EU Fines Apple and Meta for Competition Violations

The European Commission has issued its first fines under the Digital Markets Act (DMA), targeting tech giants Apple and Meta.

Apple faces a penalty of €500 million for allegedly restricting app developers from informing users about cheaper options available outside its App Store; Meta has been fined €200 million over its controversial “consent or pay” model for users of Facebook and Instagram within the European Union (EU).

First Fines Under the Digital Markets Act

While the fines are substantial, it is important to note that the DMA allows for penalties of up to 10% of a company’s total worldwide annual turnover. Given the immense revenues of both Apple and Meta, these initial fines could be viewed as a measured approach by the Commission in its first enforcement actions under the new legislation.

The decisions come after thorough investigations into the practices of both companies, which were designated as “gatekeepers” under the DMA, a status applied to dominant digital platforms that provide core platform services. The DMA aims to prevent these gatekeepers from engaging in anti-competitive practices and to ensure a level playing field for smaller businesses and more choice for consumers.

Apple’s Anti-Steering Obligations

The European Commission found that Apple has been in breach of its anti-steering obligations under the DMA. According to the Commission’s investigation, Apple’s rules prevented app developers who distribute their applications through the App Store from freely informing their customers about alternative offers that exist outside of Apple’s own marketplace.

These restrictions extended to preventing developers from directing users to these external offers and from allowing them to complete purchases through those channels. The Commission determined that Apple imposed a number of limitations that hindered app developers from fully leveraging the advantages of alternative distribution channels beyond the App Store.

As the EU explains, under the DMA “app developers distributing their apps via Apple’s App Store should be able to inform customers, free of charge, of alternative offers outside the App Store, steer them to those offers and allow them to make purchases.”

Consequently, consumers were also unable to fully benefit from potentially cheaper or more advantageous offers because Apple’s policies restricted developers from directly communicating such options to them. After a careful assessment, the European Commission concluded that Apple had failed to adequately demonstrate that these restrictions were objectively necessary and proportionate.

As part of its decision, the Commission has mandated that Apple must remove the technical and commercial restrictions it has imposed on steering. Further, Apple is required to refrain from perpetuating this non-compliant conduct in the future, which includes adopting any measures that have an equivalent aim or effect.

Separately, the Commission also announced the closure of an investigation into Apple’s obligations regarding user choice. This decision followed Apple’s early and proactive engagement in finding a solution to ensure compliance in this area, which relates to providing users with more options for default settings, such as choosing their preferred browser and being able to uninstall pre-installed applications.

Meta’s “Consent or Pay” Model

The European Commission found that Meta breached the DMA concerning its “consent or pay” model. Introduced in November 2023, this model presented users in the EU with a binary choice when accessing Facebook and Instagram: They could either consent to the combination of their personal data across Meta’s services for the purpose of personalized advertising or pay a monthly subscription fee to access an ad-free version of the platforms.

The Commission concluded that this model was not compliant with the DMA, which requires gatekeepers to “seek users’ consent for combining their personal data between services.” Users who do not consent “must have access to a less personalised but equivalent alternative,” according to DMA requirements.

The core of the issue was that Meta’s approach did not provide users with the necessary specific choice to opt for a service that uses less of their personal data while still being equivalent to the service that offers personalized advertisements.

Essentially, users were not given a genuine alternative that respected their privacy without requiring payment, which goes against the DMA’s objective of ensuring user control over their data. The Commission also found that Meta’s model did not allow users to freely exercise their right to consent to the combination of their personal data.

Commission’s Rationale

The European Commission has articulated a clear rationale behind these enforcement actions. It emphasizes that the DMA is a vital tool for fostering digital markets where potential can be unlocked, choice is available to consumers, and growth is facilitated through fair competition. The legislation is designed to protect European consumers and to create a level playing field for businesses operating in the digital space.

In the view of the Commission, both Apple and Meta have failed to meet their obligations under the DMA by implementing measures that inadvertently reinforce the dependence of both business users and end consumers on their dominant platforms.

Looking ahead, both Apple and Meta have been given 60 days to comply with the European Commission’s decisions. Failure to do so could result in periodic penalty payments, the amount of which has not been specified. These first non-compliance decisions under the DMA are highly significant as they set a precedent for how the EU intends to regulate the conduct of major tech platforms in the future.

Editor’s Note: The opinions expressed here by Impakter.com columnists are their own, not those of Impakter.com — In the Cover Photo: Apple Store on Fifth Avenue, New York, United States. Cover Photo Credit: Atmtx.