must effectively and easily allow them to select an alternative default service, such as a browser or search engine on their iPhones.

Apple’s idea is that out of the box, an iPhone presents a complete experience. This keeps coming up, but it’s worth reiterating that there were no third-party apps at all for iPhone for the first year. “A widescreen iPod with touch controls; a revolutionary mobile phone; and a breakthrough Internet communications device.” Music, video, web browsing, email, maps, text messaging, contacts, calendar, and more. These apps aren’t just developed in a vacuum and bundled together on a device. On iOS these apps are designed to work together, integrated into a holistic experience. You can — and zillions of iPhone owners do — choose to use alternative apps, but the core apps in iOS are not, as the EU would suggest, a collection of shovelware.

But most of the built-in apps in iOS can be removed from your iPhone the exact same way you delete apps from the App Store. There’s a handful that can’t, among them: Settings, Camera, Photos, App Store, Phone, Messages, and Safari. You can remove those apps from your Home Screen, but they remain in your App Library. If the EC is really going to investigate Apple over removing default apps, I presume they’re thinking that Safari, in particular, needs to be deletable, because making it un-deletable is a form of preferencing? It’s all guess work. I further suppose they might want the App Store app to be deletable, but that’s a problem because it’s through the App Store that a user can re-install built-in apps they’ve previously deleted.

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.

Here’s article 6(3) of the DMA, in its entirety:

The gatekeeper shall allow and technically enable end users to easily un-install any software applications on the operating system of the gatekeeper, without prejudice to the possibility for that gatekeeper to restrict such un-installation in relation to software applications that are essential for the functioning of the operating system or of the device and which cannot technically be offered on a standalone basis by third parties.

The gatekeeper shall allow and technically enable end users to easily change default settings on the operating system, virtual assistant and web browser of the gatekeeper that direct or steer end users to products or services provided by the gatekeeper. That includes prompting end users, at the moment of the end users’ first use of an online search engine, virtual assistant or web browser of the gatekeeper listed in the designation decision pursuant to Article 3(9), to choose, from a list of the main available service providers, the online search engine, virtual assistant or web browser to which the operating system of the gatekeeper directs or steers users by default, and the online search engine to which the virtual assistant and the web browser of the gatekeeper directs or steers users by default.

How this browser choice screen is non-compliant with the above article, I don’t know. And even in the announcement of their investigation, the EC doesn’t say. My best guess, having read Steven Troughton-Smith’s Whisper-generated transcript of last week’s Apple compliance “workshop”, is that the EC’s problem with Apple’s current browser choice screen is that the list of included web browsers in each EU member state is determined by which web browsers are most popular in each country — which in turn means the only browsers included are those which are already in Apple’s App Store. There’s no mechanism for a new browser that was never in the App Store to be included in the choice screen until a year after it becomes popular enough — via sideloading or distribution through alternative app marketplaces — to make the list. But DMA article 6(3) doesn’t actually say that. It just says the choice screens must include “a list of the main available service providers” — which is exactly what the iOS 17.4 browser choice screen does.

I’ll bet you, like me, took note of article 6(3)’s clauses regarding search engines and virtual assistants. Google Search is a designated “core platform service” and so Google, the gatekeeper that owns it, is obligated to include a choice screen for web search in Android. Apple is obligated to offer a choice screen for browsers, because Safari is a designated core platform service, but not for search, because Google Search is Google’s service, not Apple’s. But as far as I can see, there are no virtual assistants, on any gatekeeper’s platform, that have been designated core platform services, and so I don’t think either Google or Apple is obligated to provide a choice screen for them.

Update: Turns out Apple has already announced that it’s working to allow Safari to be completely uninstalled from iOS by the end of the year.

Back to today’s press release from the EC:

Meta’s “pay or consent” model

Finally, the Commission has opened proceedings against Meta to investigate whether the 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 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.

I wrote about this last week — this is the argument that it’s insufficient for Meta to offer a fair price for a no-targeted-ads experience because the overwhelming majority of people will choose to use Meta’s platforms free-of-charge with targeted ads rather than pay. Nothing, seemingly, will do short of Meta offering its platforms both without charge and without targeted ads, even though non-targeted ads would, at best, generate only pennies on the dollar euro. Not only is the EC signaling that Meta isn’t allowed to set its own price for its own services — they’re seemingly arguing that Meta is obligated to provide its platforms effectively free-of-charge. That’s a radically anti-business stance for an ostensibly capitalist government body to take.

At the end of the EC’s press release come the threats. Quote from commissioner Thierry Breton:

“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. Should our investigation conclude that there is lack of full compliance with the DMA, gatekeepers could face heavy fines.”

First fine: up to 10 percent of the company’s global revenue. Subsequent fines: up to 20 percent. Not EU revenue, global revenue. This, from a bloc of countries that accounts for only 7 percent of Apple’s revenue. The EC clearly thinks these threats will get these “gatekeeping” companies to ask “How high?” when the EC demands they jump. (The DMA, of course, doesn’t specify how high they need to jump to comply.) Whereas the question they’re actually forcing these companies to ask is “Why are we doing business in the EU?”