The EU announced investigations into Google, Meta and Apple over potential violations of the Digital Markets Act (DMA).

Should any of the tech giants be found in violation of the DMA, they could each potentially face fines amounting to up to 10% of their annual turnover.

What is the Digital Markets Act (DMA)? The DMA is a new piece of legislation designed to ensure that large online platforms, called “gatekeepers”, behave in a fair way online to create a fair and open environment for online businesses. Only six companies have obligations under the DMA:

• Alphabet (Google’s parent company).
• Apple.
• Meta.
• Amazon.
• Microsoft.
• ByteDance.

All six companies, none of which are based in the EU, were required to ensure they fully complied with DMA obligations and submit compliance reports by March 7.

DMA violation penalties. The consequences of non-compliance with the DMA includes:

• Fines: Up to 10% of the company’s total worldwide annual turnover, or up to 20% in the event of repeated infringements.
• Periodic penalty payments: Up to 5% of a company’s average daily turnover.
• Remedies: These can include behavioural and structural remedies, such as the divestiture of (parts of) a business.

Under investigation. EU antitrust boss Margrethe Vestager and industry head Thierry Breton confirmed that investigations have been launched into five separate possible DMA violations:

• Apple reportedly not allowing apps to openly communicate with users and form contracts with them.
• Google allegedly not allowing apps to freely communicate with users and form contracts with them.
• Apple reportedly not offering users enough choice.
• Meta allegedly unfairly asking individuals to pay to stop their data from being utilized for ads.
• Google reportedly giving its own goods and services preference in its SERPs.

The investigations are expected to take approximately 12 months.

Why we care. Tougher data privacy policies might affect Google’s capacity to deliver personalized ads and content. This could potentially reduce the effectiveness of advertising campaigns, as they may not effectively reach the desired target audience as accurately.

App store concerns. The Commission is investigating whether Google and Apple have broken the DMA rules regarding their app stores. According to Article 5(4) of the DMA, gatekeepers (the six companies the DMA applies to) must let app developers guide users to offers outside their app stores without any fees. The Commission is concerned that Google and Apple might not be following this rule entirely. Their measures seem to limit developers’ freedom to advertise and promote offers. They also impose charges, making it harder for developers to communicate and make deals directly.

Self-preferncing concerns. The Commission is investigating Alphabet to see if Google’s search results give preference to Alphabet’s own services like Google Shopping, Google Flights, and Google Hotels over similar rival services. They’re worried that Alphabet’s actions to comply with the DMA might not ensure fair treatment for third-party services listed on Google’s search results page compared to Alphabet’s own services, as demanded by Article 6(5) of the DMA.

User choice obligations. The Commission is worried that Apple’s measures, including the design of the web browser choice screen, might hinder users from genuinely exercising their choice of services within the Apple ecosystem, which goes against Article 6(3) of the DMA.

Meta’s pay or consent model. The Commission is worried that Meta’s “pay or consent” model, which presents users with a binary choice, might not offer a genuine alternative if users opt not to consent. Consequently, this may fail to achieve the goal of preventing gatekeepers from accumulating personal data.

What the EU is saying. EU antitrust boss Vestager said:

• “We suspect that the suggested solutions put forward by the three companies do not fully comply with the DMA.”
• “We will now investigate the companies’ compliance with the DMA, to ensure open and contestable digital markets in Europe.”

Industry head Breton added:

• “We have been in discussions with gatekeepers for months to help them adapt, and we can already see changes happening on the market. But we are not convinced that the solutions by Alphabet, Apple and Meta respect their obligations for a fairer and more open digital space for European citizens and businesses.”
• “Should our investigation conclude that there is lack of full compliance with the DMA, gatekeepers could face heavy fines.”

What Google is saying. Oliver Bethell, a competition executive at Google, said in a statement:

• “To comply with the Digital Markets Act, we have made significant changes to the way our services operate 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 to balance conflicting needs within the ecosystem. We will continue to defend our approach in the coming months.”

What Meta is saying. Meta said in a statement:

• “Meta said: “Subscriptions as an alternative to advertising are a well-established business model across many industries . . . We will continue to engage constructively with the Commission.”

Deep dive. Read the European Commission’s announcement in full for more information.