The European Union is trying to loosen the grip of companies such as Apple, Microsoft and Google on the digital economy. The Digital Markets Act (DMA), a law passed in 2022 to reduce monopolies in the tech industry, targets tech giants who have until March 6 to eliminate unfair competitive advantages that allow them to dominate their respective markets .
But some experts think the status quo is unlikely to change. Many of these companies have already announced compliance plans for the DMA, and in most cases the changes (as one would expect from the plans the companies themselves have in place) are unlikely to result in a loss of power. Then there’s Apple, which appears to be engaging in blatantly malicious compliance practices that put European developers at a disadvantage.
Last September, Alphabet, Amazon, Apple, Meta, ByteDance and Microsoft were designated “gatekeepers” for the regulation – a term the DMA applies to tech giants that offer core platform services that have considerable market power. These services include search engines such as Google Search, messaging services such as WhatsApp and Facebook Messenger, and operating systems such as Android, Windows and iOS.
Messaging apps need to interoperate with competitors
The DMA outlines specific obligations for these core platform services, aiming to provide consumers with more choice and thus generate more competition. For example, messaging apps need to interoperate with competitors, and app stores cannot force developers to use payment systems, identity providers, and other services run by gatekeeper companies. Gatekeepers have until March 6, 2024 to comply with the rules or face hefty fines of up to 10% of a company’s total global turnover.
Subsequent reactions from companies targeted by the legislation varied widely. Some companies, including Meta, Apple, Microsoft and ByteDance, appealed their gatekeeper and core platform service designations, with iMessage and Bing successfully granted exemptions. However, TikTok parent company ByteDance failed to prevent it from being designated after complaining that the DMA rules would force it to disclose private, highly strategic information.
Suspending its designation would have given TikTok more time to comply, but the EU Court of Justice rejected the company’s request after finding there was no risk of “serious and irreparable harm” to TikTok.
Max von Thun, director of Europe and Transatlantic Partnerships at the Open Markets Institute, told the Financial Times edge ByteDance’s case “always looked weak,” but he noted that positioning itself as a challenger to U.S. tech giants might still be enough to sway the EU. The EU has yet to make a final decision on ByteDance’s appeal, but the rejection means the DMA rules must be followed, at least temporarily, after they come into effect in March. As of this writing, the company hasn’t explained exactly how it plans to do this.
Rather than appeal their designations, companies such as Amazon, Meta and Google simply announced changes to the DMA. Von Thune said the announcements “point to superficial compliance aimed at meeting regulatory requirements without posing any real threat to the gatekeepers’ market dominance.”
‘Ostensible compliance aimed at ticking regulatory boxes’
That makes it difficult to measure how much benefit consumers and smaller competitors actually gain.Jan Penfrat, Senior Policy Advisor at European Digital Rights (EDRi) said this edge While he noted that some actions will take time to produce results, any changes proposed by the gatekeepers “have not resulted in any meaningful changes in the power structures that would help these companies stay ahead of the curve.” Alphabet, for example, must now allow people to delete Google apps on Android phones — something that could snowball to benefit smaller providers, though that remains to be seen.
Apple’s App Store platform, one of the DMA’s biggest targets, has been criticized for years for banning alternative payment methods and taking up to 30% of app developers’ revenue. Apple initially claimed that it actually operated five separate app stores, each too small to be designated as a gatekeeper, and von Thurn said the challenge looked like a “malicious attempt to pass on an obvious Unified services impose artificial distinctions to evade compliance.”
Apple initially claimed it actually operated five separate app stores, each too small to be designated as a gatekeeper
Penfrat said Apple is the gatekeeper likely to be hardest hit by the DMA because there are already several competitors capable of challenging Apple’s App Store dominance, including Spotify and Epic. “Apple makes a lot of money off of their App Store monopoly, with over $85 billion in annual revenue, so they are particularly resistant to meaningful change.”
When its appeal didn’t work, Apple took a different approach. In response to the DMA, new rules announced on January 25 for developers releasing iOS software in the EU were enough to make some people uneasy.
What iOS 17.4 will bring to EU residents Technically DMA rules are followed, but they come with new conditions that are onerous for developers. Its upcoming policy will reduce the commission Apple charges on apps hosted on third-party app stores, but impose a “core technology fee” of 0.50 euros (about 54 cents) if downloads exceed 1 million – the only The choice is to stick with the company’s original commission rate of 15% to 30%.
This may be fine for apps with a limited number of users, but if they become a victim of their own success, these fees can add up quickly. David Heinemeier Hansson, the creator of Ruby on Rails, gave the example of finding that Meta had to pay Apple $135 million a year to host Instagram in a rival app store.
Penfrat even called the changes “malicious” and said they could actually make things worse for developers trying to break away from Apple’s App Store monopoly. “With Apple’s current proposals, it seems that no one will try to challenge the gatekeepers’ monopoly. It’s simply not worth it. If the European Commission allows this bill to pass, the DMA will fail.”
“Big Tech’s strategy for DMA is to introduce changes that look like opening up walled gardens, but are actually not feasible or attractive to businesses and users.”
Apple previously decided to drop support for Progressive Web Apps (PWA) in the EU, even blaming DMA. The company reversed that decision after facing a possible EU investigation. PWAs are here to stay—although they must be built on WebKit, the engine used by Safari. As part of its response to the DMA, Apple allowed third-party browsers to use their own engines on iOS in the EU. But PWAs downloaded through these browsers will still rely on Safari’s WebKit.
“The implication is that Big Tech’s strategy towards the DMA is to introduce changes that look like open walled gardens but are actually not feasible or attractive for businesses and users,” von Thun said. “The European Commission should not Accept this is an inadequate measure and instead consult the businesses who should benefit from it and use this feedback to push gatekeepers to do better.”
All gatekeepers targeted by the DMA still need approval from the European Commission.In January, an EU commissioner told Reuters If the EU deems the proposed solution not good enough, it will take “strong action”.