Failure to Comply with Digital Markets Act: EU Charges Apple and Meta
The European Union (EU) is set to bring charges against tech giants Apple and Meta (formerly Facebook) for their alleged non-compliance with the Digital Markets Act (DMA). The DMA, which aims to establish fair competition criteria for online “gatekeepers,” is similar to anti-trust laws in the U.S. The EU regulators are particularly concerned about Apple and Meta’s marketplace dominance and have demanded that they rein in their power by this summer.
Open Competition Criteria for Online “Gatekeepers”
Under the DMA, companies like Apple and Meta are required to allow users to access third-party “alternative marketplaces” for applications. This means that users should have the option to choose from different app stores instead of being limited to the official App Store or Google Play Store. In response to these regulations, AltStore, SetApp by MacPaw, and Epic Games have already announced plans to launch their own independent marketplaces.
Potential Consequences for Non-Compliance
If Apple and Meta fail to address the charges and provide a remedy before an official decision is issued, they could face fines of up to 10% of their global annual turnover. Apple is currently leading the race towards DMA charges.
Apple’s “Core Technology Fee”
Interestingly, while Apple claims to be complying with the regulations by allowing web-based app distribution, they have introduced a new policy called the “Core Technology Fee.” This fee requires developers to pay €0.50 for every first annual install of their app that exceeds 1 million downloads. Even free apps are subject to this fee, meaning that developers of highly popular free apps may owe Apple money for those downloads. This new cost of business has not existed in Apple’s official App Store before.
Investigation into App-Based Self-Preferencing and Steering Policies
The EU launched non-compliance investigations into Apple, Meta, and Google’s parent company Alphabet immediately after the DMA went into effect. Apple and Google were specifically under scrutiny for their app-based self-preferencing and steering policies. These policies force apps to charge user subscriptions through the App Store or Google Play Store, allowing Apple and Google to take a percentage of app revenue. Apple, for example, pockets 15 to 30 percent of app revenue from developers selling in the App Store.
Meta’s “Pay or Consent Model”
Meta, on the other hand, may face charges for its new “pay or consent model.” This model promotes ad-free subscription alternatives to data collection on Facebook and Instagram. However, it has been accused of potentially violating data privacy regulations under the DMA. Critics argue that it does not provide a genuine alternative for users who do not consent to personal data accumulation.
Meta’s Defense
In response to the charges, Meta argues that it does comply with the DMA by offering EU users the option to subscribe to its paid subscription service on Facebook and Instagram. This subscription service provides an entirely ad-free experience. According to Meta, if a user chooses not to subscribe, they are consenting to their data being used.
Priority Cases: Apple and Meta
Since the launch of the investigations, Apple and Meta have become priority cases for the EU regulators. The charges against these tech giants could have significant implications for the future of competition and consumer choice in the digital marketplace.