The European Union has launched investigations into Apple, Google and Facebook parent Meta on suspicion that they are failing to comply with a new landmark European law designed to promote competition in digital services.
The European Commission said it “suspects” that various practices by all three companies “fall short of effective compliance” with the Digital Markets Act (DMA), which went into effect earlier this month. If the probes find a “lack of full compliance,” they could face “heavy fines,” said European Commissioner Thierry Breton.
The DMA requires dominant online platforms to give users more choices and rivals more opportunities to compete. It currently applies to the three tech giants under investigation, as well as Amazon (AMZN), Microsoft (MSFT) and ByteDance, the Chinese parent company of TikTok.
By mid-May, the list could also include Elon Musk’s X and Booking.com, the EU has said.
Violations of the new law can lead to stiff penalties, including fines of up to 10% of a company’s global revenue and up to 20% for repeat offenses. For most of the regulated companies, that would translate to tens of billions of dollars.
The practices the European Commission is investigating include what it calls Meta’s “pay or consent” approach. Last October, Meta (META)?launched?a subscription service, called “Subscription for no ads,” allowing European users of Facebook and Instagram to pay up to €12.99 ($14) a month for ad-free versions.
“The Commission is concerned that the binary choice imposed by Meta’s ‘pay or consent’ model may not provide a real alternative in case users do not consent, thereby not achieving the objective of preventing the accumulation of personal data by (large companies),” the body said in a statement.
A Meta spokesperson responded: “Subscriptions as an alternative to advertising are a well-established business model across many industries, and we designed ‘Subscription for no ads’ to address several overlapping regulatory obligations, including the DMA. We will continue to engage constructively with the Commission.”
The EU is also looking into app stores operated by Apple (AAPL) and Google. The DMA states that large digital platforms —?so-called gatekeepers —?must allow app developers to “steer” consumers to offers outside the two dominant stores, free of charge.
Among other concerns, the EU suspects that Apple and Google’s parent Alphabet (GOOGL) constrain developers’ ability “to freely communicate (with end-users) and promote offers and directly conclude contracts, including by imposing various charges,” the Commission said.
“We are concerned Alphabet, Apple & Meta & are not meeting their obligations, e.g.: Apple & Alphabet still charge recurring fees to app developers,” European Commissioner Margrethe Vestager wrote on X Monday.
Apple’s “choice screen” for Safari is also under scrutiny, the European Commission said. Under the DMA, Apple must prompt users with “choice screens which must effectively and easily allow them to select an alternative default service, such as a browser or search engine on their iPhones,” it noted.
Apple told CNN in a statement: “We’re confident our plan complies with the DMA, and we’ll continue to constructively engage with the European Commission as they conduct their investigations.”
Another of the Commission’s concerns pertains to Google Search. Alphabet may not have done enough to ensure that third-party services appearing in search results are treated in “a fair and non-discriminatory manner” compared with Alphabet’s own services, such as Google Shopping and Google Flights.
Oliver Bethell, a competition executive at Google, said in a statement: “To comply with the Digital Markets Act, we have made?significant changes?to the way our services operate in Europe.
“We have engaged with the European Commission, stakeholders and third parties in dozens of events over the past year to receive and respond to feedback, and to balance conflicting needs within the ecosystem. We will continue to defend our approach in the coming months.”
This story has been updated with additional information.
