Experts fear the Digital Markets Act won’t address tech monopolies

The European Union is attempting to loosen the grip that companies like Apple, Microsoft, and Google have over the digital economy. Tech giants targeted by the Digital Markets Act (DMA) — a law passed in 2022 aiming to make the tech industry less monopolistic — are required to remove unfair competitive advantages that have let them dominate their respective markets by March 6th. 

But some experts believe the status quo is unlikely to shift. Many of these companies have announced compliance plans in response to the DMA, and for the most part, these changes — as one might expect from a plan crafted by the company itself —  are unlikely to result in a loss of power. And then there’s Apple, which appears to be engaging in outright malicious compliance, leaving European developers at a disadvantage.

Last September, Alphabet, Amazon, Apple, Meta, ByteDance, and Microsoft were designated as “gatekeepers” under the regulation — a term the DMA applies to tech giants providing core platform services that hold considerable market power. These services include search engines like Google Search, messaging services like WhatsApp and Facebook Messenger, and operating systems like Android, Windows, and iOS.

The DMA outlines specific obligations for these core platform services, intended to expand options for consumers generating more competition. Messaging apps, for example, will need to be interoperable with competitors, while app stores cannot force developers to use payment systems, identity providers, and other services operated by the gatekeeper company. Gatekeepers have a deadline of March 6th, 2024 to comply with these rules, or risk facing hefty fines of up to 10 percent of the company’s total global turnover.

The ensuing responses from the companies targeted by this legislation have varied wildly. Some, like Meta, Apple, Microsoft, and ByteDance, launched appeals against their gatekeeper and core platform service designations, with iMessage and Bing successfully snagging exemptions. TikTok’s parent company ByteDance, however, failed to stall its designation after complaining that DMA rules would force it to disclose private, highly strategic information.

Suspending its designation would have provided TikTok with more time to comply, but the EU court shot down the company’s request after finding no risk of “serious and irreparable harm” for TikTok. 

Max von Thun, the director of Europe and transatlantic partnerships at Open Markets Institute, told the Verge that ByteDance’s case “always looked weak,” but notes that positioning itself as a challenger to US tech giants may still be enough to sway the EU. The bloc hasn’t reached a final decision on ByteDance’s appeal yet, but the rejection means it’ll have to at least temporarily comply with DMA rules when they go into effect in March. At the time of writing, the company still hasn’t explained exactly how it intends to do that.

Companies like Amazon, Meta, and Google, rather than appealing their designation, have simply announced changes in response to the DMA. These announcements, said von Thun, “point towards superficial compliance designed to tick regulatory boxes without posing any real threat to the gatekeepers’ market dominance.”

That makes it difficult to gauge how much consumers and smaller competitors actually stand to gain. Jan Penfrat, senior policy advisor at European Digital Rights (EDRi) told The Verge that none of the changes proposed by gatekeepers “have led to any meaningful change to the power structures that help keep those companies at the top,” though he notes that some actions will take time to yield results. For example, Alphabet must now allow people to remove Google apps on their Android phones — it’s possible this could snowball into benefiting smaller providers, though that remains to be seen.

Apple’s App Store platform was one of the biggest targets for the DMA, having come under fire over the years for banning alternative payment methods, as well as taking up to 30 percent of revenue from app developers. Apple originally claimed that it actually operates five separate app stores, each conveniently too small to be designated a gatekeeper, a challenge that von Thun said looked like a “bad-faith attempt to evade compliance by imposing artificial distinctions on what is clearly a unified service.”

According to Penfrat, Apple is the gatekeeper that could be hit hardest by the DMA, since there are already several competitors in a position to challenge Apple’s app store dominance, including Spotify and Epic. “Apple makes big money with its app store monopoly, over 85 billion USD per year, hence their particular resistance to meaningful change.”

When its appeal didn’t work, Apple instead chose a different approach. The new rules it announced on January 25th for developers releasing iOS software in the European Union in response to the DMA have, suffice to say, rustled some jimmies. 

The changes set to be introduced for EU residents with iOS 17.4 technically comply with DMA rules, but they come with new conditions that are onerous for developers. Its incoming policies would reduce the commission Apple takes for apps hosted on third-party app stores, but enforce a €0.50 (around 54 cents USD) “Core Technology Fee” if they reach over a million downloads — with the only alternative being to stick with the company’s original 15–30 percent commission rate.

That might be fine for apps with a limited number of users, but those fees can add up quickly if they become victims of their own success. An example given by David Heinemeier Hansson, creator of Ruby on Rails, finds that Meta would need to pay Apple $135 million each year alone to host just Instagram on a competing app store.

Penfrat went as far as to call these changes “malicious,” saying they could actually make matters much worse for developers trying to get away from Apple’s app store monopoly. “Under the current Apple proposal, it seems unlikely anyone would even attempt to challenge the gatekeeper’s monopoly. It’s simply not worth it. If the EU Commission lets this pass, the DMA will be lost.”

Apple previously decided to drop support for progressive web apps (PWAs) in the EU, going as far as to blame the DMA. After facing a potential investigation from the EU, the company has walked back that decision. PWAs will continue to exist — though they’ll have to be built on WebKit, the engine used by Safari. As one of its responses to the DMA, Apple is allowing third-party browsers to use their own engines in iOS in the EU. But PWAs downloaded through those browsers will still be reliant on Safari’s WebKit.

“Reading between the lines, Big Tech’s strategy towards the DMA is to introduce changes that appear to open up their walled gardens, but that are actually unworkable or unappealing to businesses and users,” said von Thun. “Instead of accepting such inadequate measures, the EU Commission should consult businesses supposed to benefit from them, and use this feedback to push the gatekeepers to do better.”

All of the gatekeepers being targeted by the DMA still need to get their proposals approved by the European Commission. In January, an EU commissioner told Reuters that the bloc would take “strong action” if it feels the solutions being proposed aren’t good enough.