The Brief – For whom the bell tolls in EU’s digital competition policy

The European Commission has been very busy investigating what it sees as Big Tech’s anticompetitive practices under the Digital Markets Act (DMA), the EU’s landmark digital antitrust law.

These are laying the groundwork for what can actually sting companies, especially those with massive resources and teams of lawyers: fines.

The DMA sets out a high ceiling for these fines, up to 10% of the company’s annual global turnover for ‘gatekeepers’ first infringements.

These are firms with a dominant or unique position in the market, offering core platform services, such as search engines or app stores.

Regulators have set a high ceiling for possible fines under the DMA, in force since November 2022, but have yet to enforce them. The list of gatekeepers, who are subject to such fines, was announced in September 2023.

A similar landmark law on content moderation, the Digital Services Act, outlines fines up to 6%, whereas the Artificial Intelligence Act sets the ceiling at 7%.

So far, there have been no fines under the DMA. The most recent tech antitrust fine is €1.84 billion for Apple’s treatment of music streaming providers from March.

The iPhone maker abused its dominant position through its App Store, steering users away from music streaming services, stated the Commission when announcing the fine in March.

The company has appealed the fine in the Court of Justice of the EU, contesting its definition as a ‘gatekeeper’, as well as the finding that these so-called anti-steering provisions are abusive.

Still, the €1.84 billion fine, is far below the maximum 10% of turnover, that the DMA and general antitrust rules allow for. Apple’s 2023 revenue was $383.3 billion (€354.1 billion) in 2023, so making it possible to  apply for a potential fine of up to €35.1 billion.

It is the third biggest fine in the digital antitrust space, surpassed by two levelled at Google: One of €4.34 billion in 2018 for Google’s Android operating system, and another of €2.42 billion in 2017 for prioritising Google shopping results in its search engine.

The two Google penalties were calculated based on a 2006 directive on setting fines.

The directive sets a maximum of 10% fines of the annual turnover of a company and sets out guidelines for how to calculate fines.

A basic amount is calculated based on the revenue brought in from the infringing, in this case an anticompetitive, action. The EU executive can decide to increase or decrease the amount based on ad hoc circumstances, such as cooperation with the investigation, and how to deter other large global companies.

In the Google decisions, the Commission specified that the penalties were calculated based on the revenue brought in from ‘search advertising services on Android devices’ and the ‘comparison shopping service’ in each case, respectively.

In the latest Apple fines, however, the Commission set a €1.8 billion amount as a “lump sum”, which “was necessary in this case because a significant part of the harm caused by the infringement consists of non-monetary harm.” The 2006 directive’s revenue-based methodology cannot “properly” account for such harm, said the EU executive.

In other words, the Commission used somewhat discretionary authority to decide on this number, giving little explanation on how this figure was decided.

Apple doesn’t disclose specific numbers for its different services, such as the App Store, Apple Music, Apple Pay, and subscriptions. Overall these business lines accounted for roughly one fifth of its total revenue in 2023.

The services segments have been setting new turnover records, inching towards one quarter of the total as of early 2024.

None of this is to say that the Commission should levy the maximum allowed fines under the DMA or antitrust policies. But it will be interesting to see what level of transparency the EU executive grants for these multi-billion euro fines, which hit at the heart of some of Big Tech’s business models.

One company facing the DMA firing squad is Meta which last week was accused of infringing on the regulation with its “pay or OK” model. Apple’s App Store has also been accused of breaching the DMA, while an investigation into new contractual terms for developers is ongoing.

The Roundup

With all eyes on the NATO 75th Anniversary Summit, read our latest articles from Global Europe & Defence Editor Alexandra Brzozowski and Politics Editor Aurélie Pugnet who are reporting from Washington DC.

NATO’s new defence plans, requiring record-high military spending, will face scrutiny when leaders meet on Wednesday (10 July) to discuss ways to ramp up the alliance’s defence capabilities.

NATO leaders on Wednesday (10 June) are expected to pledge more advanced air defence capabilities and offer more F-16 fighter jets to Ukraine to counter Russia’s intensified missile strikes on the country.

Read our latest Brief here on EU Health policy here 

In other news

The political balances that emerged after the EU elections have changed Ursula von der Leyen’s initial plan to seek support for her reelection from the right, and she is now turning to the Greens to find a safe majority, but trust remains a thorny issue.

The EU’s food safety authority (EFSA) said that the Commission’s criteria to relax rules on certain gene-edited foods are ‘scientifically justified’, while the Hungarian Council Presidency is pulling the brakes on the file.

Look out for…

• Informal meeting of EU environment ministers, 11-12 July 2024
• European Commissioner for Agriculture Janusz Wojciechowski receives Japanese Minister of Agriculture, Forestry and Fisheries Tetsushi Sakamoto, 11 July 2024.
• Economy Commissioner Paolo Gentiloni in Ireland, meets PM Simon Harris and Finance Minister Jack Chambers on Thursday.

Views are the author’s

[Edited by Rajnish Singh]

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