EU investigation underway

EU takes action against Google, Apple and Facebook

(Bild: Koshiro/stock.adobe.com)

The technology giants need to brace themselves - competition authorities on both sides of the Atlantic are tightening the thumbscrews. The market power built up over decades by US companies such as Apple, Google, Amazon, Meta and Microsoft is to be broken up. For the first time, the authorities are not ruling out the possibility of a break-up. This would be a first in Europe, where the competition authorities have already launched investigations.

Among other things, the EU competition authorities want to examine the business practices of Apple and Google in their app stores. According to the new Digital Markets Act (DMA), the companies must allow third-party app providers to refer their customers to offers outside of the aforementioned app stores free of charge. Apple emphasized that the most recent adjustment to the guidelines for the App Store is already DMA-compliant from the company's point of view.

EU also scrutinizes Meta and Google
Google is also taking a closer look at possible preferential treatment of its own offers in the results of internet searches. The internet company referred to changes in the display of search results and announced that it would defend its approach to implementing the DMA.

The EU is also investigating Meta's new subscription model, which requires users to pay for an ad-free version of the online networks Facebook and Instagram. "Subscriptions as an alternative to advertising are common in many industries," explained Meta. The company's own offering is designed in such a way that it complies with regulatory requirements, some of which overlap.

If companies do not comply with the DMA, you can imagine what Parliament will demand: Break-ups.

Andreas Schwab, Abgeordneter des Europaparlaments

In Europe, the pressure to enforce the DMA is high, says Andreas Schwab. The Member of the European Parliament played a key role in drafting this law, which subjects large technology companies to stricter regulation. "If the companies don't comply with the DMA, you can imagine what Parliament will demand: Break-ups. The ultimate goal is to make markets open and fair and allow more innovation."

According to a report from last year, the EU Commission has threatened the internet company Google with the forced sale of its lucrative online advertising business. This contributes a large part of the turnover and profit of the parent company Alphabet. The European antitrust authorities are now officially investigating the company for possible violations of the DMA, which Google considers to be unjustified.

The EU has designated six IT giants as so-called "gatekeepers" with excessive market power. They are now subject to stricter regulation under the Digital Markets Act.

(Bild: EU-Kommission)

In the USA, Google is facing a possible break-up in the "antitrust case of the decade". This focuses on the multi-billion dollar payments made to Apple and other partners to set Google as the default search engine in their smartphones and internet browsers.

Apple's App Store in the sights
The authorities are concerned about Apple's restrictive access to hardware and software interfaces. Until now, third-party providers have only been able to offer their programs via Apple's App Store and have also had to process payments through it, for which the company collects up to 30 percent commission.

Last week, the US Department of Justice took the company, which is valued at 2.7 trillion dollars (2.5 trillion euros) on the stock exchange, to court and warned that a break-up could not be ruled out in the event of a conviction. Apple has announced that it will defend itself against these accusations.

Under the new EU rules, app developers will also be able to sell iOS applications via Apple's App Store in future.

(Bild: ©Aleksei - stock.adobe.com)

The 1998 proceedings against Microsoft could serve as a blueprint for a split between Apple and Google. Back then, the US software company averted a corresponding order by loosening the link between the "Windows" operating system and the "Internet Explorer" browser.

Break-up as a last resort
However, it is anything but certain that the authorities will resort to such measures again this time. "There is no such tradition in Europe," says an EU representative who wished to remain anonymous. "Breaking it up is seen as a last resort."

Lawyer Damien Geradin from the law firm Geradin Partners also sees practical problems, especially with iPhone provider Apple. Its hardware and software are coordinated and closely interlinked. "You can't force Apple to sell the App Store. That would make no sense."

Geradin suggests that the authorities should therefore impose conditions on certain business areas. In the case of Google, forced sales could be limited to those divisions that the company has recently strengthened with acquisitions.

Max von Thun, European Director of the Open Markets Institute, predicts that the US Department of Justice is also more likely to work towards ensuring that companies open up their platforms and do not put third-party providers at a disadvantage. This non-profit organization campaigns for competition law. "The authorities want to emphasize that all options are on the table, even if they don't necessarily want to go down that path."

The authorities want to emphasize that all options are on the table, even if they do not necessarily want to pursue this path.

Max von Thun, Open Markets Institute

Because ordering a break-up would lead straight to the courts, warns Assimakis Komninos, partner at law firm White & Case. "There are not many examples of break-ups, but the few experiences from the past show that this is very tricky."

DMA is intended to stimulate competition
Among other things, the DMA obliges large technology groups to open up their platforms to competitors. Violations could result in penalties of up to 10 percent of annual global turnover. According to its own statements, the EU intends to conclude its investigations within twelve months.

When asked whether the EU's measures were not being rushed, EU Industry Commissioner Thierry Breton replied: "The law is the law. We can't sit around and wait." In response to the investigations, the shares of the companies concerned fell by more than half a percent on Wall Street.