Context: The European Union’s Digital Markets Act (DMA) is going to enter into full force in early March, but it’s already clear that it’s not going to be the immediate game changer that many had hoped. Legislative amendments are inevitable if the bill is intended to make a major difference in the marketplace. Digital gatekeepers, above all the ever-recalcitrant Apple, are reducing it to near-uselessness through hardball platform rules that comply with the suboptimal letter of the law while preserving the status quo (February 2, 2024 games fray article). There are also legal challenges pending, at this stage against the EU Commission’s gatekeeper designations (and in the not too distant future also over enforcement measures).
What’s new: On Friday, the EU General Court (EUGC), which is the lower level of the Court of Justice of the European Union (CJEU), announced an order by its president dismissing a petition by Bytedance (February 9, 2024 CJEU press release (PDF)). The applicant sought a suspension of TikTok’s gatekeeper designation pending its appeal, arguing that the need to comply in the interim would cause irreparable harm. While the outcome doesn’t help Bytedance, at least not in the near term, the order shows some of the various limitations of the DMA: gatekeepers may still offer their users the pre-DMA status quo and promote it as the better option, and the EU Commission risks mind-boggling damages claims if it insist on compliance with its designations and other orders but ultimately loses on appeal.
Direct impact: The Commission won this round, but it remains to be seen whether it will seriously want to risk multi-billion-dollar damages claims further down the road. Normally it is the Commission that imposes fins, which sometimes run in the billions of dollars against large corporations, but here the EC risks that similar or even larger amounts of money will flow in the other direction.
Wider ramifications: The holdings of the EUGC’s president (chief judge) are presumably very much to Apple’s liking. The iPhone company is likely emboldened now by the fact that the order supports Apple’s strategy of ultimately getting app developers and users to prefer the status quo ante (the way things were until Apple started to formally comply with the DMA), and given Apple’s sky-high profitability, the EU Commission may in the end not even dare to go after Apple over its apparent refusal to comply with its gatekeeper designations with respect to other Apple App Stores than the one for the iPhone. The next games fray article will discuss what is arguably the worst set of measures taken by Apple so far against the EU DMA.
Court rulings are rarely binary. If interim relief is sought (which only TikTok did) and denied, the court may still pronounce a legal standard that helps others or even the same party further down the road. And there can be obiter dicta, remarks that weren’t strictly needed to reach a certain conclusion, but which will influence the development of the case law. One can lose a battle, yet win the war or help others win their wars.
The order by the EUGC’s top judge, Marc van der Woude (court website), focuses on Bytedance not having established irreparable harm that warrants an interim measure against the EU Commission’s TikTok gatekeeper designation. In that regard, it points to different factors that suggest Bytedance should be able to live with the need to comply until there’s a final decision on its appeal (which could ultimately go up to the European Court of Justice (ECJ), the higher level of the CJEU). Three of them are interesting beyond the TikTok case:
- Monetary damages (opportunity costs with respect to revenues) are not considered irreparable as damages could be recovered from the EU Commission.
- The EUGC has put TikTok’s appeal on the fast track, so it won’t take too long before the first court decision after full briefing and oral argument comes down.
- Gatekeepers may continue to offer their user the status quo ante (pre-DMA situation) as an option and promote it as the superior choice.
Let’s look at this through the lens of what could happen in a large-scale dispute with Apple and the EU Commission. There is already a dispute over whether the EC correctly included all Apple App Stores in its gatekeeper designation (September 5, 2023 EU Commission decision) or whether only the iPhone App Store should have been considered. So far, Apple’s announced rule changes relate only to the iPhone, not even to the iPad (though users use apps across iPhones and iPads, and if iPhone apps wanted to benefit from some of the additional flexibility the DMA formally affords them (though in the end that will be pointless in most cases for any numbe of other reasons anyway), they’d have to put a different version of the app on the iPhone and on the iPad, requiring users to search for the app on both devices in order to install it (as opposed to automatic synchronization). But with respect to the Mac, considering that the App Store does not have the same gatekeeper function there (there are other viable ways of reaching customers) and apps are not identical to the ones on iPhones, games fray believes Apple may very well prevail in court.
In para. 56, the Bytedance order says:
“…. It follows that the alleged harm, even if it were established, could be the subject of an action for damages which the applicant may bring if it were to succeed in the main proceedings.”
The basis for that is already stated in para. 50:
“… Contrary to what the applicant claims, any such harm could be remedied by an action for compensation being brought on the basis of Articles 268 and 340 TFEU (see orders of 28 November 2013, EMA v InterMune UK and Others, C‑390/13 P(R), EU:C:2013:795, paragraph 48 and the case-law cited, and of 28 April 2009, United Phosphorus v Commission, T‑95/09 R, not published, EU:T:2009:124, paragraph 33 and the case-law cited).”
It is unclear what exactly Bytedance claimed. Maybe the order just means to say that there is a possibility for compensation, while Bytedance suggested the damage was of a kind that could not be recovered as a matter of law.
If the EC now told Apple to comply with respect to the full range of App Store gatekeeper designations, the above would also apply. It’s interesting that Apple has neither moved for such interim relief as Bytedance did, but isn’t complying either with respect to non-iPhone App Stores. Maybe Apple is confident that the EC won’t dare to enforce, given the enormous monetary risk. It would make the EC look really bad if it had to pay billions of dollars of EU taxpayers’ money to the world’s richest corporation.
The fact that the TikTok case was put on the fast track makes it possible that Apple will get the same treatment.
The paragraph one must interpret most carefully now with a view to Apple’s EU rule changes in response to the DMA is para. 47:
Next, it should be noted, as the Commission does, that Article 5(2) of Regulation 2022/1925 does not prohibit the combination and cross-use of the end user’s personal data, but merely makes those actions subject to the prior consent of the user. The applicant appears to assume that all or a significant proportion of TikTok’s end users will refuse to give consent to the use of data for the purposes [confidential]. However, that assumption is not supported by any evidence concerning the likely behaviour of users. There is nothing to prevent the applicant from taking appropriate measures to inform TikTok’s end users of the possible advantages that they might draw from the cross-use or combined use of their data with a view to enhance [confidential] or TikTok.
This is not new law. It’s not a case of legislating from the bench. It’s merely a clarification of something that shouldn’t have required one, but it is important nonetheless:
- The DMA’s requirements are just about what a gatekeeper must allow (for example, alternative app stores) or for what it must obtain content (for example, sharing data across services). None of that means the gatekeeper can’t still offer users to stick to the pre-DMA situation. If there are alternative app stores, they can still use the default one. If there are restrictions on the use of data, users can still authorize such use.
- Gatekeepers may “tak[e] appropriate measures to inform [their] end users of the possible advantages that they might draw from [choosing the status quo ante].”
The part that one must be careful about is that the order does not say a gatekeeper has complete freedom to use “scare screens” and similar tools to lead users to choose what the gatekeeper wants them to. It also doesn’t (as it couldn’t) say that gatekeepers enjoy unfettered freedom to disparage alternatives. Ultimately the messaging to end users is reviewable under the DMA as well as under other laws. For instance, national Unfair Competition Law in a jurisdiction such as Germany tends to be much stricter than U. S. comparative advertising rules. U.S. TV spots like “at [restaurant] they accept anything but American Express” are more of an American than European thing. And even claims that implicitly or explicitly reference the competition as a whole may be deemed unlawful in certain jurisdictions unless the claims can be objectively proved.
Other aspects of the DMA are in greater need of improvement, but it’s possible that a future amended version will also indicate more specifically how gatekeepers who reluctantly comply with the DMA may tell their users that a choice afforded to them under the DMA is actually a dangerous path. There’s a difference here between the freedom of speech those companies may exercise in the political debate and what a “scare screen” may tell users.