Digital Markets Act Roundup: October 2024

Elon Musk can breathe a sigh of relief as his social networking service, X, and X’s advertising division have been exempted from the Digital Markets Act. Google doesn't appear to be so lucky with another month of antitrust scrutiny of the company, particularly towards its advertising empire. In addition, the EU Commissioners-Designate responded to written questions in preparation for their hearings before the European Parliament casts their votes. Below, the roundup highlights the most important developments related to the DMA from October 2024.

X is not a ‘Gatekeeper’

Following an investigation launched in May 2024, social media site X (formerly Twitter) will not be designated as a gatekeeper in a decision announced on October 16, 2024. Despite meeting the gatekeeper threshold, which X notified the Commission on March 1, 2024, the investigation concluded that X is not an important gateway for business users to reach end users.

Gatekeepers are deemed to provide core platform services if the company achieves an annual turnover in the EU equal to or above €7.5 billion in each of the last three financial years or where its average market capitalization or equivalent fair market value amounted to at least €75 billion in the last financial year. The service must also have 45 million monthly active end users and 10,000 yearly business users, which will be deemed to significantly impact the market and have an entrenched and stable market position. Following notification to the Commission that a company’s service meets such thresholds, the Commission has 45 working days to make a designation decision. If a company is designated a gatekeeper, it then has six months to comply with the law.

The Commission opened a market investigation to assess the rebuttal submitted by X on March 1, 2024, concerning its notification for the social networking service and advertising business, X Ads. The rebuttal argued that, while X meets the thresholds, neither service constitutes an important gateway between businesses and consumers. The Commission concluded in May this year that X Ads does not qualify as an important gateway and, therefore, was not made a core platform service. X argued that “X Ads has a too small and decreasing scale in terms of share of advertising spend in the Union to constitute an important gateway in the market for online advertising” and that X lacks “platform power.” The Commission generally agreed, writing that X Ads saw “a decline in the number of advertising business users, as well as a decline in pricing and a year-on-year revenue decline” despite the advertising industry growing.

Related reading:

• Digital Markets Act Roundup: September 2024
• Digital Markets Act Roundup: August 2024
• Digital Markets Act Roundup: July 2024

Similarly, the Commission has now concluded that X’s social media service is not an important business gateway and has not been designated. This means X is off the list of DMA gatekeepers altogether and will not be required to implement rules such as providing advertisers free access to ads performance measurement; allowing users to port personal and non-personal data continuously and in real-time to other services; adhering to the ban on cross-using personal data across services unless consent is granted; on the condition that consent for cross-combining personal data is denied, gatekeepers must provide the user with a less personalized but equivalent alternative. Despite the favorable decision, the company still faces a potential non-compliance ruling with the DMA’s companion regulation, the Digital Services Act.

Commissioners-Designate Questioned

On October 23rd, the current Commissioners-Designates published their written responses to questions from European Parliament lawmakers. The next steps in appointing the EU’s College of Commissioners involve scrutiny of potential financial conflicts of interest and confirmation hearings before the European Parliament’s committees, after which committee chairs and political group representatives will assess the candidates in advance of the Parliament’s final vote. Before the hearing, candidates must respond to written questionnaires from the committees conducting the hearings. Nominees must demonstrate their competence as a Commissioner and illustrate their expertise in the specific portfolios allocated to them. Confirmation hearings will be held in November 2024.

Teresa Ribera, the candidate as the Executive Vice-President of a Clean, Just, and Competitive Transition who will be in charge of enforcing the DMA and competition in the EU, wrote that the previous Commission successfully “added new instruments to tackle emerging challenges in the Single Market, in particular, digital gatekeepers (the Digital Markets Act)” and stated her intention to “push for a vigorous enforcement of the DMA.” She added that competition:

“and other policies, like industrial, trade or budgetary policy, have a complementary role in fostering long-term competitiveness and economic growth. As recognized in the Draghi report, there is no competitiveness without effective competition in a market economy. The proper enforcement of competition policy should lead to more innovation and can ensure that the European industrial policy is more efficient and effective by helping to set the right incentives.”

She proposed that if elected, she would not only “strengthen and better target competition enforcement” but also “provide upfront guidance and cut red tape for Member States to implement unproblematic public measures and help enable pro-competitive cooperation between businesses.”

Riberia also makes clear that enforcement of competition policy would not merely be punitive but intends to facilitate the promotion of European businesses. Of note, under merger control, she said:

“I am determined to swiftly find the best way to ensure that ‘killer acquisitions’ of target companies with low or no turnover but with high competitive and innovative potential do not escape scrutiny under EU merger rules, just because they do not meet the turnover-based notification thresholds. This is key to protect innovation and future competitiveness in the EU.”

As reported in last month’s roundup, the EU Court of Justice ruled that Article 22 of the European Merger Regulation cannot be used to probe below threshold mergers when the referring Member State authority lacks jurisdiction under its own national rules. Therefore, Ribera has stated her intention to resolve the problem of killer acquisitions, a common practice in the digital economy, where large dominant firms buy small start-ups and often evade merger notification because of the small companies' low or no revenue.

Henna Virkkunen, the current candidate as the Executive Vice-President for Tech-Sovereignty, Security and Democracy, who will also be tasked with implementing the DMA and other digital policies, articulated three priority areas in enforcing the DMA:

“1) to open up closed ecosystems, be it in operating systems, web browsers or online marketplaces; 2) to give consumers choice and the ability to take back control in an environment where they feel large digital companies are powerful, and 3) to ensure that data belongs to those who generate it and not to those who can best exploit it.”

This suggests a continued focus on enforcing Article 6(7), which mandates gatekeepers to allow third parties free and effective interoperability with hardware and software controlled by the gatekeeper. Apple is the first to be targeted in specification proceedings to help the company comply with interoperability obligations such as Article 6(7).

Other closed ecosystems seeking to be opened in the DMA are the continued focus on Google’s suspected self-preferencing in Google Shopping, currently being investigated “to determine whether Alphabet's display of Google search results may lead to self-preferencing in relation to Google's vertical search services.” Consumer choice is another current focus, particularly regarding Apple and Meta, who are being investigated for not implementing user choice obligations and for imposing a binary choice on users to accept continued data collection or be denied use of its service, respectively. Her final priority area suggests stronger enforcement of Article 6(9), which mandates that gatekeepers must allow effective portability of data provided by or generated through the activity of the end user, which potentially shifts power away from incumbents' hold over data and puts control back in users hands.

Beyond the DMA, Virkkunen has expressed intent to implement many recommendations from the Draghi report; for example, she proposes increased support for digital skills development, “lowering the threshold for our businesses to adopt innovative technologies such as AI” as well as “support[ing] effective implementation, enforcement, and simplification of rules and regulations and cutting bureaucracy, using technology to decrease the compliance burden for our businesses.” She makes it clear that AI will be important in the next Commission, stating that “Europe should become the AI continent” and supporting the creation of “AI Factories” to help startups access compute power. Ribera and Virkkunen’s hearings will be held on November 12, 2024.

Other Updates

EC’s Digital Fairness Fitness Check

On October 3rd, the Commission announced the publication of its Digital Fairness Fitness Check report. In the mission letter to incoming Justice Commissioner Michael McGrath, he was tasked with developing “a Digital Fairness Act to tackle unethical techniques and commercial practices related to dark patterns, marketing by social media influencers, the addictive design of digital products and online profiling especially when consumer vulnerabilities are exploited for commercial purposes.” The findings of the report are to support McGrath in developing the Act. The report found that consumers do not feel in control of their online experience due to practices such as dark patterns, addictive design, and personalized targeting of advertising.

The report recognizes that the DMA has some consumer protection elements but argues that because the regulation only applies to large gatekeepers, harmful practices from small or medium-sized businesses are left solely under the purview of consumer law, which does not account for some online-specific practices such as those listed above. Among the recommendations from the report, the Commission Working Group recommends:

“facilitating closer cooperation between different enforcement authorities and their respective networks, e.g. following the example of the DMA High-Level Group, which formally brings together different authorities (including competition and consumer authorities) [...]; furthermore, in 2023, the European Data Protection Board established a taskforce on the interplay between data protection, competition and consumer protection law.”

Overall, the report recognizes the need to view consumer protection and competition enforcement in tandem, similar to the UK’s Digital Markets, Competition and Consumers Act 2024, which introduces new digital competition powers alongside consumer protection.

G7 Competition Summit

The G7 Competition Summit took place on October 3rd and 4th at the headquarters of the Italian Competition Authority, the Autorita' Garante della Concorrenza e del Mercato (AGCM). The meeting comprised delegations from G7 member countries (Canada, France, Germany, Japan, Italy, the United Kingdom, and the United States) and the European Commission.

The event was a closed-door event with two working sessions. The first session focused on “current and future horizon scanning and enforcement activities; the second will address policy and regulatory issues. The overarching theme of the discussions will be artificial intelligence (AI) and the related competition issues, considering the transformative impact of AI on our economy and society.”

The Commission wrote that:

“Attending authorities and agencies also exchanged views on other concerns in digital markets and how to use both preventive (ex-ante) and corrective (ex-post) approaches to address these challenges. The European Commission shared its experience with the application of the Digital Markets Act aimed at ensuring fairness and contestability in digital markets, with a particular focus on AI.”

The event’s Communiqué describes concerns regarding market concentration in “crucial AI inputs,” already dominant firms self-preferencing and bundling their AI products, potential anticompetitive partnerships, and potential algorithmic collusion between firms. Therefore, regulatory solutions to these issues are highlighted for discussion at the event, as well as international collaboration to “learn[...] from each other’s experiences and insights to ensure that our approaches remain effective and aligned with the challenges ahead.”

EU-UK Competition Cooperation

On October 29, 2024, the Commission announced that the Commission and the UK’s competition authority finalized technical discussions in creating a Competition Cooperation Agreement. The agreement allows:

“the Commission, the national competition authorities of the EU Member States (‘NCAs') enforcing EU competition law, and the UK Competition and Markets Authority to cooperate directly in competition investigations. It is the first EU competition cooperation agreement enabling NCAs to cooperate directly with a third country competition authority, as is foreseen by the TCA for the UK.”

The agreement means that details of important antitrust and merger investigations can be shared between authorities and can result in the coordination of investigations between the jurisdictions involved. There could be the possibility of exchanging information regarding investigations into DMA gatekeepers and firms of Strategic Market Status under the incoming UK Digital Markets, Competition and Consumers Act, which could help with the regulatory alignment between the two regulations.

Other Commission Actions

DMA Call for Tenders. The Commission has launched a call for tenders for a study into how emerging technologies may impact digital market regulation. Specifically, the Commission says that the study would focus on “the policies and mitigating measures that the online platforms put in place to deploy emerging technologies, taking into account their current and eventual need to comply with the DMA.” By looking at emerging technology, the Commission is seeking to understand the “early stages of the technology life cycle” to better counter problems with DMA compliance. The deadline for receipt of tenders is November 18, 2024.

Booking.com DMA Workshop. With Booking.com (Booking) coming into DMA compliance in November 2024, the Commission has organized its multi-stakeholder compliance workshop. The workshop allows “interested third parties to receive their views on specific issues and questions that may arise in relation to the measures that Booking has put in place.” On the same day, Booking will publish both its confidential and non-confidential compliance reports explaining how the company will comply with relevant DMA obligations. The workshop will be held on November 25, 2024, with interested attendees needing to register attendance by November 11th if they wish to participate in person. Participants can also register online. Previous gatekeeper compliance workshops can also be viewed online.

Civil Society Letter Calls on Commission to Break up Google AdTech

A coalition of anti-monopoly civil society organizations published an open letter calling on the new EU Commission to implement structural remedies in its case investigating Google’s potential abuse of dominance in the ad tech stack, arguing that “only mandatory divestment of Google’s ad tech businesses stands a chance of leveling the playing field.” The case against Google regards potential abuse of dominance, where the Commission submitted a preliminary statement of objections over “Google favoring its own online display advertising technology services to the detriment of competing providers of advertising technology services, advertisers and online publishers.”

The letter highlights that the Commission has “rightly pointed out that this structural conflict requires a structural solution” stemming from Google owning multiple layers of the ad tech stack and warns against relying only on behavioral remedies. They suggest looking to the US, whose “Department of Justice has made it clear that it plans to seek structural remedies in the search case it recently won against Google in U.S. courts, and in the separate U.S. case against Google for the monopolization of ad tech."

In the Google search case in the US, the Department of Justice has published its proposed remedy framework, which includes divestment of the Chrome browser and Android operating system as well as ending Google's deals to have Google search pre-installed or set as the default on new devices. In the United States v. Google LLC regarding Google’s ad tech business, the suit seeks “to force Google to sell much of its suite of ad technology products, which include software for buying and selling ads, a marketplace to complete the transactions and a service for showcasing the ads across the internet.”

Other Civil Society Actions

App Fairness Open Letter. The Coalition of App Fairness, an industry organization campaigning for improved trading conditions for app developers, published an open letter regarding Apple and Google’s lack of compliance with the DMA. The letter called Apple’s EU terms “anticompetitive” as it forces developers to pay a fee if they wish to take advantage of the DMA, for example, if they wish to create a third-party app store. The letter also argued that there are still “complex install procedures” and fees that stop alternative app stores from competing with Apple and Google; and that Apple and Google are breaking the law by imposing taxes on developers “for communicating to users and selling them special deals or offers” despite the rules stating they must be allowed to do so freely. They call on the new commissioners to tackle these issues in future DMA enforcement.

Lobbying in DMA Workshops. In a timely report regarding DMA compliance workshops, SOMO, the Centre for Research on Multinational Corporations, an independent, non-profit research organization in partnership with Corporate Europe Observatory and LobbyControl, found lobbying efforts in DMA workshops. They found that 21% of workshop attendees were affiliated with big tech companies without disclosing it. The report points out that DMA workshops should be serving “as an important opportunity for stakeholders to publicly question Big Tech gatekeepers’ compliance. These spaces mustn’t be distorted by the influence of hidden affiliations.” The result of firms that maintain a conflict of interest having too large a say in these spaces “contribute to a breakdown in the distinction between expertise and advocacy in competition policy and regulation.”

Google v Epic Games

On October 7, 2024, Epic Games’s antitrust battle against Google gained new ground in the US, although Google’s successful appeal took it one step back. The court had previously found that Google “unreasonably restricted trade” in the Android app market with its Google Play store policies in 2023. Hearings on the proposed remedies were held on August 14, 2024, with US District Judge James Donato issuing an injunction in October that was planned to take effect on November 1, 2024. The injunction bans Google from forcing developers to exclusively use its PlayStore, forcing developers to use Google’s payment method, and allowing developers to advertise direct download options in the app for three years. The injunction also banned device manufacturers from pre-installing Google Play Store and forced Google to allow developers to launch third-party app stores and allow third-party app stores to distribute PlayStore apps until the injunction ends in 2027.

The case against Google is from 2020, when Epic launched two suits against Google and Apple, respectively, arguing that Google maintains an illegal monopoly over app distribution and abusive in-app payment policies. The Apple suit was filed on similar grounds, but in the 2021 ruling, Epic only half won its battle. In that case, the Judge ruled that Apple had not maintained an illegal monopoly but was ordered to remedy its anti-steering rules, meaning developers should be allowed to advertise alternative payment methods. On January 16, 2024, the Supreme Court declined to hear both Apple and Epic’s appeals on the verdict.

The remedies in the Google case appear to largely mirror obligations and prohibitions mandated in the DMA, with some rules going further. For example, where the DMA forces operating system gatekeepers to allow defaults to be changed or deleted, the Google ruling here bans Android phone manufacturers from pre-installing the PlayStore in the first place. That said, Google has appealed the verdict, which has “delayed the injunction to allow the 9th U.S. Circuit Court of Appeals to consider Google's separate request to pause the judge's order. Donato denied Google's separate request to pause the order for the duration of its broader appeal in the case.” This means that, besides the order banning Google from making monetary deals with device manufacturers to block the pre-installation of third-party app stores, the other remedies sit in limbo while appeals drag on. Wes Davis and Sean Hollister report for the Verge that “Judge Donato reportedly told the courtroom he suspects the Ninth Circuit will grant that longer stay, too — which could genuinely let Google off the hook till it gets through appeal.”

FCO Concludes Meta Probe

The German competition authority, the Bundeskartellamt, announced that it had concluded its proceedings against Meta’s collection and combination of user personal data. The investigation from 2019 “prohibited Meta from combining personal user data from different sources without user consent.” Despite Meta’s appeal, the European Federal Court of Justice and the Court of Justice agreed with the Bundeskartellamt’s argument, resulting in Meta creating the Account Center for users to manage their consent, as well as introducing new cookie policies and Facebook Login changes so users can use the login function and refuse data combination. Such measures are “now deemed to be a sufficiently effective package to allow the Bundeskartellamt to close the case.”

The announcement included that “other authorities have effective and appropriate tools at their disposal to achieve further improvements “for users of Meta services in the European Union, if necessary,” explicitly pointing out that the“Commission, for example, now has the power to take action against combining data across different services of so-called gatekeepers if users have not given their valid consent; this is set out in Article 5(2) of the Digital Markets Act (DMA), which draws on the issues underlying the Bundeskartellamt’s Facebook decision.”

Apple iOS Rollout

On October 23, 2024, Apple announced that beta versions of iOS 18.2, iPadOS 18.2, and macOS 15.2 are now available. These changes, announced earlier this year, provide additional information about browsers shown to users in the choice screen; create a new Default Apps section in Settings that lists defaults available to each user; and make deletable the App Store, Messages, Photos, Camera, and Safari apps for users in the EU. Though the changes have been made to bring Apple into DMA compliance, the update has extended default app management to users worldwide, including changing calling and messaging defaults. Additionally, the new update gives developers “support in Safari for exporting user data and for web browsers to import that data.” This will allow users to install an alternative browser and import their data from Safari.

The update states that the changes follow “feedback from the European Commission and from developers” and announces that:

“in these releases developers can develop and test EU-specific features, such as alternative browser engines, contactless apps, marketplace installations from web browsers, and marketplace apps, from anywhere in the world. Developers of apps that use alternative browser engines can now use WebKit in those same apps.”

However, the non-profit group Open Web Advocacy identified problems in practice with some changes, arguing that “Apple decided earlier this year to make it impossible for browser vendors to test their own browsers if the developers were not physically located in the EU” and that there “is still no solution proposed by Apple to allow web developers outside the EU the ability to test and maintain their websites and Web Apps for EU consumers on third-party browsers which use their own engine.”

They also write that though Apple has introduced a new tool for browser apps to check if it is currently the default browser app, it will only tell the browser app if it is the default once per year. While this is to avoid continual and annoying default prompts on the user end, “it is not clear that it is necessary to limit the ability to check the current status” on the developer side. Other issues that Open Web Advocacy identified can be found in their blog post.

Apple Intelligence Coming to the EU

After initially stating that Apple’s integrated artificial intelligence features would not be coming to the European market, Apple announced in a press release that this “April, Apple Intelligence features will start to roll out to iPhone and iPad users in the EU. This will include many of the core features of Apple Intelligence, including Writing Tools, Genmoji, a redesigned Siri with richer language understanding, ChatGPT integration, and more.” According to an Apple spokesperson in a statement to TechCrunch:

“Since announcing Apple Intelligence, we have been working to find a path to deliver as many features as we can in the EU in a way that complies with the DMA while maintaining user privacy and security, and to determine what additional product engineering would be required to do so. We look forward to bringing Apple Intelligence features to users in the EU in future software updates.”

Apple had previously said that EU users would not get the AI features due to “regulatory uncertainties brought about by the Digital Markets Act.” This means that Apple Intelligence could be brought under DMA rules when integrated into iOS, a core platform service or Apple Intelligence could itself become a core platform service as a virtual assistant.