The US and EU take the scalpel of Big Tech’s monopoly… Will the ‘dinosaurs’ dominance’ be put to rest? [세계는 지금]

Withdrawal from the market-shaking competition for technological hegemony

EU ‘Digital Market Act’ implemented in March
‘Special management’ of 6 companies including Alphabet, Apple, and MS
Prohibition of top exposure of the company’s services, forced payment, etc.
Apple ‘white flags’ allowing third-party app markets for the first time in 15 years

U.S. Biden administration fights antitrust lawsuit
FTC investigates generative AI investments for ‘restrictions on competition’
Google, which has 90% of the search market share, is also involved in a lawsuit.
In the worst case, an order may be issued to ‘split the company’.

Starting next month, iPhone users in Europe will be able to download applications (apps) from places other than Apple’s App Store. Since launching the App Store in 2008, Apple has never allowed other app markets on the iPhone, but changed its policy after 15 years.

What has brought Apple to its knees is the European Union’s (EU) Digital Market Act (DMA), which takes effect on the 7th of next month (local time). The EU has begun to ‘bash Big Tech’ by enacting the world’s first law to regulate the market monopoly activities of Big Tech (giant information technology) companies.

There is a strong wave of monopoly regulations from the European and U.S. governments targeting Big Tech. This is because the competition for hegemony surrounding the generative artificial intelligence (AI) market is being led by big tech companies such as Microsoft (MS) and Google, and the need for regulation has increased. There are predictions that the growth of ‘tech dinosaurs’, which have been continuously increasing in size over the past 20 years, may be put on hold.

◆EU to withdraw fines worth 700 billion won

The DMA selects six big tech companies as ‘gatekeepers’ subject to special management and aims to regulate their abuse of market dominance. The six companies selected as gatekeepers are Alphabet (Google’s parent company), Apple, Microsoft, Meta, Amazon, and China’s ByteDance, the parent company of TikTok.

The DMA prohibits these companies from forcing users to use their services. In other words, Apple must allow iPhone users to delete the pre-installed App Store and install a different app market, and Meta must open its service so that users of small messenger apps can send messages to WhatsApp users without signing up.

We also do not allow priority exposure practices that allow our services or products to appear at the top on search platforms. The EU can impose a fine of up to 10% of annual sales on companies that violate this.

The EU is already planning to impose its first fine on Apple in line with the implementation of DMA. The British Financial Times (FT) reported on the 17th that “the European Commission has decided to impose a fine of 500 million euros (approximately 720 billion won) on Apple early next month for violating anti-trust laws.” This follows the Commission’s decision to side with music streaming app ‘Spotify’, which sued Apple in 2019. Spotify claimed that Apple had no choice but to raise subscription fees by forcing its own payment system (App Store internal payment), which charges a commission of up to 30%, and that it was ultimately losing out in competition with Apple Music.

Apple, which has become a target of the EU, has raised the white flag. On the 25th of last month, Apple announced a major reform plan to allow third-party app markets and external payment systems. It was also announced that internal payment fees would be lowered from the existing 15-20% to 10-17%. Apple explained that 99% of app developers in Europe will pay reduced fees than before. The New York Times predicted that “Apple could suffer a financial blow.” Apple’s App Store sales are estimated at $24 billion (about 32 trillion won) annually, with Europe accounting for about 6% of sales.

◆U.S. antitrust investigation into big tech that invested in generative AI

U.S. government regulations have recently targeted the generative AI market. The U.S. Federal Trade Commission (FTC) began an investigation into AI startup investments by three companies, Microsoft, Alphabet, and Amazon, at the end of last month. MS has a close partnership with ChatGPT developer OpenAI, and Alphabet and Amazon are investors in AI startup Anthropic, which is considered a strong competitor to OpenAI.

These big techs are establishing themselves as leaders in the race for AI hegemony by investing in and forming partnerships with AI startups with their own technology and using the technology virtually exclusively. Accordingly, the FTC is examining whether Big Tech’s investment in startups restricts competition within the industry or violates antitrust laws.

The Joe Biden administration is already engaged in an antitrust lawsuit with several big tech companies. The trial that is receiving the most attention is Google’s alleged violation of antitrust laws in the search market. The U.S. Department of Justice said that Google, which occupied more than 90% of the search engine market, committed anti-trust activities by paying more than $10 billion (approximately 13 trillion won) annually to smartphone manufacturers and software companies such as Apple in order to establish and maintain this dominance. The lawsuit was filed in October 2018. This trial is scheduled for final arguments in May, so a ruling could be made within this year. In the worst case scenario, Google could face the risk of splitting the company.

U.S. antitrust laws are strong enough to order the breakup of companies if they are found to have committed monopolistic practices. A representative example is the split of Standard Oil, an oil refining company founded by ‘oil king’ John Rockefeller, into 34 companies in 1911. Standard Oil’s market share at the time was over 90%.

Google is also being sued for monopolistic practices in the online advertising business. The U.S. Department of Justice, which filed this lawsuit starting in September of this year, argues that Google should sell its online advertising exchange ‘Ad Exchange’ to restore order in market competition. The U.S. CNN broadcast evaluated, “Both antitrust lawsuits are cases that could shake Google’s enormous power and influence in the Internet market.”

Reporter Lee Ji-an [email protected]

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