Explainer: Why is the EU probing Big Tech under the Digital Markets Act?

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25/03/2024 16:34

By Martin Coulter
       LONDON, March 25 (Reuters) - The European Union on
Monday launched investigations into Alphabet, Apple and Meta for
potentially breaching a landmark new law designed to prevent Big
Tech having an unfair advantage over competitors.
    Last year, Brussels designated six companies as
"gatekeepers" under the Digital Markets Act (DMA), meaning they
were big and powerful enough to warrant extra regulation:
Alphabet  GOOGL.O , Amazon  AMZN.O , Apple  APPL.O , Meta
 META.O , Microsoft  MSFT.O  and TikTok owner ByteDance.
They were given six months, until March 7, to comply with the
rules, which aim to open up commonly used popular tech platforms
and give users greater choice.
    Violations could result in fines of as much as 10% of a
company's global annual turnover. The EU Commission hopes to
wrap up the probes within a year.
    Below is a rundown on main areas of the investigation:  
    ANTI-STEERING:
    Two of the five investigations relate to Alphabet and
Apple's payment systems, specifically around "anti-steering"
behaviour.  
    Whenever you make an in-app purchase on an iPhone or an
Android device – such as ordering food for delivery or upgrading
to the premium version of Strava – Apple or Alphabet will
usually take a cut of the fee. 
    To get around this, app developers sometimes "steer"
consumers towards their own websites, encouraging them to make
payments to them directly so they can swerve the big tech
companies' extra charges. 
    Apple has already been accused of anti-steering behaviour.
The EU fined the tech giant $2 billion earlier this month over
claims it had blocked users of music streaming services from
accessing discounts and promotions outside its own payments
ecosystem. Brussels' move was cheered by Spotify  SPOT.N , which
has accused Apple of blocking rivals from sharing perks with
their subscribers. 
    Beyond music streaming, the EU is now investigating whether
Apple and Google have prevented even more consumers from
accessing offers outside their control.   
    SELF-PREFERENCING:
    In bricks-and-mortar retail, supermarkets sometimes sell
cheaper own-brand alternatives on the shelves next to pricier
goods. 
    That becomes more complicated with online marketplaces,
where tech companies have been accused of displaying their own
products more prominently than those of their rivals, giving
themselves an unfair competitive edge. 
    Another of the EU's five investigations concerns whether
Google prioritises its own services – such as Google Hotels or
Google Flights – when users type queries into its search engine,
potentially limiting business for rivals such as Booking.com or
Skyscanner. 
    The EU said on Monday it was also looking into whether
Amazon was giving preference to its own products in its online
store over rivals, but stopped short of launching an
investigation.   
    WHAT ELSE IS THE EU INVESTIGATING? 
    Under the DMA, Apple was supposed to make it easy for device
users to uninstall software and change default settings, such as
their go-to web browser or search engine. 
    The EU said it was concerned the company had not made such
choice as easy as it should be for users, and would
investigate. 
    The law also requires gatekeepers' platforms to gain
explicit consent from users when they intend to combine a
person's data across different platforms, such as Meta's
Facebook and Instagram. 
    In an attempt to comply with the rules, Meta introduced a
"pay or be tracked" policy, which would charge consumers who do
not consent to their data being collected and combined like this
9.99 euros ($10.82) for ad-free versions of the apps. 
Following questions over the subscription package's legality,
Meta last week said it could reduce the fee to 5.99 euros.  
    On Monday, the EU said the binary choice does not amount to
a real alternative for users, and it would investigate.   
    WHAT HAVE THE COMPANIES SAID? 
Google, which made significant changes to its services ahead of
the deadline, said it would defend its approach in the coming
months. Apple said it was confident its plan complied with the
DMA.
    A Meta spokesperson said the company was trying to comply
with the act's guidance.
    "Subscriptions as an alternative to advertising are a
well-established business model across many industries, and we
designed Subscription for No Ads to address several overlapping
regulatory obligations, including the DMA," Meta said.
     
      ($1 = 0.9233 euros)

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(Reporting by Martin Coulter; Editing by Catherine Evans)
((martin.coulter@thomsonreuters.com; Follow me on Twitter
@martinjbcoulter; +447436546182;))