The European Union’s proposed digital regulations could impact the way tech giants like Google and Facebook do business there.
In Europe, it’s a shot across the bow for U.S. tech giants.
New draft rules tied to the Digital Services Act and Digital Markets Act (collected under the Digital Services Act Package) would broaden European Union regulators’ power to rein in Big Tech. In fact, Big Tech (specifically, Amazon, Facebook and other U.S. companies) could become, well, smaller tech through breakups and limits on what they can do across the continent.
And, of course, as have been seen in the past, sweeping fines loom as part of the arrows in the European Union’s quiver.
Yes, draft regulations can be changed. This is the middle of a comment period, with a debate to come in the EU Parliament. But despite what might be some tweaking at the margins, by and large, Big Tech firms will have to change the way they operate in Europe.
As reported in this space on Tuesday, the draft regulations in the DMA would compel large tech “gatekeepers” to let third-party software work with their platforms and services. The DSA would, among other things, mandate that companies disclose more fully how they use online advertising and algorithms to recommend content to users.
Along the way, if the rules are not followed, companies can be fined. Or, more drastically, they can be broken up.
PYMNTS noted earlier in the week that, per the draft, if a company is deemed to be a repeat offender — penalized three times within five years — the EU can break up the businesses, according to sources cited by the Financial Times.
The two sides of the debate are crystallizing.
“The two proposals serve one purpose: to make sure that we, as users, have access to a wide choice of safe products and services online. And that businesses operating in Europe can freely and fairly compete online just as they do offline,” Margrethe Vestager, the European Union commissioner leading the charge on tech issues, said via statement posted on the EU’s website.
On the other hand, the U.S. tech giants contend that the potential regulations would be onerous.
“While we will review the Commission’s proposals carefully over the coming days, we are concerned that they appear to specifically target a handful of companies and make it harder to develop new products to support small businesses in Europe,” Karan Bhatia, Google’s vice president of government affairs and public policy, said in a statement, as reported by Reuters.
Five takeaways are below:
The Regulations Are Sweeping: The European Union said on its site that overall as part of the DSA, binding EU-wide obligations will apply to all digital services that connect consumers to goods, services, or content.
Platform Companies In The EU’s Sights: The new rules’ draft says the DMA will “only” apply to “major providers of the core platform services most prone to unfair practices,” such as search engines, social networks or online intermediation services (aka the gatekeepers). Core platform services, according to the DMA, are where “unfair practices” may be most in evidence: “Concerning the impact of the initiative on SMEs, since they are very unlikely to qualify as gatekeepers and would not be targeted by the list of obligations, this initiative would not impose an additional burden on them.”
Monetary Penalties: Non-compliance could result in sanctions that could include fines of up to 10 percent of the gatekeeper’s worldwide revenues (not just revenues from EU areas).
External Review: Language contained in the act’s draft notes the commission could also order that a platform provide access to “and explanations relating to” its databases and algorithms. Oversight might include the appointment of independent external experts and auditors to assist the European Commission in compliance monitoring.
Access: The DMA, according to the draft, will mandate that online platforms no longer prohibit consumers from linking to businesses outside their platforms or prevent users from uninstalling pre-installed software or apps.
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