Digital Markets Act: Apple, Google and Meta at risk of ‘heavy’ fines as Europe launches new probes

Digital Markets Act: Apple, Google and Meta at risk of ‘heavy’ fines as Europe launches new probes
Digital Markets Act: Apple, Google and Meta at risk of ‘heavy’ fines as Europe launches new probes

Yves Hermann/Reuters

European Internal Market Commissioner Thierry Breton gives a press conference in Brussels on March 25, 2024.


London
CNN

The European Union has launched investigations into Apple, Google and parent company Meta on suspicion of failing to comply with a landmark new European law designed to promote competition in digital services.

The European Commission said it «suspects» that the various practices of all three companies «do not meet effective compliance» with the Digital Markets Act (DMA), which came into effect earlier this month. If investigations find a «lack of full compliance», they could face «heavy fines», European Commissioner Thierry Breton said.

The DMA requires dominant online platforms to provide consumers with more choice and competitors with more opportunities to compete. It currently applies to the three tech giants under investigation, as well as Amazon (AMZN), Microsoft (MSFT) and ByteDance, the Chinese parent company of TikTok.

By mid-May, the list could also include Elon Musk’s X and Booking.com, the EU said.

Violations of the new law could result in severe penalties, including fines of up to 10% of a company’s global revenue and up to 20% for repeat violations. For most of the regulated companies, this would mean tens of billions of dollars.

The practices the European Commission is investigating include what it calls Meta’s «pay or consent» approach. Last October, Meta ( META ) launched a subscription service called «Ad-Free Subscription,» allowing European Facebook and Instagram users to pay up to €12.99 ($14) per month for ad-free versions.

«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 the accumulation of personal data from (major companies),» the authority said in a statement.

A Meta spokesperson responded: “Subscriptions as an alternative to advertising are a well-established business model in many industries, and we designed Ad-Free Subscription to meet several overlapping regulatory obligations, including the DMA. We will continue to work constructively with the Commission.»

The EU is also looking at app stores run by Apple ( AAPL ) and Google. The DMA said the big digital platforms – the so-called gatekeepers – should allow app developers to «steer» users to offers outside the two dominant stores, free of charge.

Among other concerns, the EU suspects that Apple and Alphabet’s Google ( GOOGL ) are restricting developers’ ability to «communicate freely (with end users) and encouraging bids and direct contracting, including through the imposition of various fees,” the Commission said.

“We are concerned that Alphabet, Apple & Meta & are not fulfilling their obligations, e.g. Apple & Alphabet still charge recurring fees to app developers,” European Commissioner Margrethe Vestager wrote on X Monday.

Apple’s Safari selection screen is also under scrutiny, the European Commission said. According to the DMA, Apple must prompt users with «choice screens that must effectively and easily allow them to choose an alternative default service, such as a browser or search engine on their iPhones,» it notes.

Apple told CNN in a statement: «We are confident that our plan complies with the DMA and will continue to engage constructively with the European Commission as they conduct their investigations.»

Another of the Commission’s concerns concerns Google Search. Alphabet may not have done enough to ensure that third-party services appearing in search results are treated in a «fair and non-discriminatory manner» compared to Alphabet’s own services, such as Google Shopping and Google Flights.

Oliver Bethel, executive director of competition at Google, said in a statement: “To comply with the Digital Markets Act, we have made significant changes to the way our services work in Europe.

“We have engaged with the European Commission, stakeholders and third parties in 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.”

This story has been updated with additional information.

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