Digital Markets Act: European Commission opens investigations against Alphabet, Apple and Meta

On 7 March 2024, referred to as “DMA compliance day”, the Digital Markets Act (“DMA”) “went live”. Since then, the six companies designated as gatekeepers up to now – Alphabet, Amazon, Apple, ByteDance, Meta und Microsoft – have had to ensure that they are fully compliant with the obligations set down in the DMA. The aim of these rules is to ensure that markets in the digital sector are contestable and fair.

Less than twenty days after compliance day, the European Commission (the “Commission”) has already found signs indicating that three of the gatekeepers (Alphabet, Apple and Meta) are not adequately complying with the DMA’s obligations or are even deliberately circumventing them. This has prompted the Commission to open official investigations against these three companies, which could end with them having to pay heavy fines.

Specific accusations against Alphabet, Apple and Meta

The Commission is accusing the three gatekeepers, according to a press release, of having infringed various provisions of the DMA:

Alphabet

The Commission has levelled two accusations against Alphabet, Google’s parent company.

The DMA provides that app developers are allowed to “steer” end users to their own products or services outside of a gatekeeper’s sales channels by free communication and advertising. The Commission is now accusing Alphabet of interfering with the use of products or services outside of Google Play, Google’s app store.

Moreover, the Commission believes that Alphabet may be engaging in “self-preferencing”. The accusation is specifically that Alphabet’s own services are given preference in the results shown in the general Google search (for example Google Shopping, Google Flights and Google Hotels). This means that it may be discriminating against services offered by rival service providers.

Apple

As in the case of Alphabet, the Commission is also accusing Apple of interfering with free communication and advertising for products and services offered by app developers on other sales channels through the rules for its own app store.

Besides this, the Commission assumes that Apple is not making it easy enough for users of iPhones to:

• delete apps from iOS;
• modify default system settings on iOS; and
• modify default standard services (e.g. browsers or search engines).

Meta

When it comes to Meta, the parent company of Facebook, Instagram and WhatsApp, the Commission has doubts about the compatibility of its “pay or consent” model with the DMA. In simple terms, this refers to services and products offered for which end users either have to consent to their data being processed (e.g. to the data being used for personalised advertising) or pay for the data not to be processed. The offer can only be used by selecting one of these options. The Commission maintains that such an arrangement could conflict with the requirement under the DMA that gatekeepers give end users a “real” choice about whether their data is processed.

Commission has already announced further steps

The Commission is already exhibiting a willingness to commence other proceedings in the near future, such as on Apple’s new payment structure and other terms of use for alternative app stores as well as on possible self-preferencing by Amazon in the ranking of products in its own marketplace. The Commission reported that it has already launched investigations into these matters.

Finally, the Commission has granted Meta an extension of six months to comply with the interoperability obligation under the DMA in connection with Facebook Messenger. This essentially means that users of Facebook Messenger must also be able to communicate with users of similar services (and vice versa).

Outlook and assessment

The initiation of these proceedings represents the first milestone in the enforcement of the DMA and shows that the Commission intends to put into practice its announcement to strictly enforce the DMA in a consequent and timely manner.

The proceedings are not entirely unexpected. The various gatekeepers' compliance efforts to date have, in some cases, been criticised by experts and the market. This applies to Apple, for example, which was accused of making a “mockery" of the DMA by 34 companies from the market (including Spotify and Epic Games) in an open letter to the Commission at the beginning of March. In this respect, it is a confrontation that was to be expected.

Conversely, it is also worth noting that other gatekeepers – at least for the time being – are not affected by the proceedings or investigations. This applies in particular to Microsoft, which has sometimes been said to be making serious efforts to comply with the DMA. On the other hand, proceedings have also not been initiated against Bytedance, the parent company of TikTok. However, as Bytedance is currently challenging its designation as a gatekeeper in court, it was not necessarily to be expected in any case that the company would fully comply with the obligations under the DMA.

The Commission has announced that it intends to complete the investigations within 12 months and decide whether the three gatekeepers comply with the DMA. If the gatekeepers are found to have infringed the rules, it will be able to impose fines of up to 10% of their total worldwide turnover. In the event of repeated or even systematic failures to comply, there is a risk of even higher fines or structural remedies for the gatekeepers (even including break-ups).

The course and findings of the proceedings (including potential subsequent court proceedings) are likely to provide first indications of how far the objectives of the European legislator can be realised through the DMA. All of the market players affected by the provisions of the DMA are therefore well advised to keep an eye on these proceedings.

Alongside the investigations opened by the Commission, the gatekeepers involved could also be confronted by legal measures brought by business users before national courts due to their failure to comply with the rules of conduct under the DMA (private enforcement of the DMA). Through this possibility of private enforcement, business users and the national courts will have a crucial role to play in helping the Commission monitor DMA compliance (see also our article on Noerr News).

Background to the DMA

In September 2023, the Commission designated six companies (Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft) as gatekeepers in relation to a total of 22 core platform services (“CPS”). These CPS serve as a gateway between a large number of business users on the one hand and end users on the other. This status as a gateway brings with it a great potential to exert influence on the commercial activities of many market players. For this reason, the DMA imposes special obligations on the gatekeepers operating the CPS in order to keep the markets open and promote innovation (more details can be found in our article on Noerr News).

To enable the Commission to verify whether the gatekeepers are complying with the obligations under the DMA without having to carry out time-consuming investigations, the gatekeepers had to explain what steps they were taking to comply with their obligations in compliance reports by 7 March 2024 (more background information can be found in our article on Noerr News). Compliance workshops held by the Commission subsequently took place for every gatekeeper in March 2024. During the workshops, the Commission, gatekeepers and business users of CPS involved were able to engage in discussions about the extent to which the gatekeepers are meeting their obligations by taking the measures set out in the compliance reports.