Big Tech test

European Commission's investigations will be followed globally

A few weeks after the Digital Markets Act (DMA) came into force, the European Commission (hereinafter “Commission”) has initiated investigations of Google, Meta, Amazon, and Apple for non-compliance with key principles aimed at creating fair and competitive digital markets. These investigations will, one way or the other, be landmark events since the companies under investigation are globally dominant. Specifically, the Commission is looking into Alphabet’s rules on steering in Google Play and self-preferencing on Google Search, Apple’s steering in App Store and in the choice screen for Safari, and Meta’s “pay or consent model”. In addition, the Commission has launched investigation into Apple’s new fee structure for alternative app stores and Amazon’s ranking practices. The DMA has a set of objective criteria for qualifying a large online platform as a “gatekeeper”. The gatekeeper must have a strong economic position and significant market impact and be active in multiple European Union (EU) nations. It must have “strong intermediation”, linking a large user base to many businesses, and it must have met these criteria in each of the last three financial years. Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft are the six global giants designed as gatekeepers.

The DMA demanded compliance with its regulations from gatekeepers by March 7. The Commission is of the view that Alphabet’s and Apple’s measures impose various restrictions and limitations, including financial charges that constrain developers’ ability to freely communicate and promote offers, and directly conclude contracts. It is investigating if Google’s searches, which prominently feature Google Shopping, Google Flights, Google Hotels, etc, lead to “self-preferencing” over rival services. It is examining Apple’s measures to comply with obligations to allow users to easily uninstall any software applications, change default settings on iOS, and prompt users with choice screens, which easily allow them to select alternative services such as a browser or search engine on iPhones. In Meta’s case, the Commission is examining the recently introduced “pay or consent” model for users in the EU to see if it complies with the DMA, which requires gatekeepers to obtain consent from users when they intend to combine, or cross-use personal data across different platform services. Meta’s binary “pay or consent” model may not provide a real alternative for users who do not consent. Amazon may also be self-preferencing its own brand products and Apple’s new fee structure and other terms and conditions for alternative app stores may be contrary to DMA obligations.

The Commission can impose fines up to 10 per cent of the company’s global turnover, rising to 20 per cent for repeated infringements. In extreme cases, it may oblige a gatekeeper to sell a business or ban acquisitions of related services. The DMA represents an acid test for large digital monopolies. These are often believed to be “natural” monopolies — a user may be interested in only one search engine, online store, or social media platform. Once that platform is big enough, it benefits from network effects. But anti-competitive practices by dominant players can also throttle competition. The EU is a market big enough and lucrative enough for the Commission to force even very large players to comply with the DMA through the threat of cutting off access. Depending on the outcome of the investigation, the DMA could lead to similar legislation in other regions. The ensuing competition may lead to a wave of innovation that benefits consumers and entrepreneurs.