The EU unveils its plan to rein in big tech
A YEAR AGO Europe was being hailed as a regulatory superpower in technology. Countries around the world copied its strict new privacy law, the General Data Protection Regulation (GDPR), while America’s government scarcely tried to exercise any control over a fast-moving industry.
The positions have since been reversed. This autumn the European Court of Justice quashed a €14bn ($17bn) fine on Apple levied by Margrethe Vestager, the EU’s competition chief, in a huge setback for the bloc’s antitrust strategy. And America has found new purpose. In October Congress published a lengthy report on how to update competition law. The same month the Department of Justice launched a lawsuit against Google over alleged abuses of its monopoly in search advertising. And in December the Federal Trade Commission and 46 states sued Facebook over anticompetitive practices in social-networking.
Europe wants to reclaim its place in the vanguard. On December 15th the European Commission, the EU’s executive arm, published long-awaited drafts of a double bill of ambitious new legislation aimed at reining in big technology platforms. If adopted, the Digital Services Act (DSA) and Digital Markets Act (DMA) would together amount to the biggest overhaul in 20 years of European policy towards the internet, and the firms that populate it.
Since online platforms play a central role in society and democracy at large, said Thierry Breton, commissioner for the internal market, “we are organising our digital space for the next decades.” Both laws ditch the old “ex post” approach of bringing lawsuits citing past events—a process that takes too long to have much bite when it comes to huge firms—in favour of “ex ante” rules that would constrain big tech companies upfront.
The twin laws’ scope together is remarkably broad. Illegal goods, services and content, abuse of platforms, advertising and transparency of recommendation algorithms are all tackled in the DSA. The DMA, meanwhile, defines a new category of “gatekeeper” platforms—and prohibits them from engaging in practices deemed uncompetitive. Tech giants could no longer favour their own products on their platforms over those of third-party sellers or stop users uninstalling pre-installed software. The only big, controversial area of technology policy left alone, indeed, is where tech giants pay their taxes.
Both laws take unapologetic aim at the industry’s heavyweights. In terms of market capitalisation, it is overwhelmingly American companies that would be affected. That is in contrast to the GDPR, which applies to companies large and small (and which is widely considered to have benefited large groups possessed of greater resources to pay for compliance, at the expense of minnows).
The DSA applies only to firms with a reach of 45m users, or a tenth of the EU’s population. The DMA treats a company as a gatekeeper if it controls a “core platform service” with the same reach of 45m and has a market capitalisation of €65bn or more. Tellingly, only one European firm, SAP, a German maker of business software, meets the value threshold. But Alphabet (Google’s parent), Amazon, Apple, Facebook and Microsoft easily satisfy both.
The sanctions are heavy. Breaking DSA rules could result in a fine of up to 6% of annual global turnover. Violating the DMA carries penalties of up to 10% of annual global turnover—which would amount to around $28bn for Amazon or Apple. Serial offenders could be broken up.
The tech giants have lobbied hard against the rules but have so far found eurocrats unreceptive. The laws’ final drafts are at the heavy-handed end of what was expected, says an executive at a technology firm. Mr Breton has taken a more combative stance of late even than Ms Vestager. He argues that the tech giants have grown “too big to care”.
They certainly care about the legislation, and most of all about the DMA. Whereas the law on digital services mostly compels them to do more of what they are doing already, the DMA reshapes the whole market, they argue. Three of its provisions stand out.
First, it singles out large companies, unfairly in their eyes. Second, it bans them from what tech executives claim is the sort of preferential treatment of their own products that is common across industries online and offline alike.
Third, the new rules impose a greater obligation than currently exists for large firms to share data with smaller companies and to ensure interoperability with their own software and hardware. Search engines such as Google and Amazon will have to provide their ranking, query, click and view data to rival search engines such as Qwant, a French firm. That, they say, could impinge on their intellectual property.
The devil will be in the detail, some of which could change in the legislative process, likely to last one or two years (or more; GDPR took four to reach fruition). The laws will go to the European Parliament, where politicians may propose further amendments of an anti-big-tech nature, then to the Council of Ministers. But companies are not expecting big changes.
Not just the American tech giants but the incoming Biden administration will be on the watch for signs of digital protectionism. France and Germany in particular are suspected of trying to create a favourable environment for nascent European tech champions to thrive. According to a technology executive involved in lobbying ahead of this week’s presentation, EU officials often point enviously to China’s exclusion of American firms from its mainland and nurturing of its own tech giants.
Still, the new rules could backfire. Biggish European tech firms will have to obey even though they wield nothing like the clout of the American behemoths. This week rumours swirled in Brussels that the draft laws were held up because Spotify and other European firms were trying to change the criteria for being a gatekeeper firm so they could slip through the net.
Emmanuel Macron, France’s president, recently bemoaned that Europe seems to be better at regulating tech firms than building its own. “Now, when you look at the map,” he told Niklas Zennstrom (the Swedish founder of Skype, sold in 2011 to Microsoft), “we have what we call the GAFA [Google, Apple, Facebook, Amazon] in the US, the BATX [Baidu, Alibaba, Tencent, Xiaomi] in China and GDPR in Europe.” Adding two more sets of regulatory initials may have an effect on America’s, maybe even China’s corporate ones. But it will not by itself help Europe create a rival to them.
Author: | Post link: https://www.economist.com/business/2020/12/15/the-eu-unveils-its-plan-to-rein-in-big-tech
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