Meta and Apple Violated Digital Marketing Act, EU Alleges

Apple has become the first tech giant to be formally charged by the European Commission for breaching the Digital Markets Act. The preliminary ruling was issued on Monday, June 24, and could result in the Cupertino firm being hit with a hefty fine. On July 1, the Commission ruled that a second entity, Meta, did not fulfill with DMA.

In accordance with ReutersThe Apple and Meta cases are a priority, but regulators are still investigating whether Google's parent company Alphabet is giving disproportionate favoritism to Google Play and its own services in Google search results.

In the event of a breach of the DMA, organisations may be fined up to 10% of their total global turnover, or 20% for a repeat offence.

What is DMA?

The DMA, set to be created in 2022, is an EU regulation designed to promote fairness and competition among digital products and services. It has set obligations for some powerful tech companies, called “gatekeepers,” to comply with the rules in their daily operations.

They cover:

• Providing users with access to the data that gatekeepers collect about them.
• Tracking users outside of their platforms.
• Allowing third parties to interact on their platforms.
• Allow users to remove any pre-installed software or application.
• De-prioritizing services and products offered by third parties on the gatekeeper platform.

In September 2023, the European Commission named Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft as gatekeepers or providers of certain “core platform services” such as Google Maps, the Apple App Store and Amazon Marketplace.

Fines for non-compliance with the DMA can be up to 10% of a company’s total global turnover, up to 20% in the case of a repeat violation. In more extreme cases, the Commission can order an organization to sell all or part of its business or prohibit the organization from acquiring related services.

The DMA has been in force since May 2023, but the deadline for submitting DMA compliance reports to the European Commission was March 7, 2024. A few weeks later, the Commission announced that it had launched investigations into non-compliance by Alphabet, Apple and Meta.

Meta's 'pay or consent' approach on Facebook and Instagram does not meet DMA requirements

On July 1, the European Commission ruled that Meta’s “pay or opt-in” advertising model, in which users who subscribe to Instagram or Facebook can opt out of targeted advertising, violates the DMA. The commission said that the “pay or opt-in” model does not provide a service equivalent to paid advertising if users opt in. The “pay or opt-in” advertising model also “does not allow users to exercise their right to freely consent to the aggregation of their personal data,” the commission said. stated.

What does the DMA ruling against Apple mean?

The commission found that Apple has three sets of business rules that ultimately prevent iOS app developers from directing their users to third-party purchasing options. This is contrary to the DMA, which states that developers should be able to direct their customers to purchasing options outside the App Store easily and free of charge.

Apple takes a 30% cut of revenue from any in-app purchases, so when users make app-related payments in their phone's browser, for example, it eats into its profits.

Margrethe Vestager, Executive Vice President responsible for Competition Policy, said in her speech: press release June 24: “Our preliminary position is that Apple does not fully allow governance. Governance is key to making app developers less dependent on intermediary app stores and ensuring consumers know the best deals.”

In addition to publishing these preliminary findings, the Commission has also launched a new investigation into Apple’s terms and conditions for developers that were drafted in response to the DMA. These new terms and conditions act as a condition for offering an iOS app through a distribution channel other than the App Store and include the so-called “Core Technology Fee.” The Commission is primarily examining whether Apple continues to effectively restrict the distribution of apps through alternative channels while leaving developers the option to sign up to its old terms and conditions.

How did Apple break DMA?

The European Commission found that Apple violated the DMA in three main ways:

1. None of the three sets of business rules for app developers allow developers to freely direct their customers to purchase options outside of the app.
2. Transitioning to purchases outside of the iOS app is only possible through “deep links,” where a link in the app redirects the user to a web page to complete the transaction, which is strictly limited.
3. Apple's fees for attracting new customers to a developer by placing their app on the App Store exceed the amounts strictly necessary for compensation.

Why has the European Commission launched a new investigation into Apple?

The European Commission is set to investigate whether Apple's new terms of business for developers who want to put their iOS apps on distribution channels other than the App Store are so restrictive that they will discourage them from doing so.

In particular, the following aspects of DMA will be examined:

1. A new Core Technology Fee, which charges developers €0.50 for the first install of an app over a million.
2. The numerous steps a user must go through to download alternative app stores or apps to an Apple device, and the informational screens that are displayed as part of this process.
3. The requirements for developers included the ability to offer alternative app stores or directly distribute apps from the Internet to the iPhone.

How did Apple and Meta react to DMA?

Apple Responds to DMA Demands in January, saying that access to third-party apps on Apple devices presented security risks including “malware, fraud and scams, illegal and harmful content.” However, it did number of changesincluding its pricing structure.

The maximum commission Apple takes on subscriptions and in-app purchases for apps listed in the App Store has been reduced from 30% to 17%, and the company does not take a commission on those distributed by a third-party app. However, it has also added a controversial Core Technology Fee for app developers with more than a million installs per year; this costs €0.50 for the first install over one million in the last 12 months.

Some developers, including the CEO of Fortnite maker Epic Games, have claimed that the introduction of the Core Technology Fee means they will be charged more than before, and this has been dubbed “a new insidious example of malicious subordination.”

SEE: EU DMA compliance reporting deadline for gatekeeper organisations

In response to this week's announcement, Apple spokesman Peter Ajemian said: Edge: “Over the past few months, Apple has made a number of changes to comply with DMA in response to feedback from developers and the European Commission.

“All developers doing business in the EU on the App Store have the opportunity to take advantage of the opportunities we have introduced, including the ability to direct app users to the web to make purchases at a very competitive price. As we always do, we will continue to listen to and engage with the European Commission.”

“Meta's no-ads subscription follows guidance from Europe's highest court and is compliant with the DMA,” said Meta spokesman Matthew Pollard. Edge. This matches Meta's statement In a blog post from last year: “Subscription Without Ads looks at the latest regulatory changes, recommendations and decisions made by leading European regulators and courts in recent years.”

When will we know if Apple and Meta will be fined?

At this point, the Commission has only made preliminary findings that suggest Apple and Meta are in violation of the DMA. Apple and Meta have been informed of this, but still have the opportunity to respond or take actions that will alleviate concerns before a decision is made.

However, if these preliminary findings are confirmed and Apple and Meta are found to have violated the DMA, a non-compliance decision will be made by March 25, 2025.

A separate investigation into Apple's web browser choice screen, which “may interfere with users' ability to truly exercise their choice of services within the Apple ecosystem,” will likely take longer to resolve, Apple officials said. Reuters.

Note: Megan Krause contributed to this article to address the allegations against Meta.