If the bosses of the world's biggest tech companies were still doubting the European Union's commitment to regulating the digital market, the 1.8 billion euro ($1.95 billion) fine imposed on Apple on Monday (March 4th) by the European Commission for breaching competition law through music streaming served as a strong statement of intent.
More new EU rules governing how Europe's biggest online platforms operate come into effect this week, now that the deadline to comply with the Digital Marketing Act (DMA) has passed.
Starting today (March 7), the six tech giants designated as “gatekeepers” by the European Commission — Google parent Apple, Alphabet, Amazon, ByteDance, TikTok owner Meta and Microsoft—are required to comply with a series of legislative changes designed to curb their global dominance.
They include illegal companies favoring in-house services over third-party providers and forcing platforms to give other businesses, such as apps, access to the data they create – allowing smaller services to communicate directly with their customers and making it easier for users to switch services .
The laws are enforced with fines of up to 20% of total global turnover (aka gross revenue) for repeat offenders or, in extreme cases, the “last resort” of forced divestitures and liquidation.
THE CHANGE IS ALREADY UNDERWAY
The changes are already having a significant impact on digital music services and, in turn, on the global record business.
In January, Apple announced that it would begin allowing European users to download app stores other than company-operated apps installed on iPhones. It will further reduce the fees it charges developers for purchases made through the App Store, cutting the commission from the existing 15% to 30% between 10% and 17% for developers using the company's payment processing system.
However, Apple's plans to charge “high-volume” services with more than a million users a €0.50 ($0.54) “Basic Technology Fee” per download, per year, to use alternatives to the App Store has been heavily criticized from several European companies, including Spotify and Deezer.
“Apple's new terms not only ignore both the spirit and the letter of the law, but if left unchanged, make a mockery of the DMA,” the streaming services said in an open letter to the European Commission, sent last week and also signed by 32 other European digital companies and associations, including the trade body Digital Music Europe.
The new fee structure, which only applies in the 27 EU member states, will prevent app developers from opting into the revised terms “and hinder fair competition”, say Spotify and Deezer, calling on regulators to take “swift , timely and decisive action. against Apple.” (In January, Spotify said in a company blog post that the new fees “equal to us being the same or worse than the old rules.”)
Similar anti-competitive concerns were behind the European Commission's decision to fine Apple €1.8 billion in early March, following long-running complaints from Spotify about Apple's restrictions on third-party developers and the 30% fee that charges them on all purchases made through iOS apps. (Apple said it would appeal the fine, which was issued under existing EU terms, rather than the Digital Markets Act.)
Defending its response to the new EU rules, Apple estimated that less than 1% of developers would pay the basic technology fee and warned that DMA poses greater risks to users and developers by compromising its ability to detect malware, fraud and illegal content in external applications.
NOT JUST AN APPLE
Other so-called gatekeepers — defined by policymakers as a platform with an annual turnover of more than 7.5 billion euros ($8.1 billion) and more than 45 million active monthly users in the EU region — are also making sweeping changes as result of DMA.
In addition to Apple, music executives will pay the most attention to how ByteDance, the Chinese owner of TikTok, responds to the provisions of the law. In November, the company filed an appeal against the EU's classification of TikTok as a “gatekeeper” arguing that the platform is “a challenger, not an incumbent, in the digital advertising market” and that the new rules could hamper its ability to “remain competitive and developing”.
Despite the ongoing legal challenge, TikTok has already taken a number of steps to comply with the terms of the DMA, including the release of improved data portability tools that allow developers to download and export profile data, followers and posts from TikTok to other services with users' permission. These changes are rolling out to European users now, TikTok announced in a March 4 blog post, “with plans to roll out globally in the near future.”
In January, Google and YouTube parent Alphabet announced that they would allow users to choose their default browser and provide more links to competing sites when searching on Google – although, like Apple, Alphabet's compliance with DMA has been disputed.
In a post on X (formerly Twitter) this month, Epic Games CEO Tim Sweeney criticized the tech giant for charging a commission of up to 27% on any in-app purchases made without using Google's payment services. (Google/Alphabet had previously been hit with three large fines totaling €8.2 billion by the EU over antitrust issues).
Meanwhile, Meta allows users to separate their Facebook and Instagram accounts to prevent personal information from being shared for targeted ads. Amazon is tweaking its Amazon Ads service to provide stronger data protection for customers, and Microsoft is implementing changes to its Windows operating system.
The terms of the Digital Markets Act only apply to companies and services operating in the 27-member EU bloc, but their impact is far reaching. Following the EU's lead, similar regulations to limit the dominance of tech companies are being drawn up in several other nations, including Japan, South Korea, India, Brazil, Australia and the United Kingdom.
What meaningful impact the DMA or similar international legislation will actually have on curbing Big Tech – and the music companies that either lead or rely on them to reach audiences – may take years to be felt, if at all, but EU regulators say they are not shying away from the challenge.
“We look very closely at how companies are complying [with the DMA]The European Commission recently said in a statement, “and when we have full enforcement powers we will not hesitate to act.”
