Massive Fines for Big Tech Call EU’s DMA Fairness Into Question

Multimillion-dollar fines recently leveled against Apple Inc. and Meta Platforms Inc. by the European Union’s Commission for compliance failures under the Digital Markets Act have raised questions about whether such a framework is effective—or fair.

The DMA is far-reaching legislation passed in the EU in 2022. These fines against Apple ($570 million) and Meta ($230 million) mark its first major enforcement action. According to the Commission’s website, it was implemented to “comprehensively regulate the gatekeeper power of the largest digital companies,” empower EU citizens to navigate the digital landscape with more choice and flexibility, and create a level playing field in the digital business environment.

The DMA provides criteria for the identification of companies—labeled as gatekeepers—providing core platform services that are of a certain financial size (measured by global turnover or market cap) and user volume.

The DMA identified six companies as gatekeepers when it was passed: Alphabet Inc. (which owns Google), Amazon.com Inc., Apple, ByteDance Ltd. (which owns TikTok), Meta, and Microsoft Corp. Since then, Booking.com has been added.

These gatekeepers face numerous obligations and restrictions. The DMA generally limits data usage, allows users more choices of services within any core platform, bans favorable treatment of their own services, and allows more access to information by business users and developers.

The recent fines for Apple and Meta show the stringent penalty structure for noncompliance under the DMA. Fines can increase to 10% to 20% of a company’s global turnover. And while not yet tested, the DMA also seems to provide for a private cause of action for EU citizens to pursue damages for violations.

At first glance, the DMA’s attempt to ensure fairness in the digital business landscape is admirable. But when we look at the means to accomplish these goals, the picture is concerning.

Causes for Concern

First, the DMA targets a handful of companies. Most were presumptively labeled as gatekeepers, and others must self-identify as meeting the criteria for gatekeeper status.

The criteria are far from objective. The commission can waive certain aspects and can selectively enforce against targeted companies—seemingly at the commission’s will. Meta raised this concern in its response to the DMA fine: “The European Commission is attempting to handicap successful American businesses while allowing Chinese and European companies to operate under different standards. This isn’t just about a fine; the Commission [is] forcing us to change our business model effectively imposes a multi-billion-dollar tariff on Meta.”

Second, the DMA’s restrictions and obligations are a moving target. The commission can “update dynamically the obligations for gatekeepers when necessary.” That suggests the commission can change the goalposts and then fine a company for not complying—a concern Apple raised after it was fined.

A changing regulatory landscape that carries such significant penalties is concerning. It isn’t clear what would stop the Commission from using the DMA to “tax” foreign companies while also forcing them to invest more money into complying with shifting standards. At its worst, the DMA can be viewed as the weaponization of a regulatory landscape that is distinct from taxes or tariffs, which are levied against all companies or a nation.

Third, the mechanism to prove a violation has limited due process. Most critically, there is no burden of proof on the Commission (or private claimant). Instead, Article 8(1) requires the gatekeeper to “ensure and demonstrate compliance” rather than placing the burden on the claimant to prove non-compliance.

This means the Commission can make findings and issue a fine without needing to prove anything to anyone. There is an appellate process, but the burden is on a gatekeeper to prove its innocence. This is different from an antitrust violation alleged by the US government, where the federal agency must prove, among other things, market power and anticompetitive conduct.

There are legitimate concerns with the incredible power that Big Tech wields in the digital business environment. But they created that environment and continue to operate it, prompting tension between preserving competitive markets and infringing on a company’s creative license.

Compare this scenario to Walmart Inc., a chain retail company that has expanded into every aspect of a consumer’s life from automotive parts to pharmacy needs to groceries.

Walmart is a physical marketplace that has spent decades building a brand and perfecting the environment to sell products. It carries its own products, as well as products from companies with which it has entered agreements. Not everyone can sell their items at Walmart, and customers can’t buy items the store doesn’t carry.

Choosing to shop at Walmart limits customers to purchasing the products sold in their stores—products that pay Walmart to be sold there—and paying whatever price the store chooses. If customers disagree, they can shop elsewhere, but they must incur the related expenses and inconveniences.

The situation is hardly different with Apple, Google, and Microsoft. These tech giants created a digital landscape and environment for users. They now provide a marketplace for products they contract with and from which they benefit. Should customers demand more or different choices, they can demand them from the company or go elsewhere.

From the antitrust trials in the US to the DMA, there is a growing concern about the market effects of increased consolidation of digital businesses. This is exacerbated by the incredible speed of digital growth. But despite growing concerns, it’s not clear the free market is in any danger.

There has yet to be an evidentiary showing that Big Tech’s “anticompetitive behavior” has harmed the consumer. Findings have been abstract, suggesting that certain behavior could lead to higher prices, less innovation, or less choice but have not found actual harm. And customers continue to flock to the same Big Tech names, seemingly unphased.

This murky environment has left consumers in the middle of a titanic fight. On one side is Big Tech, which created and continues to operate the digital landscape and is trying to maximize the profitability of their creations. On the other are governments trying to keep pace and ensure a playing field that allows for competition and protecting consumers from oligopolies that dominate the digital market.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Chris Zona is a partner in the litigation department of Mandelbaum Barrett PC’s New York City office, specializing in complex commercial litigation.

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