Tech companies could face significant fines if found guilty of violating the Digital Markets Act
The EU is investigating Apple, Google’s parent company Alphabet, and Meta for potential violations of the bloc’s new laws aimed at regulating anti-competitive behavior by large technology firms.
If found guilty of breaching the Digital Markets Act (DMA), which came into effect on 7 March, these companies could face substantial fines. The DMA is intended to enhance choice for online consumers.
The European Commission, the EU’s executive body, is examining potential breaches related to several issues: Apple and Google’s practices that enable app developers to direct users to offers outside their app stores; whether Alphabet gives preferential treatment to its own services like Google Shopping in search results on its search engine; Meta’s practice of charging users for an ad-free experience on Facebook and Instagram, and its compliance with DMA rules on user data; and whether Apple facilitates the selection of alternative browsers on their phones.
The commission expressed concern that the measures implemented by these gatekeepers may not effectively comply with their obligations under the DMA.
The law mandates compliance from the six tech gatekeepers—Alphabet, Amazon, Apple, Meta, Microsoft, and ByteDance (owner of TikTok)—which provide services like search engines, social networks, and chat apps used by other businesses. These companies are required to adhere to guidelines that promote fair competition for their competitors and offer users more choices.
Thierry Breton, the commissioner for the internal market, warned of the possibility of “heavy fines” for companies found to be in violation of the act.
The Digital Markets Act came into effect on March 7,” he stated. “We have been engaging in discussions with gatekeepers for months to assist them in adjusting, and we are already witnessing market changes. However, we are not convinced that Alphabet, Apple, and Meta’s solutions adhere to their obligations to create a fairer and more open digital environment for European citizens and businesses.
Competition Commissioner Margrethe Vestager stated that the companies had ample time to adhere to the act, noting that the commission had collaborated with them to ensure compliance.
“I certainly don’t think this is rushed,” Vestager told reporters. She emphasized that the purpose of the new laws was “not to have cases,” but to provide consumers with choices to which they were entitled under competition laws.
“The sooner we see changes, the sooner consumers can benefit from the DMA,” she said. The EU has implemented “strong deterrents” to encourage tech companies to take their obligations seriously, with hefty fines for those that fail to meet the required standards.
Failure to comply with the DMA could lead to fines of up to 10% of turnover, increasing to 20% for repeat offenses. Apple reported a revenue of $383 billion last year, Alphabet $307 billion, and Meta $134 billion.
The commission is also looking into Apple’s revised fee system for alternative app stores and Amazon’s methods for ranking products on its platform. The EU executive intends to conclude these investigations within a year, as outlined in the DMA.
Anne Witt, an antitrust law professor at the EDHEC Business School in France, noted that the commission had acted swiftly to enforce the act. “The commission has not hesitated to initiate these investigations, given that the DMA’s conduct rules only became applicable to gatekeepers in early March. This is a significant test for the DMA,” she remarked.
Max von Thun, the European director of the Open Markets Institute, a research organization focusing on the impact of corporate monopolies, emphasized the importance of the commission’s readiness to utilize non-financial penalties permitted under the act. These could include requiring the divestiture of parts of a business.
“The commission should not hesitate to impose significant fines on the gatekeepers and make use of other powerful sanctions provided for by the DMA, including structural separation and bans on acquisitions, where this is necessary in getting the gatekeepers to play ball,” he stated.
A spokesperson for Meta expressed the belief that charging for ad-free versions of its platforms complied with the act. “We designed ‘subscription for no ads’ to address several overlapping regulatory obligations, including the DMA,” they stated.
Google, which stated it had implemented significant changes to its services, indicated it would defend its approach in the coming months. Apple expressed confidence that its plan complied with the DMA.