Digital Markets Act Roundup: July 2024

The month of July began with the European Commission informing Meta of its preliminary findings that its “Pay or Consent” subscription model did not comply with the Digital Markets Act. This announcement followed Apple, which received its own non-compliance notification, as discussed in last month’s roundup. Below, the roundup highlights the most important developments related to the DMA from July 2024.

Booking.com and the DMA

Booking, the parent company of the online travel agent (OTA) site Booking.com, is the most recently designated gatekeeper. Global Competition Review reported in July that Booking found compliance with the DMA challenging “due to differences in gatekeeper business models” and was seeking clarity from the Commission. Because Booking was only designated in May 2024, full DMA compliance is not expected until six months after designation. This means compliance reports are not yet available, nor have concrete product changes to its core platform service been publicly announced.

Hotel industry complaints about Booking. Booking was identified as an important gateway for businesses to reach consumers, as Booking maintained a share of 71 percent in the OTA market in 2023, according to the European hospitality industry group HOTREC. In an EU-wide survey, HOTREC pinpoints some of the main issues with dominant OTAs, including undercutting and multisourcing. Undercutting is when the OTA cuts the price set by the hotel, often without the hotel’s permission and making it difficult for hotels to compete for direct bookings. Multisourcing is when an OTA offers rates and availability from other OTAs or wholesalers on its own platform, resulting in pricing inconsistencies, financial losses, operational strain, and poor customer service relations.

Related reading:

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

High commission rates of OTAs are frequently flagged as a major problem for hotel profitability. Commission rates range from 15-30 percent per booking. High commission fees are a problem for hotels relying on OTAs, which tend to be smaller hotels, according to HOTREC’s survey. Presumably, this is because larger hotels are less reliant on being discovered by consumers through an OTA. Thus, ensuring fair practices is crucial as OTAs and Booking, in particular, become more popular and integral to the hotel and travel industry.

The DMA articles that apply to Booking. Booking will need to adhere to a ban on parity clauses, essentially banning gatekeepers from disallowing business users from offering a better price through other sales channels under Article 5(3) and (4). Booking has a price parity clause stating that hotels cannot offer better prices or deals on other distribution channels that they control, including their own websites. Booking will need to amend this policy in the EU, allowing hotels to offer better prices elsewhere.

This has two potential effects. The first is that consumers may be more willing to book directly with the hotel if they can see it is cheaper or has better terms for booking directly. This means the hotel can avoid commission fees and keep more of its profits. However, if fewer consumers book through Booking.com, the hotel will be ranked less favorably on its site. As previously illustrated, OTAs like Booking are important for hotel discovery, and if fewer bookings are made through those sites, it is less likely they can be discovered by users coming to Booking.com.

The DMA also mandates data access obligations for business users under Article 6(10), as a gatekeeper must provide business users access to effective, high-quality, continuous, and real-time access to data generated in the context of using the relevant core platform service, free of charge. This could help address information asymmetries flagged by HOTREC, as they state Booking has been “withholding guest data.” However, it is unclear whether the DMA can tackle other flagged issues, such as price undercutting.

Spain fines the company. On July 30, 2024, the Spanish National Commission on Markets and Competition (CNMC) issued a €413.24 million fine against Booking after finding it abused its market dominance under both national competition law and Article 102 TFEU. The antitrust case was launched in October 2022 following complaints lodged by the Spanish Association of Hotel Managers and the Regional Hotel Association of Madrid. The investigation considered whether Booking imposes unfair trading conditions on Spanish hotels and imposes policies that restrict possible competition from other OTA’s.

The CNMC announced that Booking abused dominance “by better positioning hotels with the most bookings on Booking.com, it has prevented other online agencies from entering the market or expanding.” Because Booking ranks hotels higher when consumers book through Booking.com, “hotels concentrate their online bookings solely through Booking.com, preventing competitors from entering or expanding into the market.”

The CNMC has also found that Booking’s price parity clause is abusive and that there is no “transparency in information about the impact and profitability of subscribing to the Preferred, Preferred Plus and Genius programs.” By subscribing to these programs, hotels can improve their position in Booking.com's results ranking but must agree to higher commission fees or offer discounts on the best-selling or cheapest room that the hotel has on Booking.com. The lack of transparency is seen by the CNMC as preventing hotels from making an informed choice about whether to subscribe.

Booking now must pay the fine and amend the offending terms and conditions. Booking has responded to the fine, stating its intention to appeal and that the company believes “that the EU’s Digital Market Act is the right forum to discuss and assess the majority of these issues, presenting an opportunity to agree on solutions that apply across Europe rather than country by country.”

Indeed, Global Competition Review reported the following day that the agreed fine was a reduced fine due to changes made “to its parity clause policy as a result of the Digital Markets Act [which] helped it knock off approximately €75 million from the Spanish competition watchdog’s abuse of dominance fine.” More information on those changes is not publicly released, but it would appear that the DMA is already affecting some of Booking’s policies.

TikTok loses designation appeal

ByteDance, the parent company of TikTok, has relentlessly tried to appeal its designation as gatekeeper, arguing that it is a challenger to social media incumbents, largely U.S. tech companies, and that business users do not have a dependency on its platform to reach end users. Bytedance first requested an interim measure that would pause the need to implement the DMA until its appeal, which was promptly dismissed. Bytedance had its designation appeal heard and decided by the EU Court of Justice on July 17, 2024.

The Court found that Bytedance meets the quantitative thresholds laid down in the DMA, with respect to “its global market value, the number of TikTok users within the European Union and the number of years during which that threshold relating to user numbers had been met, so that it could be presumed that it was a gatekeeper.” The Court determined that Bytedance does indeed have a significant impact on the EU internal market, that TikTok is an important gateway allowing business users to reach their end users, and that Bytedance enjoys an entrenched and durable position, despite Bytedance’s arguments to the contrary.

Bytedance also attempted to argue that it does not have an “ecosystem and did not benefit from network or lock-in effects,” which the Court rejected, and believes that the scale of TikTok, which has rapidly grown in a short time, is not reduced by the fact that users multi-home other social media accounts. Indeed, the Court disregarded the presence of multihoming, suggesting “that competition amongst gatekeepers does not amount to true contestability for the purposes of the DMA.”

Bytedance’s main argument, that it does not enjoy an entrenched and durable position and that it is a challenger on the market, was rejected by the Court. Bytedance attempted to argue that its position is contested by competitors such as Meta, which launched features imitating TikTok and enjoyed rapid growth from those features. The Court acknowledged that perhaps in 2018, TikTok “was indeed a challenger seeking to contest the position of established operators such as Meta and Alphabet, it had rapidly consolidated its position, and even strengthened that position over the following years, despite the launch of competing services such as Reels and Shorts, to the point of reaching, in a short time, half the size, in terms of number of users within the European Union, of Facebook and of Instagram.” This vast and rapid growth means that TikTok’s market power is too significant to forgo DMA designation and must be subject to its rules.

Bytedance said it is “disappointed with this decision. TikTok is a challenger platform that provides important competition to incumbent players. While we will now evaluate next steps, we already took measures to comply with the relevant obligations of the DMA ahead of last March's deadline.” So far, TikTok has launched a data portability application programming interface for developers to access TikTok user data as either a one-time or recurring data transfer and a “Download Your Data” tool for both personal and business accounts to export and download profile data and posts. Bytedance only has one designated core platform service, TikTok, as its advertising service was deemed not to be a core service.

Other Updates

EDRi investigates Apple. The civil society organization EDRi, along with nine signatories, published an analysis, which has been submitted to the Commission, regarding Apple’s compliance with the DMA. The analysis illustrates that Apple is in breach of a number of DMA articles, arguing that Apple is 1) intentionally undermining user choice regarding app download; 2) that Apple’s Core Technology Fee and Notarization process and fee are unreasonable and unnecessary, serving only to “ensure that all but the most well-funded commercial vendors are excluded from running an app store and competing with the gatekeeper;” 3) that Apple’s browser choice screens are not designed to encourage user choice; and that 4) Apple is violating DMA mandates requiring free and automatic interoperability with its operating systems.

The analysis acknowledges that the Commission has come to some of the same conclusions in its preliminary findings of non-compliance, and the analysis is intended to help the non-compliance investigations and support the Commission in devising remedies.

Opera appeals Microsoft Edge exclusion. The browser Opera is appealing the Commission’s decision not to include Microsoft Edge in the list of core platform services to the European Court of Justice. Opera points to the fact that Edge meets the relevant quantitative thresholds and that its lack of designation “fails to properly assess Edge’s durable and privileged position on Windows devices, which creates an uneven playing field for its competitors. Edge, like Internet Explorer before it, is the gatekeeper through which Windows users must pass to download another browser. This is precisely the type of gatekeeper role which the DMA was intended to address.” Opera points to the integral role played by internet access via browsers and argues that unfair advantages in that space make it difficult for users to choose alternatives to defaults, benefiting large incumbents like Microsoft.

Apple’s appeals EC's preliminary findings. The details of Apple’s appeal against the almost €2 billion fine issued by the Commission in March were released in the Official Journal of the EU on July 1, 2024. The fine results from a complaint from music streaming service Spotify, stating that Apple takes a 30 percent cut of subscription fees for featuring the app in the App Store and Apple does not allow Spotify to notify users that other, cheaper ways to subscribe are available. The Commission has concluded that Apple is abusing its dominance under EU competition law under Article 102 of the Treaty on the Functioning of the European Union (TFEU).

Though this is an antitrust law case rather than a DMA case, it is considered to be connected to the DMA as the Commission has concluded in its preliminary findings of the DMA non-compliance investigation that Apple is not adhering to rules banning anti-steering in the app store. Under the DMA, Apple must allow app developers to steer consumers to better deals within their apps, and the Commission is investigating whether Apple’s fees are fair and proportionate. In the appeal, Apple argues that the definition of the relevant market is incorrect, its policies are not abusive, and the suggested remedies from the Commission are disproportionate. It also argues that the decision violated Apple’s rights of defense.

Related to this, the US Department of Justice and 16 state and district attorneys general have sued Apple, claiming the company has broken antitrust law and monopolized the US smartphone market. Apple is also appealing this, dismissing the lawsuit on the basis that the company is successful on the merits of a superior product rather than abusive tactics. Apple filed its motion to dismiss on August 1, 2024.

MEPs overseeing the Commission. Euractiv reported that EU Parliament members have stated their intention to increase their role in overseeing the Commission’s implementation of digital policy. Eliza Gkritsi writes for Euractiv that the Parliament has not traditionally been an active part of implementing legislation but that members have stated an interest in Parliament taking a more active role. This might be done through a dedicated group monitoring the implementation of new digital laws or conducting its own research. The DMA is one of the new digital laws the Parliament is keen to oversee.

Von der Leyen was re-elected. On July 18, 2024, the current President of the European Commission, Ursula von der Leyen, was reconfirmed by the European Parliament for a second 5-year term. Digital policy appears to be a key priority area for the next Commission, as illustrated in Leyen’s political guidelines. She alluded to the importance of digital policy implementation and enforcement, calling for “tech giants” to “assume responsibility for their enormous systemic power in our society and economy.”

She further wrote, “We have begun the active enforcement of the Digital Services Act and the Digital Markets Act. We will ramp up and intensify our enforcement in the coming mandate. We will support this by tackling challenges with e-commerce platforms to ensure consumers and businesses benefit from a level playing field based on effective customs, tax and safety controls and sustainability standards. Reaching our digital targets and building a true digital single market would be a game-changer for our productivity and competitiveness.”

Italy investigates Google for misleading consumers. Italy’s competition authority, the Autorità Garante della Concorrenza e del Mercato (AGCM), has opened an investigation into Alphabet (Google) and how it prompts users to consent to link their data across Google services. The AGCM alleges that the consent prompts are inadequate in communicating how personal data will be used for such linking. AGCM is also alleging that Google uses “techniques and methods” to get that consent which does not allow for freedom of choice and freely given consent. The press release does not specifically state if the market investigation is intended for national competition law enforcement or if the market investigation is intended to be passed on to the Commission for enforcement under the DMA.

However, if Google is found to be denying consumers a choice in linking their Google information, this could constitute a breach of Article 5 of the DMA, which states that gatekeepers cannot combine personal data from a core platform service with personal data from any other services provided by the gatekeeper or with personal data from third-party services without consent. The gatekeeper also cannot cross-use personal data from a core platform service in other services provided separately by the gatekeeper without consent. Consent is clarified to mean consent under the General Data Protection Regulation, meaning freely given, specific, informed, and unambiguous.

Meta’s “regulatory uncertainty” around AI. Jess Weatherbed reported for The Verge that Meta will not release its multimodal Llama AI model in the EU “due to the unpredictable nature of the European regulatory environment.” Weatherbed says that Meta’s multimodal AI models, which are AI models that can receive a variety of prompts and output video, audio, images, and text, will be implemented in products like the Meta Ray-Ban smart glasses. Meta’s Llama ban in the EU will include future multimodal AI model releases; however, larger, text-only AI models will be available to EU customers. This is significant as companies that rely on or use these models in their products and services will be unable to offer those services in the EU.

Apple and Google’s photo and video transfer capabilities. The Data Transfer Initiative (DTI), a nonprofit organization focused on advocating for industry members to allow for better data portability, announced that users of Google Photos can now transfer their photos directly to Apple’s iCloud Photos. iCloud Photos users could already transfer media over to Google Photos, meaning the two are now interoperable. While DTI, whose members include Google and Apple as well as other big tech players, announced the new features with great jubilation, Austin Carr from Bloomberg made the point that “such a basic feature is only rolling out in 2024 shows just how siloed our digital lives have been.” However, Carr acknowledges that DTI’s executive director Chris Riley “says it’s unacceptable that years have elapsed between big rollouts” of portability features, and Riley directly points to the DMA as “a really powerful catalyzing force” in cracking open these siloes.

European Commission accepts Apple's commitments on NFC. The Commission has announced that it is accepting commitments offered by Apple to resolve another EU antitrust case against it, this time concerning access to its NFC (or Near-Field-Communication) reader, which allows users to make “tap and go” payments with iPhones or other Apple devices. The Commission had preliminarily found that Apple is dominant in the market for smart mobile devices and the in-store mobile wallet market on iOS. This is because Apple Pay is the only mobile wallet that may access the NFC hardware and software on iOS devices to make payments, which amounted to abuse of dominance under Article 102 TFEU.

Apple has committed to allowing third-party wallet providers access to the NFC input on iOS devices free of charge, without having to use Apple Pay or Apple Wallet; to be objective, transparent, and non-discriminatory in granting access to the technology; allow other wallets to be set as a default; and establish an independent review board to settle disputes of Apple’s decisions.

While this was not a DMA case strictly, its commitments cross over with DMA interoperability obligations. These commitments are legally binding, remain in force for ten years, and are without prejudice to Apple’s obligations under the DMA. Executive Vice-President Margrethe Vestager commented on the commitments, stating that the “commitments also bring more than what is required by the DMA. [...] We are looking forward to seeing the implementation in practice. These provisions will help us to do that. This shows that antitrust enforcement goes hand in hand with the DMA.”

Spain opens investigation into Apple. In more Spanish antitrust news, the Spanish competition regulator, the CNMC, has opened an investigation into Apple’s App Store policies and whether they impose unfair trading conditions on developers. This would constitute an abuse of market dominance under national competition law and Article 102 TFEU. The CNMC now has a maximum of 24 months to investigate and resolve the case.

If Apple is found to infringe the LDC, Spain’s competition legislation, Apple faces fines of up to 10% of the total worldwide turnover. Francesca McClimont from Global Competition Review writes that the CNMC’s investigation “will not prejudice” the DMA’s non-compliance investigations into Apple. The CNMC is allowed to enforce its own competition rules against DMA gatekeepers, so long as it is not “for the purpose of ensuring contestable and fair markets” according to Article 1(5). Any obligations imposed on gatekeepers under national competition law cannot be contrary to DMA enforcement. Alternatively, national competition authorities can investigate violations of Articles 5, 6, and 7 of the DMA and send the Commission the results of an investigation.

Fortnite returns to iOS. On July 25, 2024, Epic Games, creator of the popular game Fortnite, announced that Fortnite will return to iOS in the EU and that the Epic Games Store will soon be launched on both iOS and Android worldwide. This store boasts “great terms: a store fee of 12% for payments we process and 0% on third-party payments.” Epic goes on to say that their mobile games will be available “to other mobile stores that give all developers a great deal. And, we will be ending distribution partnerships with mobile stores that serve as rent collectors without competing robustly and serving all developers fairly, even if those stores offer us a special deal for our own games.” Epic specifically states that they have long battled against unfair app store terms, have been advocates of enforcing the DMA, and see other new digital competition legislation being implemented around the globe as creating an opportunity to usher in global change for developers. EU users of the new AltStore on iOS can expect to see Fortnite on that app store, and Epic expects to announce support for at least two other third-party stores.

EU antitrust focuses on Meta. Meta reportedly faces its first EU antitrust fine for tying its classified advertisements service, Facebook Marketplace, with its social network. This is the result of a 2022 Statement of Objections that the EU sent to Meta over the tying, stating that it distorts competition in the market for online classified ads and imposes unfair trading conditions on Facebook Marketplace's competitors for its own benefit. The objections state the Commission’s concern that competitors of Meta’s Marketplace are foreclosed as Meta maintains a substantial distribution advantage that competitors cannot match.

The unfair conditions flagged by the Commission are 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, which the Commission deems unnecessary. These concerns amount to Article 102 TFEU, which prohibits abuse of dominance, and the Commission is set to issue an order in the coming months, meaning it could order Meta to untie the Marketplace from the Facebook social media platform. This comes as the Commission plans to utilize the DMA to stop Meta from using data from rival ads platforms to compete against them, according to Samuel Stolten from Bloomberg.