Thursday, August 4, 2022

Intricacies of EU antitrust enforcement against Big Tech on full display as Politico reports on DG COMP questionnaires concerning Google Play Store app tax

The EU Commission is on a summer break, with only a few people holding down the fort, which makes it all the more surprising that a major EU antitrust investigation just became known. Politico's Samuel Stolton achieved a major scoop as he was first to report that "[t]he European Commission’s antitrust enforcers are investigating Google’s app store rules, according to two people close to the matter." According to the article, "billing terms and developer fees" for the Google Play Store are being looked at--and while the investigations are only preliminary--not full-blown--investigations at this stage, Politico's unnamed sources even predict that an investigation by Dutch competition watchdog Autoriteit Consument & Market (ACM, Authority for Consumers & Markets), which I mentioned in May, will have to be closed as Brussels will take care of this matter on an EU-wide basis. Otherwise there would be a risk of divergent--even if maybe only marginally inconsistent--decisions relating to the Netherlands, a country that is part of the EU's Single Market. The UK is not, as a result of Brexit, so the CMA (Competition & Markets Authority) can go ahead with its own investigation of the same set of issues.

The Dutch connection and UK non-connection are much simpler and more straightforward than how this DG COMP inquiry into Google Play relates to

  • the future enforcement of the EU's Digital Markets Act (DMA) and

  • the next steps regarding Epic Games' EU antitrust complaint over Apple's App Store terms.

The DMA was adopted by the European Parliament last month, and the EU Council (where the governments of the EU member states cast their votes) had already reached a political agreement (an informal decision affirmed later) prior to the parliamentary vote. As Politico mentions, it's only "in early 2024" that Big Tech will actually have to comply. In the meantime, the Commission will hammer out its guidelines and designate gatekeepers--and there may be legal challenges to particular aspects of the new law, which could delay everything.

Two weeks ago, Google announced some new in-app payment rules--allowing the use of third-party payment processors but not in a way that would be profitable for developers-- for the EU. It was almost irrationally soon for that, almost like if a car indicated a left turn somewhere on PCH in the L.A. area because it would actually make a turn in Seattle two days later. Formally, the DMA hasn't even been enacted (that will happen in October), and it won't be until early 2024 at the earliest that the Google Play Store would be formally affected. While Google does strive to come across as more cooperative with regulators than Apple does--admittedly a sub-sea level bar--even Google does try to delay the impact of competition enforcement or new laws. Case in point: the South Korean situation I reported on four weeks ago.

It is now my assumption that Google's announcement was an attempt to dissuade DG COMP from launching investigations under current, conventional EU antitrust rules, and the DMA was just used to make the whole move appear less defensive than it actually was.

I'm not surprised that the announcement underwhelmed DG COMP. It was really weak stuff, and not even very clever.

Google's agenda, with the benefit of 20-20 hindsight, is now transparent. But what does DG COMP want to accomplish, and when and how?

Here's my theory:

DG COMP knows that with Google (and Apple), these cases take long and go to court. With the DMA, the Commission will be in a much stronger position. But some issues require preparation and foresight.

If DG COMP investigates now, it realistically knows the case won't be concluded before the DMA takes effect. There won't be a satisfactory settlement in all likelihood (anything else would be a huge--but positive--surprise).

The Commission can now commence its proceedings under the traditional set of competition rules, gather evidence, and develop its theory of harm. At some point it can change lanes: the DMA is a faster track and represents lower hurdles for the agency.

It may even help the Commission and the EU's legislative institutions to fine-tune the DMA itself or, more likely, the related implementation guidelines based on the facts established and legal arguments exchanged during the course of the investigation.

In February 2021, Epic Games filed an EU antitrust complaint with DG COMP, but focused on Apple as Tim Sweeney explained to Politico. I remember that someone close to Epic told another Brussels reporter (but don't remember whom) that they believed the EU was focusing on Apple--presumably with a view to the Spotify case.

It's been a long 18 months since then, considering that DG COMP normally decides within about a year whether to investigate or reject a complaint, and now we hear about those Google Play questionnaires but don't know yet what will happen with respect to the App Store. Apple and Google--the two parts of the "Goopple" mobile platform duopoly--often pursue almost the same tactics and promulgate near-identical policies, such as the 30% standard commission rate. But one key difference is that Google's walled garden is slightly more open (though only slightly so if one looks at it in depth) than Apple's. It wouldn't make sense for Google to be investigated over its app tax and Apple getting away with it--if only one of the two companies were to be investigated, that would have to be Apple, which doesn't allow any alternative app stores or "sideloading" (which Google formally allows while making sure that there still isn't any real competitive constraint).

Should my theory be right and the Commission decided to get going sooner rather than later with tackling the app tax regime, then I would strongly recommend to DG COMP to consider a similar course of action with a view to App Tracking Transparency (ATT). I just reported on that one yesterday because a new U.S. class action complaint brought by French publishers is targeting ATT in addition to the app tax.