Overview
On April 23, a year after the investigations were opened, which had occurred very soon after the prohibitions and obligations of the Digital Markets Act (DMA) became legally binding on designated gatekeepers, the European Commission rendered its first noncompliance decisions, imposing fines of €500 million on Apple and €200 million on Meta.
Apple was held liable for noncompliance with the anti-steering provisions provided for in Art. 5(4) DMA. Under this rule, gatekeepers are obliged to allow app developers to inform their users about offers available outside the application and steer them to these offers free of charge. According to the Commission, Apple's current technical and commercial restrictions hinder app developers and users from taking full advantage of offers made outside the App Store. Apple is now obliged to eliminate these restrictions to comply with Art. 5(4) DMA.
Meta was fined for its 'pay-or-consent' model. The Commission finds Meta's model in breach of Art. 5(2) DMA setting out the rules for the processing, combination, and cross-use of users' personal data. The combination of personal data requires the users' prior consent. Following its gatekeeper designation on September 6, 2023, Meta offered its users the choice to consent to the combination of their personal data for personalized ads. Alternatively, users could opt for Meta's ad-free service, subject to a monthly fee. According to the Commission, this pay-or-consent model lacks a real alternative for consumers such as a modified personalized ads service using fewer personal data. Since Meta only offered a paid alternative, the users were deprived of their right to freely give their consent.
These decisions were rather predictable as the Commission had already announced its preliminary views in June and July 2024. As regards the level of the fine, the Commission is bound by Art. 30(1) DMA setting out the upper limit of fines at 10% of the gatekeeper's worldwide aggregate turnover and otherwise retains wide discretion. According to the Commission'’s press release, the fines reflect the gravity and the duration of the noncompliance. Meta had a shorter infringement period than Apple. It ended in November 2024 when Meta introduced a new personalized ads service. This new service is currently under review for DMA compliance. If the Commission were to find noncompliance with the DMA, Meta could be subject to another fine. Apple, on the contrary, got fined for an infringement period lasting from March 2024 up to the decision date.
However, there was also a positive outcome for Apple. On the same day, the Commission announced that the noncompliance investigation into Apple's user choice obligations was closed without any negative findings. Unlike in the two infringement cases, the Commission had not previously shared its preliminary view in this case. As a result of what the Commission called a "constructive discourse," Apple made sufficient changes to its services to address the Commission's concerns. Apple now facilitates the change of various default settings and the de-installation of pre-installed Apple apps. Thereby, Apple successfully escaped a noncompliance decision regarding its user choice obligations.
Despite this partial success, Apple shared its disagreement with the noncompliance decision, considering the "countless meetings" it held with the Commission. According to Apple, the Commission "continues to move the goal posts every step of the way." Apple intends to appeal, and Meta also stated an appeal on their part is likely. These appeals seem to be less driven by the high fines than by the substantive findings of the Commission. Apple considers itself to be unfairly targeted and forced to give its technology away for free, and the decision to be bad for the privacy and security of users. Similarly, Meta reacted by stating that the Commission is "unfairly restricting personalized advertising" which leads to "inferior services."
Currently two more decisions regarding Alphabet and a third one regarding Apple are in the pipeline. The Commission already shared its preliminary findings in all three cases. Pursuant to Art. 29(3) DMA, preliminary findings are shared ahead of the adoption of a noncompliance decision. This provides the gatekeepers with an explanation on the measures the Commission considers appropriate to "effectively address the preliminary findings." Gatekeepers are entitled to review the investigation file and to respond to those findings. According to these, Alphabet faces a fine for its anti-steering practices in Google Play and self-preferencing in Google Search. Apple is preliminarily found to be in breach of the DMA regarding its new business terms, as the Commission deems its new Core Technology Fee disproportionate and unnecessary. It is a fee for developers linked to the use of alternative app distribution channels. Each gatekeeper is, however, entitled to be heard once the Commission shares its preliminary views. The Commission remains under an obligation to duly assess the gatekeeper's reply to its preliminary view on each individual case. Some gatekeepers may therefore successfully contest the Commission’s preliminary view in the future.
These first DMA noncompliance decisions demonstrate that the Commission is determined to exercise its new enforcement powers vigorously. The fact that these decisions are aligned with the preliminary views published by the Commission last year does, however, not set a precedent for upcoming decisions. Whether the Commission may uphold, or deviate from, its preliminary views in the future will depend on the merits of each individual case. This may also lead the Commission to refrain from rendering a noncompliance decision, if gatekeepers are ready to cooperate. In any event, the amounts of fines imposed show that noncompliance with the DMA entails huge financial risks. Please turn to Steptoe’s antitrust team if you wish to discuss any of these developments and their potential impact on your business.
