Apple’s Appeal Against Gatekeeper’s Designation: Device-Specificity or Neutrality?

Apple’s Appeal Against Gatekeeper’s Designation: Device-Specificity or Neutrality?

di Valeria Caforio
 

Introduction

On September 6, the EU Commission officially designated six companies, namely Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft, as gatekeepers under the Digital Markets Act (DMA), the recently enacted regulation that aims to ensure «contestable and fair markets in the digital sector across the Union».[1] Additionally, the Commission identified 22 core platform services (CPSs) provided by these designated gatekeepers.

In the wake of Tik Tok and Meta, recent reports indicate that Apple has also lodged an appeal against the Commission’s decision made under Article 3 of the DMA.[2] While the specific grounds of the appeal have yet to be disclosed, it is reasonable to infer that the company may have reiterated arguments previously presented before the Commission during the designation process. These arguments, elucidated in the decision text, primarily center around the device-specificity versus neutrality of Apple’s CPSs that have surpassed the relevant thresholds outlined in Article 3(2) of the DMA. These services encompass: i) the online intermediation service iOS Apple Store; ii) the operating system iOS; iii) the web browser Safari; and iv) the number-independent interpersonal communication service iMessage. Against this background, it is worth exploring the issue and how the same could affect the course of the judgement before the General Court.

Apple’s CPSs

Article 3(9) DMA stipulates that each designation decision must enumerate the relevant CPSs offered by a gatekeeper that are an important gateway for business users to connect with end users, as defined in Article 3(1)(b). From the point of view of the undertaking, a service is presumed to fall within this definition if it satisfies the thresholds set out in Article 3(2)(b), which refer to the number of end users and commercial users active on a monthly and annual basis within the EU. Upon reaching these thresholds, the undertaking is obligated to notify the Commission, providing comprehensive information pertaining to the relevant CPSs.[3]

As outlined in the DMA, the determination of whether a service provided by an undertaking aligns with the requirements of Article 3(1)(b) necessitates a clear delineation of the service. As a general rule, the service should fall within one of the ten designated categories of CPSs delineated in Article 2(2). Furthermore, for calculating whether the relevant thresholds are met, the regulation provides specific guidelines. On the one hand, undertakings must refrain from deeming distinct CPSs that pertain to the same category solely based on their provision through different domain names.[4] Conversely, undertakings must recognize as distinct those CPSs that serve different purposes for business users or end users, even if they belong to the same category. This principle holds true even when the undertaking offers these services in an integrated way.[5]

In July 2023, Apple notified the Commission that it met the thresholds in relation to four services: i) the online intermediation service iOS Apple Store; ii) the operating system iOS; iii) the web browser Safari; and iv) the number-independent interpersonal communication service iMessage. Specifically, for iMessage, Apple provided arguments pursuant to Article 3(5), which allows the undertaking to rebut the presumption of relevance.[6] This involves demonstrating that, despite satisfying the requirements, the service does not qualify as an important gateway for business users to reach end users.

As previously mentioned, the entire discussion with the Commission revolved around whether Apple’s services should be considered unique or distinct, depending on the specific device on which they are provided or the specific operating system for which they have been designed.

In particular, the company has adopted a device-specific perspective. For each service, excluding iMessage, which invoked different arguments, Apple employed a classification based on both the device – whether it be the iPhone, iPad, iMac, Apple Watch, or Apple TV – and the corresponding operating system – iOS, iPadOS, MacOS, watchOS and tvOS. In this context, the company operates five Apple Stores, offers five distinct operating systems, and manages three separate browsers.[7] The common rationale behind this approach is that both the device and the operating system significantly influence the purpose of the service from the perspectives of end users and commercial users. For example, end users typically access varied content on iOS and iPadOS Apple Stores. Similarly, app developers tailor applications based on the particular operating system they will run on.[8] This rationale justifies considering CPSs as distinct, even when they belong to the same category.

By contrast, the Commission has acknowledged that the Apple Store and Safari represent singular CPSs, regardless of their integration into a specific device.[9] First, these services serve identical purposes for both end and commercial users across devices. Second, Apple applies uniform or similar rules and policies to end users and commercial users, irrespective of whether the service, such as the Apple Store, is accessed on a smartphone or a PC.[10] To put it in simple terms, an ecosystem-justification summarizes the Commission’s view that Apple conceives its services across its devices as an integrated ecosystem. Surprisingly, a different conclusion emerged regarding Apple’s operating systems. The Commission concurred with the company’s assertion that five operating systems should be recognized.[11] The divergence in approach arises from the understanding that the purpose of an operating system necessitates evaluation from a technological standpoint. In other words, these services are inherently linked to the hardware (i.e., the device) for which they are crafted. Consequently, when delineating a CPSs within the category of operating systems, it is crucial to acknowledge that the nature of the device also determines the purpose of the same.[12] In line with this reasoning, the Commission deemed only iOS as a relevant CPS.

Conclusions concerning Apple’s appeal against gatekeeper designation

Apple has opted to challenge its gatekeeper status for certain CPSs before the General Court. As of now, the content of the appeal remains undisclosed. Nonetheless, some observations can still be offered.

First, it is plausible that Apple may not have challenged its gatekeeper status as such but rather contested the identification of specific CPSs based on the arguments highlighting their distinctive nature. This suggests that these services may not meet the thresholds specified in Article 3(2) and, consequently, may not be qualified as CPSs. Conversely, Apple appears to acknowledge that some of its services effectively qualify as CPSs under the DMA’s definition, contributing to the company’s designation as a gatekeeper. For these particular services, the company is obligated to comply with the obligations established by the regulation within the stipulated six-month period.

Second, it will be interesting to see how the General Court will assess the distinctive approach – that may be defined as technological – employed by the Commission with respect to the category of operating systems. Notably, some authors have emphasized that considering the DMA as a «technologically-driven piece of regulation» raises questions about the Commission applying this approach selectively to specific CPSs and not uniformly across all.[13] In a broader sense, this scrutiny will extend to the extent of discretion exercised by the Commission in interpreting the DMA.

Finally, the pivotal point of contention seems to center on the contrast between device-specificity and neutrality within Apple’s services. Over the years, Apple has constructed a closed ecosystem heavily dependent on seamless integration between services and operating systems across all devices. Consequently, the question arises as to how Apple might articulate arguments opposing this approach before the General Court and how the court will evaluate such contentions. Is the company potentially challenging its core business strategy?

 

 

[1] OJ L 265, 12.10.2022.

[2] Cases DMA.100013 Apple – online intermediation services – app stores, DMA.100025 Apple – operating systems and DMA.100027 Apple – web browsers, 5 September 2023, C(2023) 6100 final (Commission’s decision).

[3] Article 3(3) DMA.

[4] Annex, D(2)(a) DMA.

[5] Annex, D(2)(b)(c) DMA.

[6] Case DMA.100022 – Apple – number-independent interpersonal communication services, 5 September 2023, C(2023) 6077 final.

[7] Commission’s decision, paras 27, 72, and 102.

[8] Commission’s decision, paras 31-32.

[9] Commission’s decision, paras 38,

[10] Commission’s decision, para. 46.

[11] Commission’s decision, para. 82.

[12] Commission’s decision, para. 83.

[13] A. R. Martínez, Apple Seeks to Challenge its Designation Under the DMA: Part and Parcel of its Closed Ecosystem, Kluwer Competition Law Blog, 14 November 2023, available at < https://competitionlawblog.kluwercompetitionlaw.com/2023/11/14/apple-seeks-to-challenge-its-designation-under-the-dma-part-and-parcel-of-its-closed-ecosystem/> (last accessed 10 December 2023).