A week ago, Apple became the first company to face preliminary charges under the EU’s new Big Tech antitrust law, the Digital Markets Act. Now, again as predicted, it’s Meta’s turn.
Though they involve the same law, the two cases are in many ways very different.
Apple stands accused primarily of making it difficult and overly expensive for app developers to steer their iOS users to cheaper deals off the platform, where Apple doesn’t get to take its lucrative revenue cut. Meta, however, is in trouble for charging a hefty monthly fee to Facebook and Instagram users who won’t “consent” to being surveilled across Meta and third-party services for ad-targeting purposes. This allegedly violates the DMA because, in the words of the European Commission:
“[Meta’s model] does not allow users to opt for a service that uses less of their personal data but is otherwise equivalent to the ‘personalized ads’ based service [and because it] does not allow users to exercise their right to freely consent to the combination of their personal data.”
One case is about restricting developers; the other about railroading users. However, both take aim at core business models. Apple still earns most of its money from selling iPhones, but services (including App Store commissions) are the second-most important part of its revenue mix, and perhaps one day the most important. The data of Meta’s users is and probably always will be its lifeblood. Both cases therefore have enormous ramifications for their targets’ future revenue flows.
What the Commission is doing to Meta is essentially data-protection enforcement through antitrust means.
The DMA’s rules reflect the increasing tendency of tech antitrust regulators to treat piles of data like the moat-building competitive asset they are. The Commission mentions “potential advantages compared to competitors who don’t have access to such a vast amount of data, thereby raising high barriers to providing online advertising services and social network services.” However, while there’s a solid theoretical basis to this trend, it’s hard to escape the idea that regulators are also taking this tack because others have failed.
What Meta has done here isn’t just allegedly illegal under the DMA; it also very likely violates the General Data Protection Regulation (GDPR), which went into effect over six years ago. But enforcement of the GDPR has been patchy and achingly slow, largely because it’s the responsibility of underfunded national privacy regulators (the Irish Data Protection Commission in Meta’s case.) To avoid this problem, the DMA puts the European Commission itself in the role of enforcer, while also demanding a resolution to the case within a year of the investigation opening—which, for both Meta and Apple, makes next March the deadline for averting disaster.
The DMA also threatens much higher fines than the GDPR’s 4% of global annual revenue—up to 10%, or even 20% if the company persistently breaks the rules.
Funnily enough, Meta only attempted its pay-or-consent tactic because GDPR-based court rulings removed all its other legal options for profiting off its users’ data without their actual free consent. “Subscription for no ads follows the direction of the highest court in Europe,” Meta protested in a statement this morning that also claimed its model “complies with the DMA.”
So, in a sense, privacy law corralled Meta into this position, and now antitrust law is going in for the kill. More news below.
David Meyer
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NEWSWORTHY
Supreme Court on free speech. The U.S. Supreme Court has finally ruled in the so-called NetChoice cases about social media platforms and whether, as new laws in Florida and Texas demand, they must carry user-generated content that they would rather moderate out of existence. As The Verge reports, the highest court today told lower appeals courts to reconsider their previous (diverging) rulings because in both cases they hadn’t properly analyzed the First Amendment challenges to the laws. “A State may not interfere with private actors’ speech to advance its own vision of ideological balance,” Justice Elena Kagan wrote in the majority opinion.
Foxconn trouble in India. The Taiwanese Apple supplier Foxconn is facing political outrage in India after it emerged that it won’t let married women join its iPhone production lines there. According to Reuters, which first reported the policy, the government of Prime Minister Narendra Modi is being urged to act by parts of Modi’s party and by the opposition Congress party. “While foreign investment is crucial, it should not come at the cost of disregarding our cultural values,” Congress lawmaker Karti P. Chidambaram thundered.
Alibaba trouble in India and Australia. Alibaba Cloud is shutting its data centers in India and Australia, possibly because of geopolitical antipathy to China in those countries, The Register reports. Alibaba is recommending that customers move their data to its servers in other territories after the cutoff dates (July 15 in India; Sept. 30 in Australia) and says it will boost investment in Southeast Asia and Mexico instead.
Vision Pro AI. Apple plans to bring its “Apple Intelligence” AI to the Vision Pro, Bloomberg reports while warning that “it won’t happen this year.” The $3,500 headset has enough memory to do the job and it runs on a variation of the iPad operating system, which will also be getting AI features, so Bloomberg suggests the main challenge will be in designing the user interface.
ON OUR FEED
“No organization or person may encroach on or destroy rare-earth resources.”
—The Chinese government lays claim to the country’s rare-earth metals, which play a major role in the production of chips, electric cars, and many other products. This will mean even tighter state control over the sector in the country that supplies 60% of global supply. (Rare-earth metals are actually found all over the world, but their extraction is expensive and comes with high environmental costs.)
IN CASE YOU MISSED IT
Zoom—the company that blew up thanks to video calls in the pandemic—doesn’t want to be known as a video meetings company anymore, by Orianna Rosa Royle
The EU plans to grill Microsoft rivals about the $13 billion it’s throwing into OpenAI, by Bloomberg
Nvidia’s Jensen Huang plays down competition worries as key supplier disappoints with subdued expectations for AI chip sales, by Christiaan Hetzner
I’m a game developer CTO. AI is forcing us to rethink the rules—and boosting my appreciation for human creativity, by Dan Nikolaides (Commentary)
David meets Goliath: Japan and Korea make startups work with large conglomerates in a twist on the Silicon Valley model, by Robyn Klinger-Vidra and Ramon Pacheco Pardo (Commentary)
BEFORE YOU GO
TikTok’s magic lamp. TikTok seems to have ambitions to release a chatbot in the U.S., as it has filed for a trademark on a chatbot called “Genie,” Semafor reports. There’s not much more detail available—TikTok didn’t comment—but it would certainly be brave of the company to enter such a contentious and competitive space while it faces a potential U.S. ban if it can’t find a local buyer.
