Apple and Microsoft fight DMA designation of iMessage and Bing

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UPDATE 9 Sept. ’23: European secure messaging firm Wire’s COO/CTO Alan Duric is very unhappy with the European Commission’s hesitancy in designating iMessage: “Apple’s strategy, does not belong to our time and place that we live in (EU at least) – where they are not willing to make iMessage available on the other platforms, where they are not only making harder by bundling it with Operating System (as MS usually does), but they go to another level by making hard bundle with the hardware that they produce.”

Some of Apple’s public rhetoric is so disconnected from the text of the DMA it’s laughable (e.g. telling MLex the fact many iMessage users also use other messaging clients means it shouldn’t be designated, even though recital 64 explicitly rules that out as a justification). I assume its arguments to the Commission are a little more sophisticated.

Zoom is now being very vocal about competition investigations into Microsoft Teams, not yet mentioned in the designation process, but (as far as I know) it has yet to make the obvious DMA connection publicly. The Financial Times reported Microsoft “earlier this year said more than 300mn people use Teams at least once a month” (EU figures please). It might be Teams has had fewer than 45m monthly active users for the last three years; if so it must notify the Commission as soon as it reaches that level (as Booking.com has already notified the Commission it expects to do at the end of this year).

Microsoft has promised to “create new support resources to better organize and point application developers to the existing and publicly available application programming interfaces (APIs) and extensibility in Microsoft 365 and Office 365 apps and services that connect with Teams”. But this does not include enabling interoperable communications between Teams and its competitors, as Microsoft could be required to do if Teams was designated as a messaging service under the DMA.

The FT also reported cloud competitors said Microsoft “has squeezed billions of extra ? out of its customers through its licensing terms” but there are no DMA-designated cloud providers, despite Amazon/Microsoft/Google’s dominance of that market. It may be the DMA method of counting end-users works badly with cloud infrastructure services, whose “customers” are software firms rather than the users of those firms’ cloud-based apps. The Commission is still able to open a market investigation into such services, but it may be they are prioritising services which meet the quantitative tests but whose gatekeeper owners have appealed against designation (like iMessage and Bing).

UPDATE 6 Sept. ’23: The designation list is here. Maximum 5-month market investigations will determine whether iMessage and Bing will be designated. It’s unfortunate (given US accusations this is anti-American protectionism) only one non-US firm (ByteDance) has been designated, since “although Gmail, Outlook[.com] and Samsung Internet Browser meet the thresholds… Alphabet, Microsoft and Samsung provided sufficiently justified arguments showing that these services do not qualify as gateways”.

It’s popcorn time ?: the European Commission will tomorrow publish its first list of the “core platform services” it has designated under the Digital Markets Act (DMA), and hence are subject to its obligations.

Today’s Financial Times reports that Apple and Microsoft are pushing back against designation of iMessage and Bing, and “The decision is likely to hinge on how Apple and the EU define the market in which iMessage operates.” But the DMA is written to not be susceptible to these endless competition economics games ? and I certainly can’t see how iMessage won’t be designated as a DMA Number-Independent Interpersonal Communications Service (NIICS).

Will Apple claim iMessage isn’t an important gateway for business users to reach their customers? Surely there are at least 10,000 micro-businesses in the EU (eg sole trader electricians, plumbers etc.) using it at least annually to arrange jobs. Apple has around 34% of EU smartphone market share (according to StatCounter in Aug. 2023) so it seems unlikely there are fewer than 45m iMessage monthly active users (MAUs) — each of the required past 3 years. Apple markets a Business Chat service explicitly to business users (h/t X/Twitter user @gateklons), which so far does not seem to have much takeup — but that isn’t required by the DMA to meet these tests. (It would be an astonishing failure if Biz Chat has fewer than 10k annual EU business users, especially given the numerous multinational companies involved…)

There may be more of an argument over Bing, with only 3.17% EU market share in Aug. 2023 (according to StatCounter again). It would be ironic if Microsoft’s attempts to nudge its Windows users onto the service pushed it over the 45m MAU line.

I’ve heard more standard competition arguments Bing shouldn’t be designated given the overweening power of Google Search. But those explicitly aren’t part of the DMA. (The whole point of the Regulation is the measures are fast-acting, rather than potentially dragged out in court for 10+ years in arguments between competition economist expert witnesses, as is par for the course in standard competition cases.)

Microsoft unarguably satisfies DMA 3(2)(a). If Bing has 45m end users (I’d be very surprised if it doesn’t have 10k annual advertisers let alone 10k businesses findable via the service) it satisfies (b) and if for the last 3 years satisfies (c). What else is there to discuss?

It sounds like Apple (and perhaps Microsoft) are making a DMA Art. 3(5) argument (they meet the quantitative presumptions but not the broader principles). I cannot see how this could be persuasive. The undertaking + service tests are intertwined and I can’t see two such giants not meeting them. And I think that’s right, since both companies have extensive “ecosystems” which allow them at any time to start pushing users of one service towards another!

The Commission should have the courage of its convictions, designate, and let Apple try to persuade the General Court otherwise. If Microsoft has evidence Bing has fewer than 45m MAUs then the Commission should follow the “market investigation” route to make the designation decision.

Gatekeepers might fall back on handwaving about “effectiveness” (88 mentions in the DMA) and proportionality (23), mainly in the recitals. Recitals 29/30/32/35 talk about them but seem to be justifying the Regulation as a whole, not acting as individual tests for Commission decisions ? After r.35 (esp. in the Articles) “effective” is used to justify stronger action by the Commision, not restrain it.

“Proportionate” is more interesting in recital 28 (in recital 27 it is linked to market investigations). Does it limit every action the Commission takes? Or are the recitals leading up to r.35 justifications of the obligations included in the Regulation as a whole, not a limit on those which should be applied to individual services? It feels more like the latter to me but that discussion would make a great paper for our November event ?

PS This CERRE paper has much more detail on proportionality/effectiveness. I do think it is slightly guilty of economists telling us what they think the DMA SHOULD rather than DOES say legally, especially on NIICS interoperability. But it makes the important point that much will revolve around the Commission’s assessment of the effectiveness of gatekeeper compliance measures. NB It was supported by “Apple, Arcep, Booking.com, ComReg, DuckDuckGo, Google, Mediaset, Meta, Microsoft, Qualcomm, Spotify, TikTok, Vodafone, Ofcom, and ARCOM” (p1).