3 U.S. big tech giants face EU inquiry

Investigation could lead to imposition of hefty penalties under new digital law

The European Commission launched a noncompliance investigation on Monday into U.S. tech giants Apple, Google parent Alphabet and Meta for violating its Digital Markets Act, or DMA, a move that could lead to hefty penalties and that has triggered backlash in the United States.

The act went into effect on Nov 1, 2022, to prevent large companies from abusing their market power and by allowing new players into the market. The European Union set March 6 for the law's compliance deadline for the designated "gatekeepers", or the big tech platforms.

Margrethe Vestager, European Commission executive vice-president in charge of competition policy, said the investigations concern Alphabet's rules on steering in Google Play and self-preferencing in Google Search, Apple's rules on steering in the App Store and on choosing browsers and changing defaults, and Meta's "pay or consent model".

"We suspect that the suggested solutions put forward by the three companies do not fully comply with the DMA," she told a news conference on Monday.

"These decisions to open noncompliance investigation come only two weeks after the implementation deadline has passed and show that DMA compliance is something that we take very seriously."

The announcement does not mean the commission endorses all other measures implemented by gatekeepers that are not or not yet subject to investigation, she said.

"We will continue to use all available tools should any gatekeeper try to circumvent or to undermine the obligations of the DMA," she said.

European Commissioner for Internal Market Thierry Breton said the commission has discussed with gatekeepers for months to help them adapt.

"Should our investigation conclude that there is a lack of full compliance with the DMA, gatekeepers could face heavy fines," he said.

The commission plans to conclude the investigation within the year. Penalties for violations of the act could be as high as 10 percent of each company's global turnover and up to 20 percent for repeat offenses.

A Meta spokesperson said the company was endeavoring to comply with the act's guidance.

"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," the spokesperson said.

Google said it has made significant changes to its services and would defend its approach in the coming months.

Meanwhile, the European Commission has launched a preliminary investigation into Amazon's ranking practices and Apple's new fee structure for alternative app stores.

An Amazon spokesperson said it was "compliant" with the DMA.

Monday's announcement is one more problem for Apple, which faces a glut of legal challenges on both sides of the Atlantic.

Monopoly accusations

Last week, the U.S. Department of Justice sued Apple, accusing the company of monopoly in the smartphone market.

That was just weeks after the EU fined Apple nearly $2 billion for abusing its dominant position in the market in the distribution of music streaming apps to iPhone and iPad users through its App Store.

John O'Brennan, a professor of European integration at Maynooth University in Ireland, said the EU is the most important regulatory agency in the world and the big tech companies are now subject to the Digital Markets Act.

"The days of these tech giants exploiting monopoly positions in different markets are over," he said on X, formerly Twitter.

Brigham McCown, a senior fellow at Hudson Institute in Washington, said Europe is quickly becoming the place that does not build anything thanks to the regulatory bureaucracy crushing innovation.

"But it's happy to throw stones," he said on X.

Adam Kovacevich, former Google executive and CEO of the Chamber of Progress, a tech industry policy coalition, said some pundits and advocates point to the DMA and say Europe "is ahead" of the U.S. on tech regulation.

"The truth is the opposite: DMA is widening an existing gulf, where services launch first in the U.S. — and later or never in Europe," he said on X.