EU Unveils Bills Targeting Big Tech Companies

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Margrethe Vestager

The Digital Services Act and the Digital Markets Act aim to regulate illegal content and anticompetitive behavior online and will include the threat of multibillion-dollar fines.

The European Commission, the executive arm of the European Union, has unveiled two bills that aim to regulate, reshape, and rein in the power of big technology platforms, particularly the U.S. giants including Google, Facebook, Apple, and Amazon.

The twin bills—the Digital Services Act (DSA) and the Digital Markets Act (DMA) — focus on, respectively, illegal content and anti-competitive behavior. If passed, they will give European officials new powers to oversee the workings of the world's biggest tech companies and to impose multimillion-dollar fines if those companies break the rules.

The proposed legislation includes suggested fines of up to 6 percent-10 percent of annual worldwide revenue — a figure that would amount to $28 billion for a company like Apple or Amazon — or mandate the break up of firms if they repeatedly violate competition laws.
While no companies are mentioned in the draft bills, it is clear EU legislators have U.S. tech in their sights.

The news comes after the U.K. government unveiled proposals that could slap tech giants with fines of billions of pounds if they fail to remove and limit the spread of harmful online content.

The EU's DSA bill will apply only to firms with a reach of 45 million users, or a tenth of the EU’s population. The DMA would apply a series of regulations on a new category of "gatekeeper" platforms, defined as a "core platform service" with a reach of 45 million users and a market capitalization of at least €65 billion ($79 billion). Amazon, Apple, Facebook, and Microsoft, along with Google parent company Alphabet easily satisfy both conditions. Only one European firm, German software maker SAP, currently meets the value threshold.

There have been unconfirmed reports that Swedish music streaming service Spotify, and other big European tech firms, lobbied to adjust the conditions to ensure they didn't apply to them.

The scope of both bills is extremely broad. The DSA covers regulation regarding illegal goods, services, and content, and abuse of platforms as well as online advertising, and the transparency of recommendation algorithms. The DMA would regulate competition online, prohibiting "gatekeeper" platforms from engaging in practices deemed uncompetitive, such as blocking users from uninstalling pre-installed software or favoring their own products on their platforms over third-party sellers. The law would also impose a greater obligation on large firms to share data with smaller companies and to ensure interoperability with their own software and hardware.

Broadly speaking, the DSA would make stricter already existing laws on content regulation and illegal activities. The DMA would arguably entirely transform the online marketplace.

Big tech is certain to lobby hard against the legislation on several fronts. They could argue the "gatekeeper" regulations unfairly single out large companies, or that sharing data would violate intellectual property laws.

Both bills are a ways from becoming law. They first have to go to the European Parliament, where politicians may propose further amendments, then to the Council of Ministers. While some regulations may get watered down, others could be strengthened. One point of contention not addressed by either bill is taxation. Several big U.S. tech companies have been sharply criticized for allegedly paying too little tax on the billions in revenue they make in Europe.

Two years ago Europe successfully implemented the online privacy law, the General Data Protection Regulation (GDPR), which has become an international standard. But attempts to apply new antitrust legislation to tech giants faced a major setback earlier this year when the European Court of Justice tossed out a €14 billion ($17 billion) fine on Apple for supposed anti-competitive behavior.

With the DSA and DMA, Europe hopes to regain its position as a world leader in online regulation.

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