Report from Bloomberg
In Brief – In a hearing before the EU General Court in Luxembourg, Apple launched a sweeping legal attack against the EU’s Digital Markets Act (DMA), arguing that the bloc’s landmark Big Tech regulation imposes “hugely onerous and intrusive” burdens on the company and conflicts with fundamental property, privacy, and security protections under EU law. The landmark 2023 law seeks to curb the dominance of digital “gatekeepers” by imposing a collection of regulatory mandates, including opening their ecosystems to rivals products and services. Apple contends that these interoperability mandates, such as forcing its iPhone to work with competitors’ hardware and software, pose serious risks to user privacy, device security, and intellectual property. The company also disputes regulators’ classification of its App Store as a separate service under the DMA. The company has already been hit with a €500 million fine for app store policies and fees. The EU Commission defended the law to the judges, accusing Apple of maintaining “absolute control” over the iPhone ecosystem to generate “supernormal profits” while hindering competition. They argued that Apple’s restrictive practices effectively “lock in” more than a third of European smartphone users, reinforcing the need for the EU’s tough gatekeeper rules.
Context – We’ve long said that the DMA challenges Apple’s core user proposition more than the other tech giants. The others generally use technical and non-transparent practices to shape their platforms. Apple’s business model has been to create openly structured and controlled “walled gardens” with customer value propositions based on privacy, security, and seamless premium user experiences. And their devices consistently proved very popular with EU users. The DMA basically told the company that its highly successful business model was no longer legal in Europe. Meta, themselves a major critic of Apple’s walled gardens, feels equally hard done by as the Commission has used the DMA to force the company, with a business built on targeted ads, to offer free versions of its platforms that only include less-targeted, and therefore less-valuable, ads.