Digital Markets Act Roundup: August 2024

While European leaders have been on a summer recess during August, there were still notable developments related to the Digital Markets Act (DMA), particularly regarding Apple’s continuous product changes. Below, the roundup highlights the most important developments related to the DMA from August 2024.

Apple makes further product changes

Apple announced a slew of changes earlier this year to its designated core platform services to meet DMA compliance. These product changes have continuously been criticized as non-compliant, particularly the fees developers are charged to link out to external offers. Apple was the first gatekeeper to be found potentially non-compliant with the DMA, as the Commission published its preliminary findings of non-compliance in June.

New link-out rules

On August 8, 2024, Apple updated its rules for EU developers who want to communicate discounts externally. Apple explicitly stated that these changes directly responded to the Commission’s view that Apple is not complying with the DMA. Specifically, the Commission found that Apple was violating Article 5(4) of the DMA, which mandates that gatekeepers must allow app developers to steer consumers to offers outside the gatekeepers' app store, free of charge.

The new “StoreKit External Purchase Link Entitlement” terms state that developers can now communicate and promote offers available outside the Apple ecosystem. This can “be an alternative app marketplace, another app, or a website, and it can be accessed outside the app or via a web view that appears in the app.” Apple previously had strict rules governing how apps could link out to external websites and has not allowed developers to promote cheaper offers available on the developer website or alternative channels. This change means that developers can now list information about lower prices available outside of the Apple ecosystem within the app and won’t be subject to showing off-putting “scare screens.”

Related reading:

• Digital Markets Act Roundup: July 2024
• Digital Markets Act Roundup: June 2024
• Digital Markets Act Roundup: May 2024

Still, developers must pay an initial acquisition fee of 5 percent and an ongoing store services fee of 20 percent on purchases made by users, with fees reduced to 7 percent for those part of the Small Business Program. These charges apply even for off-platform subscriptions and auto-renewals. As Emma Roth summarizes for the Verge, Apple can take up to a 25 percent commission on purchases “even if the user never actually clicks the external link.” These same fees will also apply to developers operating under the EU Alternative Terms Addendum, who are also subject to the Core Technology Fee, currently under investigation by the European Commission.

Long-time Apple critics were quick to lash out against these new terms. Sarah Perez for TechCrunch reports that Spotify believes the new terms are “unacceptable” and claims that Apple is “once again disregarding ‘the fundamental requirements’ of the DMA.” Epic Games CEO Tim Sweeney labeled Apple’s actions as “malicious compliance” with the DMA and continuous “junk fees.” Apple’s approach is likely to face additional concern from regulators. The company is already under scrutiny for fees, with the Commission explicitly stating that “whilst Apple can receive a fee for facilitating via the AppStore the initial acquisition of a new customer by developers, the fees charged by Apple go beyond what is strictly necessary for such remuneration.”

Browser choice screen and deleting defaults

On August 22, 2024, Apple announced changes to how it presents potential browsers in browser choice screens and allows users to change and delete certain defaults. First, choice screens will be slightly different, displaying a list with the App Store tagline included as the description. Users will need to scroll to the bottom of the list before selecting a new default. Apple will roll out the updated choice screen to all EU users with Safari as their default browser, including those who have already seen the previous version. Users with a non-Safari browser set as their default will not see the choice screen.

Apple will also provide browser developers with new data on their browser’s performance in the choice screen, including selection rates. The Commission had scrutinized Apple’s choice screens, and early analysis of the effectiveness of the choice screens was inconclusive. Andrew Frost Moroz, founder of Aloha browser, welcomed the changes, particularly the inclusion of a description “and fewer taps to start browsing.”

In addition, Apple will introduce a new Default Apps section in iOS Settings, where users can manage their default apps. Future software updates will allow users to set new defaults for dialing phone numbers, sending messages, translating text, navigation, managing passwords, keyboards, and call spam filters. Apple also announced that users in the EU will soon be able to delete the App Store, Messages, Photos, Camera, and Safari apps to comply with Article 6(3) of the DMA.

However, Bethan John for Global Competition Review reports that alternative app store owners are apathetic to this update, arguing that allowing users to delete defaults “will do little to restore competition as the company still intends to impose a Core Technology Fee on developers.” Despite the Commision’s ongoing questions about Apple’s compliance with the DMA, the company does not seem to be planning to scrap the Core Technology Fee.

Other updates

Draft guidelines on Article 102 TFEU

On August 1, 2024, the European Commission published for consultation draft guidelines on the prohibition of abuse of dominance in Article 102 of the Treaty on the Functioning of the European Union (TFEU). The purpose of the guidelines is to reflect on the Commission's interpretation of EU court case law on exclusionary abuses and help increase legal certainty, particularly for the benefit of national competition authorities and courts. Comments on the draft Guidelines can be submitted by October 31, 2024.

Thomas Withers for Addleshaw Goddard writes a summary of the draft, noting a significant change from previous guidelines regarding the interaction between Article 102 TFEU and sectoral regulation. He writes that conduct that is compliant with sectoral legislation may still be considered abuse of dominance under Article 102 TFEU, “and, vice versa, may under certain conditions apply even where a business has already been punished under other sectoral rules, effectively giving rise to the possibility of being sanctioned twice.” Withers describes this as “controversial” and emphasizes that it“is pertinent in the context of the EU's new Digital Markets Act, which creates a regime of sectoral regulation for certain large tech players.” Under the draft guidelines, this means that even behavior deemed compliant with the DMA could still be scrutinized under antitrust law, and there is a possibility of conduct being in breach of both the DMA and antitrust law.

Commitments by Booking

The Italian competition authority, the Autorità Garante della Concorrenza e del Mercato (AGCM), published commitments made by Booking following an investigation launched in March for alleged abuse of a dominant position under national competition law and Article 102 TFEU. The investigation found that Booking leveraged its market power to exclude other online travel intermediaries from the market. They conclude that hotels are restricted to advertising the best price on Booking.com, concentrating its market position and blocking competition. The AGCM takes issue with the Preferred Partner and Preferred Plus programs which offer higher visibility in search results upon payment of higher fees and commitment to offer “competitive” prices on Booking.com. The AGCM also takes issue with the Booking Sponsored Benefit, which allows Booking to apply a discounted price to a listing so that it aligns with the best available online. Some of these concerns echo the findings of the Spanish National Commission on Markets and Competition (CNMC), which issued a fine against Booking last month.

Spotify adds in-app price info

Spotify informed iPhone users in the EU that they will now see pricing information for Spotify in the app, including prices offered exclusively on Spotify’s website. This change comes as Spotify has now opted into Apple’s Music Streaming Services Entitlement (EEA), which Apple created after the European Commission fined it €1.8 billion for abusing its dominant position. Spotify first raised the complaint to the Commission in 2019, accusing Apple of abusing its dominance by taking a 30 percent cut of subscription fees for App Store purchases and prohibiting apps from notifying users about cheaper subscription options.

While Spotify will not include links in the app in order to avoid paying a 27 percent commission on purchases made through link-outs, it can still communicate to users to go to the website to make any purchases. Spotify, which has long argued for the right for iOS apps to set their own terms, insists this update does not mark the end of its battle with Apple. The company stated that more needs to be done, as “Spotify and all music streaming services in the EU are still not able to freely give consumers a simple opportunity to click a link to purchase in-app because of the illegal and predatory taxes Apple continues to demand, despite the Commission’s ruling.”

Epic Games store launch

On August 16, 2024, Epic Games, the maker of the popular game Fortnite, announced that its game store is now available for download on iPhones in the EU and on Android devices worldwide. The store features Epic’s own titles, and the company revealed plans to allow developers to create and launch their own games on the platform in the future. Some Epic Games titles are also available on independent mobile stores like AltStore PAL.

Epic Games specifically credited the DMA for enabling the launch of its store on popular operating systems. However, the company bemoaned that currently, “the process of installing the Epic Games Store on iOS and Android is lengthy due to Apple and Google introducing intentionally poor-quality install experiences laden by multiple steps, confusing device settings, and scare screens.” The company vowed to continue fighting in the courts and collaborating with regulators worldwide to “eliminate the anticompetitive terms that Apple and Google impose on developers and consumers.”

Vestager to step down

Executive Vice President of the European Commission, Margrethe Vestager, will not seek a third term in her current role, ending her ten-year tenure leading EU competition and antitrust policy. The Financial Timesreports her departure is due to poor results for Denmark’s Social Liberal Party in the 2022 election, which is no longer part of the ruling coalition. While Vestager’s replacement has not yet been announced, the future of DMA enforcement will depend on whether they continue her tough approach to big tech.

EC cuts funding for free software

Last month, the Free Software Foundation Europe (FSFE) revealed that the Commission will cut funding support for free software projects, which are typically supported through The Next Generation Internet (NGI) initiative backed by the Horizon Europe funding program. FSFE wrote that “NGI is no longer mentioned as part of the plans for the Horizon Europe funding drafts and work programs for 2025. The lack of public funding to such crucial technologies negatively impacts not only Free Software but the whole future of the Internet.”

FSFE pointed out the irony of the EU pushing to open digital markets through legislation like the DMA while cutting support for independent initiatives that “challenge large, monopolistic, and consolidated digital platforms.” In an update to the development, FSFE reported that the Commission had responded to their statement and signaled “a vague level of intent to continue supporting Software Freedom and Free Software development in the EU” without allocating a specific budget or confirming concrete funding.

Meta ad data rules

In last month’s roundup, I reported that Meta faces its first EU antitrust fine for tying its classified advertisements service, Facebook Marketplace, to its social network. This followed a 2022 Statement of Objections from the EU, which argued that Meta’s tying practices distort competition in the market for online classified ads and impose unfair trading conditions on Facebook Marketplace's competitors for its own benefit. The Commission flagged Meta’s terms, which allow Meta to use ads-related data obtained from competitors advertising on Facebook or Instagram for the benefit of Facebook Marketplace.

This month, the UK’s competition regulator, the Competition and Markets Authority, accepted commitments from Meta to change how it uses advertising customers’ data in a case similar to the EU. Meta has now allowed “all advertisers [to] retain the ability to place advertisements on Facebook Marketplace and be certain of their advertising data not being used to improve Facebook Marketplace” by default, “without having to opt in or out.” It remains uncertain whether Meta will offer similar commitments to the EU and whether that would assuage the Commission’s potential plans to utilize the DMA to prevent Meta from leveraging data from rival ad platforms.