EU designates Apple a gatekeeper for iPadOS but not for iMessage

The questions

Can a business avoid being designated a “gatekeeper” under the Digital Markets Act (DMA) even if it satisfies the quantitative criteria under the DMA?

The key takeaway

Despite meeting the quantitative thresholds in the DMA, the European Commission has determined that Apple is not a gatekeeper in respect of its number-independent interpersonal communication service (NIICS) iMessage, after a market investigation showed that iMessage is not used widely or intensively by end users or business users in the EU. Conversely, the European Commission has designated Apple as a gatekeeper for iPadOS based on qualitative criteria under the DMA, despite iPadOS not hitting the DMA’s quantitative thresholds.

The background

Under the DMA, an undertaking will be presumed a gatekeeper if it meets certain quantitative thresholds regarding the turnover, market capitalisation, and number of users of a “core platform service” (CPS). The DMA also empowers the Commission to conduct market investigations to assess whether: 

• an undertaking that meets the quantitative thresholds should escape gatekeeper designation on the grounds that it can present substantiated arguments that manifestly call into question the presumption that it is gatekeeper
• an undertaking that does not meet the quantitative thresholds should nonetheless be designated as a gatekeeper on qualitative grounds because it constitutes an important gateway for business users to reach end users. 

Apple notified the Commission on 3 July 2023 that it met the quantitative thresholds for four CPSs: its online intermediation service App Store, its operating system iOS, its web browser Safari, and its NIICS iMessage. The Commission designated Apple as a gatekeeper for the first three CPSs on 5 September 2023, but opened a market investigation for iMessage after Apple presented arguments seeking to rebut the gatekeeper presumption. Separately, the Commission opened a market investigation to determine whether Apple should be designated a gatekeeper in relation to its iPadOS service, despite iPadOS not hitting the quantitative thresholds in the DMA.

The development 

iMessage

Despite meeting the quantitative thresholds in the DMA, the Commission determined that Apple should not be designated a gatekeeper in respect of iMessage on the grounds that business users do not consider iMessage an important channel to reach their customers. In particular, the Commission considered that:

• the overall usage of iMessage is relatively low in the EU, with iMessage having a much lower number of users compared to the other NIICSs with a designated gatekeeper under the DMA (WhatsApp and Messenger). iMessage users also use the service less frequently than WhatsApp and Messenger users
• iMessage is of limited importance as a B2C communication channel, given Apple’s Messages for Business service has an extremely limited user base in the EU.

iPadOS

Despite not meeting the quantitative thresholds in the DMA, the Commission determined that: (i) iPadOS constitutes an important gateway for businesses to reach end users, and (ii) Apple enjoys an entrenched and durable position with respect to iPadOS – so should therefore be designated a gatekeeper. The full decision has not yet been published, however the Commission has indicated that it reached this conclusion because:

• Apple’s business user numbers exceeded the quantitative threshold elevenfold, while its end user numbers were close to the threshold and are predicted to rise in the near future
• end users are locked-in to iPadOS. Apple leverages its large ecosystem to disincentivise end users from switching to other tablet operating systems
• business users are locked-in to iPadOS because of its large and commercially attractive user base, and its importance for certain use cases, such as gaming apps.

Why is this important?

Gatekeepers must comply with various obligations and prohibitions set out in the DMA, and the two decisions show for the first time that the Commission is willing to assess gatekeeper status on a case-by-case basis, and not rely solely on the quantitative thresholds in the DMA. In summary:

• the iPadOS decision demonstrates that CPS providers that do not satisfy the DMA’s quantitative thresholds could nonetheless be classified as gatekeepers, meaning that CPS providers who would not otherwise expect to be caught by the DMA may be designated as gatekeepers. There should be greater clarity on the likely impacts of this decision once it is published by the Commission
• the iMessage decision also has interesting implications for the competitive dynamics and innovation incentives in the NICCS market, as it means that Apple will not have to comply with the obligations and prohibitions imposed on gatekeepers under the DMA with regard to iMessage.

Any practical tips?

CPS providers should continue to monitor the Commission’s approach to naming gatekeepers to help assess the likelihood of their services triggering a gatekeeper designation. In particular, CPS providers whose services do not hit the quantitative thresholds in the DMA may wish to review the iPasOS decision once published to ascertain whether their service could nonetheless trigger a gatekeeper designation on qualitative grounds.

Summer 2024