October 19, 2021

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EU cannot agree on how to regulate tech giants like Apple

The question of how to regulate tech giants has been high on the agenda for most countries around the world, but a new report today says that Europe is struggling to answer it.

The European Union has been working on its plans for several years, and appeared to have reached some kind of consensus last year – which would include limiting Apple’s powers in regard to the App Store, and could also place limits on its ability to acquire companies.

However, the Financial Times reports that the outline agreement now appears to be unraveling, with arguments between right and left over the extent of the antitrust measures needed:

Last year, the EU unveiled a radical blueprint for tech regulation that would put onerous responsibilities on the likes of Google, Facebook, and Amazon to clean up their platforms and ensure fair competition.

But since then, the package of measures has become bogged down in the European parliament, and now risks being watered down and heavily delayed. There are even fears in Brussels that the new rules will not be in place before Margrethe Vestager, the EU’s competition and digital policy chief, leaves her post in three years.

“It sounded like we had agreed but that is not the case . . . at all. We are a long way from having a common position on this,” Evelyne Gebhardt, a German MEP, said in exasperation during last month’s debate.

There is now concern that any intervention finally agreed may be too late to prove effective.

The slow progress also gives Big Tech more time to fully capture key sectors of the economy. “If we wait too long some markets will not be able to be repaired any more. This is about protecting consumers and small companies in Europe. We need to get this done as soon as possible,” said one person directly involved in the parliamentary debate.

The proposed bill most likely to impact Apple is the Digital Markets Act (DMA). This is intended to limit the powers of so-called gatekeepers, who run dominant online platforms. In Apple’s case, the concern is the App Store, as we’ve previously outlined.

Apple argues that it does not have a dominant position in this market, as it considers the relevant market to be either “smartphones” or “apps.” Since the company holds a minority share of the smartphone market in most of the countries in which it operates, it believes it cannot be considered to have a dominant position.

Competition regulators tend to take the view that the relevant market is “iOS apps,” and here Apple has a 100% monopoly on their sale and distribution. Edge cases aside, there is no way for a developer to bring an iOS app to market without selling it through the App Store.

Companies like Epic Games argue that they should be allowed to sell in-app purchases without Apple taking a cut of their revenue. The argument here is that Apple harms developers by taking part of their income, and consumers by forcing developers to charge more to make up for Apple’s cut. Apple, in response, says that it is perfectly normal for a company to take a cut of the sales it facilitates.

Tech giants could also be required to provide evidence that proposed acquisitions would not be anti-competitive.

The main disagreement is over how far to go. Some are content to enact measures that would only impact the very largest companies, while others want broader rules designed to ensure that growing companies also have to follow stricter rules. But there is disagreement on other matters too, such as whether tech companies should be allowed to share data between services (like Google and YouTube), and how much leeway individual EU members should have to enact country-specific laws.

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