"The European Union was expected to
finalize the Digital Markets Act, the most sweeping legislation to regulate
tech since a European privacy law was passed in 2018.
GÖTTINGEN, Germany — The European Union was finalizing one
of the world’s most far-reaching laws to address the power of the biggest tech
companies, putting in place rules that will affect app stores, online
advertising, e-commerce, messaging services and other everyday digital tools.
The law, called the Digital Markets Act, would be the most
sweeping piece of digital policy since the bloc put the world’s toughest rules to protect people’s
online data into effect in 2018. The legislation is aimed at
stopping the largest tech platforms from using their interlocking services and
considerable resources to box in users and squash emerging rivals, creating
room for new entrants and fostering more competition.
What that means practically is that companies like Google
could no longer collect data from different services to offer targeted ads
without users’ consent and that Apple might have to allow alternatives to its
App Store on iPhones and iPads. Violators of the law, which would most likely
take effect early next year, could face significant fines.
The Digital Markets Act is part of a one-two punch by
European regulators. As early as next month, the European Union is expected to
reach an agreement on a law that would force social media companies such as
Meta, the owner of Facebook and Instagram, to police their platforms more
aggressively.
With these actions, Europe is
cementing its leadership as the most assertive regulator of tech companies such
as Apple, Google, Amazon, Meta and Microsoft. European standards are often
adopted worldwide, and the latest legislation further raises the bar by
potentially bringing the companies under a new era of oversight — just like
health care, transportation and banking industries.
“Faced with big online platforms
behaving like they were ‘too big to care,’ Europe has put its foot down,” said
Thierry Breton, one of the top digital officials in the European Commission.
“We are putting an end to the so-called Wild West dominating our information
space. A new framework that can become a reference for democracies worldwide.”
On Thursday, representatives from
the European Parliament and European Council were working behind closed doors
in Brussels to strike a final deal. Their agreement would come after about 16
months of talks — a speedy pace for the E.U. bureaucracy — and set the stage
for a final vote in Parliament and among representatives from the 27 countries
in the union. That final approval is viewed as a formality.
Europe’s moves contrast with the
lack of activity in the United States. While Republicans and Democrats have
held several high-profile congressional hearings to scrutinize Meta, Twitter and
others in recent years, and U.S. regulators have filed antitrust cases against Google and Meta, no new federal laws have
been passed to address what many see as the tech companies’ unchecked power.
Europe’s new rules could offer a
preview of what’s to come elsewhere in the world. The region’s 2018 privacy
law, the General Data Protection Regulation, which restricts the online
collection and sharing of personal data, has served as a model in countries
from Japan to Brazil.
The path of the Digital Markets Act
faced hurdles. Policymakers dealt with what watchdogs said was one of the fiercest lobbying efforts ever
seen in Brussels as industry groups tried to water down the new law.
They also brushed aside concerns raised by the Biden
administration that the rules unfairly targeted American companies.
Questions remain about how the new
law would work in practice. Companies are expected to look for ways to diminish
its impact through the courts. And regulators will need new funding to pay for
their expanded oversight responsibilities, when budgets are under strain from
the pandemic.
“The pressure will be intense to
show results, and fast,” said Thomas Vinje, a veteran antitrust lawyer in
Brussels who has represented Amazon, Microsoft and Spotify.
The Digital Markets Act is expected to apply to so-called
gatekeeper platforms with a market value of more than 75 billion euros, or
about $82 billion, which include Alphabet, the owner of Google, and YouTube,
Amazon, Apple, Microsoft and Meta.
Specifics of the law read like a wish list for rivals of the
biggest companies.
Apple and Google, which make the
operating systems that run on nearly every smartphone, would be required to
loosen their grip. Apple would most likely have to allow alternative app stores
for the first time. The law is also expected to let companies such as Spotify
and Epic Games use alternative payment to Apple’s in the App Store, which
charges a 30 percent commission.
On Android devices, Google would
most likely have to give customers options to use other email and search
services on handsets in Europe, similar to what it has already been
doing in response to a previous E.U. antitrust judgment. On Wednesday, Google announced that Spotify and some
other app developers would be allowed to offer alternative payment methods to
Google’s within its app store.
Amazon is expected to be barred from using data collected
from outside sellers on its services so that it could offer competing products,
a practice that is the subject of a separate E.U. antitrust investigation.
Meta also could not collect data about competitors to develop rival services.
The law may result in major changes
for messaging apps. WhatsApp, which is owned by Meta, could be required to
offer a way for users of rival services like Signal or Telegram to send and
receive messages to somebody using WhatsApp. Those rival services would have
the option to make their products interoperable with WhatsApp.
The largest sellers of online advertising, Meta and Google,
would most likely be limited from offering targeted ads without consent.
Offering ads based on data collected from people as they move between YouTube
and Google Search, or Instagram and Facebook, is immensely lucrative for both
companies.
Policymakers were also considering
including a provision that could give publishers in Europe the ability to
negotiate new compensation with Google and Meta for articles posted on their
platforms. A showdown over this issue in
Australia briefly led Facebook to stop letting news organizations post articles
inside the country.
“Large gatekeeper platforms have
prevented businesses and consumers from the benefits of competitive digital
markets,” said Margrethe Vestager, the executive vice president of the European
Commission overseeing digital and competition policy, in a statement. The
companies, she said, will now “have to comply with a well-defined set of
obligations and prohibitions.”
Meta, Microsoft and Amazon declined
to comment. Google and Apple did not respond to requests for comment.
Anu Bradford, a Columbia University
law professor who coined the term “Brussels Effect”
about the influence of E.U. law, said European rules often became global
standards because it was easier for companies to apply them across their entire
organization rather than one geography.
“Everyone is watching the D.M.A., be it the
leading tech companies, their rivals or foreign governments,” Ms. Bradford
said, referring to the Digital Markets Act. “It is possible that even the U.S.
Congress will now conclude that they are done watching from the sidelines when
the E.U. regulates U.S. tech companies and will move from talking about
legislative reform to actually legislating.”
President Biden has appointed Lina Khan, a prominent Amazon
critic, to lead the Federal Trade Commission and a lawyer critical of the tech
giants, Jonathan Kanter, to head the antitrust division of the Department of
Justice.
But efforts to change American
antitrust laws have moved slowly. Congressional committees have endorsed bills
that would stop tech platforms from favoring their own products or buying
smaller companies. It is unclear whether the measures have enough support to pass
the full House and Senate.
European regulators are now faced
with enforcing the new law. G.D.P.R. has been criticized for lack of
enforcement.
The European Commission, the
executive branch of the bloc, will also have to hire scores of new employees to
investigate the tech companies. Years of litigation are expected as companies
mount court challenges of future penalties issued as a result of the new law.
“The gatekeepers,” said Mr. Vinje,
the Brussels antitrust lawyer, “will not be entirely without defenses.”"
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