From a competitive perspective, Apple's entry into the relevant markets of the metaverse is good news. Apple will exert additional competitive constraints on its rivals like Meta. In principle, this market entry should lead to more competition, e.g. in the development of metaverse products, but also to more price competition between the providers.
Competition law sets the boundaries within which companies can develop and operate in the markets of the metaverse. Of course, the prohibition of restrictive agreements pursuant to Art. 101 TFEU / Sec. 1 Act against Restraints of Competition (“ARC”) also applies to the markets of the metaverse. The providers of metaverse products may therefore, in principle, not restrict the competition existing between them on the basis of agreements or concerted practices. Nor may they, in principle, restrict competition by means of vertical agreements or concerted practices with upstream or downstream providers. Furthermore, Art. 102 TFEU / Sec. 19, 20 ARC prohibit the abuse of a dominant market position and the abuse of relative or superior market power respectively.
In addition to this competition law legal framework, there is the Digital Markets Act (“DMA”). The DMA is addressed to so called gatekeepers operating a core platform service. The DMA also provides for a number of market conduct restrictions which may also have an impact on the offer and use of metaverse products.
In a similar vein as the DMA, Sec. 19a ARC is addressed to undertakings with paramount significance for competition across markets (“UPSCAM”). UPSCAMs are also subject to a number of market conduct obligations, which could impact their metaverse offering.
Apple and other metaverse providers as UPSCAMs pursuant to Sec. 19a ARC
The German Federal Cartel Office has determined that the provision of Sec. 19a ARC applies to Apple. At the beginning of April 2023, the FCO decided that Apple has a dominant, or at least strong market position at all vertically linked levels, starting from smartphones, tablets and smartwatches via the proprietary operating systems to the Apple App Store as the only digital distribution platform for apps and other software products on Apple devices available to both app publishers and users. Apple's overriding cross-market importance for competition within the meaning of Sec. 19a (1) ARC thus creates a position of power for the company that gives them scope for cross-market behavior that is not sufficiently controlled by competition, the German Federal Cartel Office said.
The metaverse provider Meta is also an addressee of Sec. 19a ARC and proceedings under Sec. 19a ARC.
In its decision against Meta, the German Federal Cartel Office also considered Meta's metaverse offering in the context of its cross-market significance. The German Federal Cartel Office said that Meta, on its stable and growing resource base, has the opportunity to steadily expand the ecosystem, possibly to a metaverse based by proprietary VR and AR hardware.
The German Federal Cartel Office can prohibit addressees of Sec. 19a (1) ARC from engaging in a range of conduct pursuant to Sec. 19a (2) ARC. Some of these prohibitions could also become relevant for the metaverse offerings. E.g.:
- It can be prohibited to give preferential treatment to the UPSCAM's own offers over those of competitors when mediating access to supply and sales markets (prohibition of self-preferencing).
- Measures in order to make a digital ecosystem un-contestable can also be prohibited. Thus, measures leading to an exclusive pre-installation or integration of offers of the UPSCAM can be prohibited. Impeding measures in app stores are also covered. In particular, the aim is to prevent other undertakings from being impeded in advertising their offers or reaching customers via other channels.
- The enveloping of markets that are not yet dominated through measures such as exclusivity agreements or bundled offers can be prohibited.
- It may also be inadmissible for UPSCAMs to collect competitively relevant data from users which is then used to impede competitors in another market.
- It can be prohibited to refuse the interoperability of products or services or data portability.
DMA regulation of the metaverse?
It is not yet entirely clear to what extent the DMA applies to the markets of the metaverse. The Commission stated that the DMA will provide tools to foster contestability in the metaverse, either because the relevant services are within its scope or through the provisions that ensure future proofing of the DMA.
It can be assumed that undertakings such as Apple and Meta fall under the DMA with some of their core platform services.
However, it is less clear to what extent and when the metaverse also concerns core platform services in the sense of Art. 2 (2) DMA. It is conceivable that the online intermediation services (i.e. the app stores), online social networking services and operating systems for the metaverse can be covered by the DMA. However, pursuant to Art. 3 (1) (b), (c) DMA, these core platform services must also be an important gateway for business users to reach end users and the gatekeeper must enjoy an entrenched and durable position in its operations (or it must be foreseeable that it will enjoy such a position in the near future). As regards the core platform services element, this market position is rebuttably presumed if the core platform service had at least 45 million monthly active end users established or located in the EU and at least 10 000 yearly active business users established in the EU in each of the last three financial years.
Assuming that the core platform services of the metaverse will be covered by the DMA in the future, numerous behavioural obligations and restrictions would take effect for the gatekeepers, e.g.:
- The gatekeeper may not combine or use personal data generated during the use of core platform services or other services of the gatekeeper without the consent of the end user. Consent requires that the end user also has a genuine choice. The gatekeeper must offer the end user a version of its core platform service that does not require the combination of data.
- The gatekeeper shall allow the effective use of third-party app stores using its operating system (sideloading).
- The gatekeeper shall not require end users or business users to use payment systems for in-app purchases of that gatekeeper.
- The gatekeeper shall allow business users, free of charge, to communicate and promote offers to end users acquired via its core platform service.
- The gatekeeper may not treat its own services and products on its core platform service better, e.g. rank higher, than similar services and products of third parties (prohibition of self-preferencing).
