EU Approves Broad New Laws To Rein In Big Tech Companies

"European lawmakers approved two sweeping new pieces of digital regulation on Tuesday, paving the way for clashes between regulators and some of the world's biggest tech companies over how the rules should be applied.

The European Parliament voted its stamp of approval for the two laws -- one focused on anticompetitive behavior, the other on content deemed illegal in Europe -- after reaching an agreement on them with European Union member states in the spring.

The laws, which are backed by the threat of noncompliance fines in some extreme cases of as much as 20% of a company's annual world-wide revenue, are the most far-reaching Western efforts to rein in technology companies in at least a generation.

They build on the EU's effort to expand its role as a global tech regulator and offer what proponents said is a road map -- and what detractors warned will be a cautionary tale -- for digital legislation in the U.S. and elsewhere.

"The EU is the first jurisdiction in the world to set a comprehensive standard for regulating the digital space," said Thierry Breton, the EU's internal-market commissioner.

The new rules could set a global benchmark for tech regulation, lawyers and digital-policy experts have said.

Lawmakers in the U.S. from both major parties have introduced bills that include elements present in the EU's Digital Markets Act aimed at reining in purportedly anticompetitive behavior by big tech companies.

One would bar dominant tech companies from using their platforms to promote their own goods and services over those from other companies. Another could force the breakup of part of Google's advertising business.

The Digital Markets Act will impose new obligations on how a small number of digital giants operate, with rules dealing with online messaging, digital advertising and the app ecosystem.

The Digital Services Act will require large social-media platforms to take steps to deal with illegal content and other material regulators view as harmful and give users an avenue to register their complaints about content moderation.

The Digital Markets Act is expected to take effect in the coming months, but it will likely take until 2024 before large tech companies have to comply with the rules.

The Digital Services Act is set to apply to all regulated companies as early as January 2024, although the EU said the rules will kick in sooner, potentially in mid-2023, for the biggest online platforms and search engines.

Mr. Breton said in a blog post Tuesday that officials are setting up teams that will focus on the societal, technical and economic aspects of the new legislation and intend to recruit more staff next year and in 2024.

Tech companies have begun weighing in on how the laws should be applied.

Some have submitted detailed policy papers to the European Commission, the bloc's executive arm, which will be in charge of enforcement involving the largest companies, to suggest which of their -- or their competitors' -- services they believe should be subject to Digital Markets Act requirements, according to people familiar with the matter.

Publicly, tech companies have been largely circumspect or supportive about the laws, which will require significant back and forth with regulators. Meta Platforms Inc., for instance, said Tuesday that it will work with regulators to comply with the new rules. Amazon.com Inc. said that it is evaluating what compliance with the digital-competition law will entail for the company and that it is committed to providing services within Europe's regulatory environment.

Twitter Inc. said it welcomes the EU's increased focus on what it called healthier digital spaces.

But some companies that are the target of the new laws highlighted concerns they have about specific provisions they said will be onerous or could have unintended consequences.

Apple Inc. in March said that it was concerned that some provisions in the Digital Markets Act, which could force it to allow third-party app stores and in-app payment services on iPhones, would create "unnecessary privacy and security vulnerabilities for our users" and could block the company from charging for its intellectual property.

Apple declined to comment on Tuesday.

The Computer & Communications Industry Association, a trade group that includes Meta Platforms, Amazon.com and Alphabet Inc.'s Google, also raised the issue of the complexity of compliance for the two laws, saying that one requires structural changes.

"The big question remains whether all companies, both large and small, actually will be able to comply with these complex new rules in practice," the group said about one of the laws.

Google didn't comment.

Fines for breaching the obligations set out in the Digital Markets Act could reach as much as 10% of a company's global revenue or 20% for repeat offenses, according to the legislation. The maximum fine for a large online platform or search engine that breaks the rules in the Digital Services Act is set at 6% of global revenue.

In extreme cases, regulators can also force a breakup of companies.

Some companies that complained about the power of digital giants to quash competition have expressed optimism about the new rules.

Spotify Technology SA, which launched an antitrust complaint against Apple in 2019, said it hoped regulators would have the tools they need.

"It is of utmost importance that the commission be sufficiently resourced in order to execute the tenets of the law in a swift and effective manner," a spokeswoman for the company said." [1]

1. EU Approves Broad New Laws To Rein In Big Tech Companies
Schechner, Sam; Kim Mackrael. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 06 July 2022: A.1.