European Commission Executive Vice-President for a Europe fit for the Digital Age (Competition), Margrethe Vestager, holds a press conference on “Apple on App Store Rules for Music Streamers” in Brussels, Belgium on April 30, 2021. ( Photo by (Dursun Aydemir/Anadolu Agency via Getty Images)
Dursun Aydemir | Anadolu | Getty Images
The European Union on Monday launched an investigation into apple, Alphabet and Afterin its first investigation under the sweeping new technology legislation the Digital Markets Act.
“Today, the Commission launched non-compliance investigations under the Digital Marketing Act (DMA) into Alphabet’s rules on steering in Google Play and self-preference in Google Search, Apple’s rules on steering in the App Store and the Safari opt-in screen and Meta’s ‘payment or consent model’,” the Commission said in a statement.
The first two investigations focus on Alphabet and Apple and relate to the so-called “anti-steering rules”. According to the DMA, tech companies are not allowed to prevent businesses from telling their users about cheaper options for their products or subscriptions outside of an app store.
“The way Apple and Alphabet implemented the DMA rules for the address protection system appears to go against the letter of the law. Apple and Alphabet will still charge various recurring fees and limit the steering wheel,” EU competition chief Margrethe Vestager said during a press conference on Monday.
Apple has already broken EU rules. This month, the company was fined 1.8 billion euros ($1.95 billion) after the European Commission announced that Apple had implemented restrictions on app developers that prevented them from informing iOS users for alternative and cheaper music subscription services that were available outside the app.
In a third investigation, the Commission said it is investigating whether Apple has complied with DMA obligations to ensure that users can easily uninstall apps on iOS and change default settings. The investigation also focuses on whether Apple actively asks users for options to allow them to change the default services in iOS, such as for the web browser or search engine.
The Commission said it is “concerned that Apple’s measures, including the design of its web browser selection screen, may prevent users from actually exercising the services of their choice within the Apple ecosystem.”
Apple said it believes it is DMA compliant.
“We are confident that our design complies with the DMA and will continue to work constructively with the European Commission as it conducts its investigations. Teams across Apple have created a wide range of new developer capabilities, features and tools to comply with the regulation ,” an Apple spokesperson told CNBC on Monday.
The fourth investigation targets Alphabet as the European Commission examines whether the company’s display of Google search results “may lead to self-preference over Google,” other services, such as Google Shopping, over similar competing offerings.
“To comply with the Digital Markets Act, we have made significant changes to the way we operate our services in Europe,” said Oliver Bethel, competition director at Alphabet.
“We have engaged with the European Commission, stakeholders and third parties at dozens of events over the past year to receive and respond to feedback and balance conflicting needs within the ecosystem. We will continue to defend our approach in the coming months.”
Alphabet pointed to a blog post from earlier this month where the company outlined some of those changes — including giving Android phone users the option to easily change their default search engine and browser, as well as making it easier for users see comparison sites in areas such as shopping or flights in Google searches.
Meta research
The fifth and final research focuses on Meta and the so-called “pay and consent” model. Last year, Meta introduced one ad-free subscription model for Facebook and Instagram in Europe. The Commission is considering whether offering the ad-free subscription model or users’ consent to the terms and conditions of the free service violates the DMA.
“The Commission is concerned that the binary choice imposed by Meta’s ‘pay or consent’ model may not provide a real alternative in the event that users do not consent, thereby failing to achieve the objective of preventing custodians from accumulating personal data ».
Thierry Breton, EU Internal Market Commissioner, said during a press conference that there should be “free alternatives” offered by Meta to its services that are “less personalised”.
“Gatekeepers” is a label for large technology companies required to comply with the DMA in the EU.
“We will continue to use all available tools should any gatekeeper attempt to circumvent or undermine the DMA’s obligations,” Vestager said.
Meta said subscriptions are a common business model across industries.
“Subscriptions as an alternative to advertising is an established business model in many industries and we designed Subscription for No Ads to address many overlapping regulatory obligations, including the DMA. We will continue to engage constructively with the Commission,” a Meta spokesperson told CNBC on Monday.
Tech giants risk fines
The commission has said it plans to complete its investigations within 12 months, but Vestager and Breton stressed during Monday’s briefing that the DMA does not dictate a hard deadline for the investigation’s timeline. The regulators will inform the companies of their preliminary findings and explain the steps the gatekeepers are taking or should take to address the Commission’s concerns.
If a company is found to have violated the DMA, the Commission can impose fines of up to 10% of the technology companies’ total global turnover. These penalties can be increased to 20% in case of repeated infringement.
The Commission said it is also seeking evidence and information to clarify whether Amazon may favor its own brand products on its e-commerce platform over its competitors. The Commission is further studying Apple’s new fee structure and other terms and conditions for alternative app stores.
This month, the tech giant announced that users in the EU will be able to download apps from websites rather than through its proprietary App Store — a change Apple has resisted for years.
The EU investigation into Apple and Amazon does not include official investigations.