The EU Is Reaping What It Sows With the DMA: Uncertainty

Ian Betteridge:

So, Apple, which bits of the DMA does Apple Intelligence violate? Because unless you can actually tell us — which case we clearly have a bit of a problem with some of the claims you’ve made about how it works — or you’re talking bullshit, and just trying to get some leverage with the EU. Which is it Tim?

I absolutely guarantee that people are going to swallow this “well you can’t make Apple Intelligence work thanks to the DMA!!” line without actually asking any questions about what it violates, because “well Apple said it and they don’t lie evah”

That’s Apple’s entire point. They don’t know. It’s uncertain by design. EC proponents keep telling me it’s a feature, not a bug, that unlike the US, it’s the spirit, not letter, of the law that matters in the EU. So it doesn’t matter if there’s not a word in the DMA that disallows the Core Technology Fee; European Commissioners have decided it goes against the spirit of the DMA, so they’re going to charge and fine Apple.

Outgoing competition chief Margrethe Vestager (her 10-year term expires in November) gave a 20-minute interview to CNBC’s Silvia Amaro this week, in which she threatened Apple repeatedly, starting around the 13:00 mark.

Vestager: We have a number of Apple issues; I find them very serious. I was very surprised that we would have such suspicions of Apple being non-compliant. They are very important because a lot of good business happens through the App Store, happens through payment mechanisms, so of course, even though you know I can say this is not what was expected of such a company, of course we will enforce exactly with the same top priority as with any other business. [...] What I see with the Digital Markets Act is that we get closer and closer to the business model. The changes that the DMA is demanding, they are changes that will touch the business model.

Amaro: Breakups even?

Vestager: Well, it remains to be seen. But if you have to carry a second app store, that will make a dent in your own app store. If you cannot promote your own services, but need to give room for competitors, rightfully, legitimately so, of course that will potentially, sort of, take away some of your own profits. So of course this will be a very difficult enforcement task, but even so much more rewarding, because the potential for the competitors of Big Tech — they are really, really big — and this is why enforcement of the DMA is a top priority.

Amaro: The reason why I am also bringing up Apple is because companies such as Spotify have also raised issues with the new changes that Apple has put forward, that ultimately the bill they will face now is the same or even bigger than what was in place before. And this is why I want to bring up the issue again of whether the DMA is actually leading to ultimate changes for the Big Tech? Or are they still hiding here, in between some of the ... well, within the law?

Vestager: Well, I think that you cannot judge the DMA before we’ve had the cases, and before we finalize them, because we have a toolbox of fines, of doubling fines, of potential breakup of companies — so we have a very strong toolbox to punish.

So how is Apple (or Meta, or Google) supposed to launch new features, integrating its own new services deeply within and between its own platforms, while under repeated threats of massive fines, fines that are far out of proportion to the revenue Apple generates in the EU itself, and even — laughably, admittedly — being “broken up”? When Vestager is very clear that Apple will only be deemed compliant with the DMA if it adversely affects Apple’s profit? And when it’s the unwritten “spirit” of the DMA, not the letter of its ambiguous rules, that matters?

This isn’t about privacy or the fact that Apple Intelligence models were trained on data scraped from the public web. Such factors might play a role in Apple Intelligence’s compliance, but not iPhone Mirroring or the new SharePlay screen sharing. This is about the DMA’s restrictions on designated gatekeepers launching their own integrated services and features.

Under repeated threats of fines up to $40–80 billion dollars (10–20 percent of worldwide revenue), it would be recklessly irresponsible for Apple, or any other designated “gatekeeper”, to launch any new services or integrated features in the EU without absolute certainty that those features are compliant with the DMA. And the nature of the European Commission is that they do not issue such assurances in advance. This is not spite. Spite would be saying these features will never come to the EU while the DMA remains in place. But a delayed rollout is the only rational response to the DMA: extreme caution in the face of the law’s by-design uncertainty and severe penalties.

Fortunately, because Apple is delaying Apple Intelligence and these other new features in the EU, all of the thriving EU-based smartphone and OS makers can jump in and compete on merit now, without Apple the gatekeeping bully in their way. As Vestager reiterates throughout the interview, competition is the European Commission’s north star.