Newsletter
Digital Competition's Newsletter: Antitrust Strategy Needed
Christophe Carugati
n°7 Free Edition
2 July 2024
The newsletter outlines news related to GenAI, DMA, and antitrust.
What matters in digital competition, and what implications does it have for digital and competition policies? What can we expect next?
As an expert in digital and competition policies and the founder of Digital Competition, I specialise in providing research and advice on complex and emerging issues to advance open digital and competition policies for better innovation. Our services include policy hubs for research on global digital and competition issues, consultations, training, and conferences for various stakeholders such as tech firms, venture capitalists, law firms, governments, and organisations navigating intricate regulatory landscapes.
I welcome inquiries for membership, consultations, and press inquiries at Christophe.carugati@digtal-competition.com
I want to emphasise that I have not received any funding for this newsletter and have no conflicts of interest with the firms mentioned below. This newsletter is a monthly free edition, and you are welcome to share it or unsubscribe anytime.
Forward
The European Commission is intensifying its enforcement actions before the summer break. It has primarily found that Apple and Meta do not comply with the Digital Markets Act (DMA), specifically regarding Apple's terms on alternative distribution channels and Meta’s “pay-or-consent” model. Additionally, the Commission informed Microsoft that tying Microsoft Teams with Microsoft Office 365 will likely constitute an abuse of dominance, even though Microsoft already unbundled Teams from Office. Finally, the Commission has sent requests for information to understand exclusivity strategies regarding some clauses of the Microsoft/OpenAI and Google/Samsung partnerships under competition law.
However, the Commission lacks a clear antitrust strategy to tackle these new issues. It does not offer solutions to address the competition concerns, instead arguing that firms must comply with the laws. In theory, this is understandable, but in practice, the DMA and antitrust laws are subject to interpretation, leaving the investigated firms questioning the Commission's expectations. Unless the Commission provides clarification with guidance, firms will likely litigate the cases for years before the European Court of Justice.
Please send me a message so we can discuss GenAI further.
My work
Opinion: What to Expect from the Commission’s Workshop on Competition in Generative AI: The Commission will likely continue its close monitoring with other competition and supervisory authorities. It will unlikely open a sector inquiry and launch a market investigation into new services under the DMA. The opinion
Opinion: Europe Is at Risk of Lagging in AI Agents. The future promise of AI agents is threatened by Europe's regulatory hurdles on data and business practices of large online platforms. European regulators must act swiftly to support AI innovation. The opinion
Training: Summer School on Digital and Competition Policies: The summer school offers a comprehensive overview of the novel and fast-moving regulatory and market developments related to digital and AI markets. The summer school
Research projects: Let’s work together
I am open to collaborating on digital and competition research projects focusing on generative AI, mobile ecosystems, the transition from search to answer engines, platform regulations, international coherence of digital market regulations, and the intersection between competition and privacy. Additionally, I am seeking funding opportunities from corporations or public institutions to support these endeavours. Please don't hesitate to reach out at your convenience to delve deeper into these topics.
I will also be glad to intervene as an expert to help you solve DMA-related issues.
News
Generative AI
France 🇫🇷 and the Commission 🇪🇺 express competition concerns. The French competition authority outlined competition issues at the upstream level of the value in its first market study. The Commission did not open a formal market investigation. Instead, it focuses on exclusivity strategies, requesting information from several players.
French 🇫🇷 market study on GenAI: The French competition authority released its first market study focusing on the upstream level of the generative AI (GenAI) value chain, particularly the key inputs needed to develop a foundation model. The study voices competition concerns, especially about data access and model distribution via cloud providers. However, some assumptions on data advantages of large online platforms, data feedback loops, data access, partnerships with content creators, and technical barriers to port models to alternative cloud providers deserve future research. The study
Investigation into Nvidia: Model developers use graphics processing units (GPUs) to perform the computations needed to develop their models. Nvidia leads the global GPU market with more than 80% market share. The French competition authority will soon open a formal investigation following an unannounced inspection in the graphics cards sector. Reuters
European 🇪🇺 Commission’s focus on exclusivity strategies: The Commission sent follow-up requests for information on the exclusive partnership between Microsoft and OpenAI to understand whether some exclusivity clauses could negatively affect competitors. It also sent requests for information to investigate the agreement between Google and Samsung, which allows Google to pre-install its small language model on certain Samsung devices. The Commission
Apple 🍏 delays Apple Intelligence in Europe: Apple’s AI agent, Apple Intelligence, intended as a new feature of its operating system, is facing delays due to concerns with the DMA. it requires Apple to offer third-party access to certain functionalities of its operating system for free, ensuring only strictly necessary privacy and security measures to protect the integrity of the system. Apple is challenging this provision before the European Court of Justice, arguing that it is inconsistent with the European Charter of Fundamental Rights and the principle of proportionality. Apple is now seeking clarification from the Commission before launching Apple Intelligence in Europe. European Competition Commissioner Margrethe Vestager has called this delay a “stunning declaration” of anticompetitive behaviour. Apple. The Court. Vestager. My opinion
Meta in talks with Apple: Apple is seeking to partner with AI firms to run Apple Intelligence on various models for complex queries. So far, Apple has already concluded a partnership with OpenAI. Meta is also in talks with Apple to integrate its models. Meta
Digital Markets Act
Strong Enforcement Expectations: While the DMA focuses on compliance, the public expects robust enforcement. Consequently, the European Commission swiftly advances by sending its first preliminary findings to Apple and Meta.
Apple’s terms for alternative distribution channels: Apple allows application developers to inform their users about alternative offers outside their applications. However, Apple imposes new business terms, requiring developers to pay a commission fee and implement privacy and security measures. Although the DMA explicitly allows Apple to do so, the Commission is doubtful they are necessary and appropriate. Apple will likely challenge the non-compliance decision unless the Commission clarifies what "appropriate terms" mean. Additionally, the Commission has opened a formal investigation into other contractual terms enabling developers to distribute their applications from alternative application stores and the web. The Commission
Meta’s “pay-or-consent” model: Meta offers an ad-free paid version if users do not consent to data collection and an ad-supported free version if users do consent. The Commission preliminarily considers that this binary choice does not allow users to freely consent. This aligns with my previous arguments in a Bruegel’s blog post. The Commission. My blog post
DMA Workshop: The Dutch competition authority organised a DMA workshop to outline the DMA's opportunities for business users. Some users expressed concerns when seeking to benefit from the DMA, while others sought to go beyond its provisions. The key message was that national competition authorities (NCAs) would assist business users in dealing with the DMA. However, NCAs must remain vigilant against unjustified rent-seeking behaviours from some business users lobbying for outcomes not foreseen in the DMA. The workshop. My infographics on the DMA
Antitrust
Microsoft is back under scrutiny in Europe for tying its services. The Commission has informed Microsoft that tying Microsoft Teams with Microsoft Office likely constitutes an abuse of dominance. To address the concerns, Microsoft has unbundled Teams from Office globally, but this has not satisfied the Commission. The current issue now seems to revolve around interoperability requirements that would allow competitors of Microsoft Teams to interoperate with Microsoft Office. Microsoft must propose solutions to avoid a prohibition decision from the Commission. The Commission
About the author
Christophe Carugati
Dr. Christophe Carugati is the founder of Digital Competition. He is a renowned and passionate expert on digital and competition issues with a strong reputation for doing impartial, high-quality research. After his PhD in law and economics on Big Data and Competition Law, he is an ex-affiliate fellow at the economic think-tank Bruegel and a lecturer in competition law and economics at Lille University.