The EU’s DMA Investigations Place Innovation Under Microscope

The European Commission is investigating Alphabet, Apple, and Meta for violating the Digital Markets Act (DMA). While supporters of the DMA celebrate this as a victory for tighter regulation of the tech industry, evidence of concrete benefits for tech companies, startups, or consumers remains sparse. Unfortunately, the reality appears far bleaker: European regulators are pushing forward with a DMA enforcement strategy that is harming not only EU consumers with worse user experiences but also businesses like hotels that are seeing reduced traffic to their websites. To be sure, the investigations into Alphabet’s self-preferencing, Apple’s anti-steering policies, and Meta’s pay or consent model risk doing more harm than good for Europe’s tech sector.

Alphabet’s Self-Preferencing

The Commission’s investigation into Alphabet probes whether Google search results preference its own services (such as Google Flights or Google Shopping) over similar rival services. Specifically, the Commission expressed concern that Alphabet's reforms to comply with the DMA might not ensure fair treatment for third-party services on Google's search results page, as required by Article 6(5) of the DMA. These concerns were fueled by critics who complained that Google still displays its own lists and maps for some searches and that users are unlikely to use some of Google’s newly introduced features, like the newly created Place Sites aggregator, which increases the visibility of platforms like TripAdvisor and Yelp. Surprisingly, these accusations persist even though Google eliminated its Flights and Shopping units to meet DMA requirements, despite many users viewing easy access to these services as integral to their Google experience.

The investigation against Google is flawed as it will not only harm consumers but exacerbate the diversion of search traffic away from EU small businesses like restaurants, airlines, and hotels, and toward intermediaries like Yelp and TripAdvisor. Indeed, affected businesses reported that they “could lose as much as 50% of their online traffic and possibly millions of euros in revenues due to Google's changes to its search result.” So, unlike its current approach, the EU should steer clear of investigations that have the effect of picking winners and losers between Google and intermediaries while harming small businesses and consumers. And, of course, the EU already fined Google $2.8 billion in 2017 for much of the same accusations of self-preferencing, suggesting that traditional anticompetitive behavior has long been addressed.

Apple and User Choice

The Commission also commenced an investigation against Apple regarding its compliance with rules that prevent gatekeepers from limiting users’ ability to switch between different software applications, as outlined in Article 6(3) of the DMA. Specifically, the Commission expressed concern “that Apple's measures, including the design of the web browser choice screen, may be preventing users from truly exercising their choice of services within the Apple ecosystem.” This echoes critics of Apple's compliance efforts, which include small web browsers, who have argued that Apple's new choice screen that allows users to choose which browsers they prefer still does not do enough to provide information about individual web browsers.

The facts suggest otherwise: Apple’s changes have already caused small browser usership rates to skyrocket. In an interview with Reuters, the CEO of Aloha, a Cypriot browser company reported, “Before, EU was our number four market, right now it's number two.” Likewise, the web browsers Vivaldi, Ecosia, and Brave all reported significant increases in usership since the update. Moreover, Google’s implementation of choice screens in 2021 had virtually no effect on its search market share, suggesting that any difficulty facing rivals does not call for additional changes by Apple, but rather reflects consumer preferences regarding which products they want to use. That is, if smaller web browsers struggle to gain traction, instead of lobbying for requirements that artificially boost their user base, they should concentrate on competing for market share through innovative search features.

Meta’s Pay or Consent Model

In the case of Meta, the Commission initiated an investigation over its “pay or consent” model introduced for users in the EU, whereby users choose between consenting to the use of their data for things like targeted advertising or paying for an ad-free experience. To appease the concerns of privacy activists, Meta has even taken steps to make no-tracking options more accessible in Europe by offering to lower its monthly subscription fee for web users from €9.99 to €5.99. But the Commission evidently remained underwhelmed by the changes, claiming that the model did not offer users a “real alternative” for purposes of Article 5(2) of the DMA, which requires gatekeepers to obtain consent from users when they intend to combine or cross-use their data across different core platform services.

The Commission's investigation overlooks that the pay or consent model benefits both consumers, by maintaining a free option, and Meta, by enabling it to effectively monetize its service and continue providing value to users. And without question, expecting completely free services without any value exchange is unrealistic: There is simply no such thing as a free lunch. Moreover, not only is the EU's heavy-handed approach to data collection in tension with the economic benefits of data and the competitiveness of EU tech companies, but the European Data Protection Board is already addressing issues with Meta’s pay or consent model under the EU’s General Data Protection Regulation, which makes an additional DMA investigation untimely if not wholly superfluous.

Conclusion

The EU's DMA investigations overlook a fundamental reality: Customers have real choices. The measures currently in place already ensure that users can easily opt for alternative services on platforms like Google, Apple, and Meta, whether by selecting amid different types of search results, choosing a different web browser, or opting to pay instead of consenting to data use. Thus, these investigations unfortunately seem to suggest the European Commission will never be happy until American tech companies are brought to heel, regardless of the harms to consumers, innovation, and the broader European economy.