Tech giants Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) are defying the European Union’s (EU) potential classification of their iMessage chat app and Bing search engine, respectively, as “gatekeepers” under a new law that is being implemented to restrict the power of Big Tech, the Financial Times reported.
Under the new law, called the Digital Markets Act (DMA), a large online platform is given the designation of a gatekeeper if it has a major impact on the internal market, provides a core platform service that is a vital gateway for businesses to reach end users, and has an “entrenched and durable position.”
EU’s New Law to Encourage Competition
Both Apple and Microsoft are trying to avoid the classification of iMessage and Bing, respectively, as gatekeepers under the EU’s DMA, which is designed to promote competition in the tech space. The two companies are arguing that these services are not popular or large enough to be assigned such a designation.
The European Commission is expected to publish a list of gatekeepers on September 6, which would include the names of companies and the specific services they offer. Apps or services with an annual turnover of over €7.5 billion, a market capitalization of above €75 billion, and active monthly users in the EU of 45 million will face scrutiny under the new rules. Also, the EU will have certain discretion over the gatekeeper designation based on other parameters beyond these metrics.
The named companies or platforms will have to meet certain rules, like sharing data and making their services interoperable with competitor apps, to attain compliance with the DMA. They will have a duration of six months, or until March 2024, to comply with the DMA’s rules.
Key Arguments
Apple contends that its iMessage offering does not meet the DMA’s criterion for the number of users. While Apple has previously not disclosed the number of iMessage users, analysts estimate that this service, which is integrated into every iPhone, iPad, and Mac, has over 1 billion users worldwide.
Meanwhile, Microsoft has argued that Bing has a market share of just 3% and any potential legal scrutiny would harm the product, further boosting the market share of rival Alphabet’s (NASDAQ:GOOGL, GOOG) Google. Meanwhile, Microsoft is not expected to dispute the classification of its Windows operating system as a gatekeeper.
Aside from Apple and Microsoft, other companies expected to be on the list include Amazon (NASDAQ:AMZN), Meta Platforms (NASDAQ:META), TikTok-owner ByteDance, and Samsung (GB:SMSN).
Is Apple a Good Stock to Buy Right Now?
Wall Street is cautiously optimistic about Apple due to the impact of macro pressures on the company’s business. With 22 Buys and eight Holds, Apple stock has a Moderate Buy consensus rating. The average price target of $208.13 implies 10% upside.
What is the Target Price for MSFT?
Most analysts are bullish on Microsoft stock due to the company’s prospects in the generative artificial intelligence (AI) market. Wall Street’s Strong Buy consensus rating on MSFT is based on 30 Buys, two Holds, and one Sell. The average price target of $390.97 implies about 19% upside.
