On Tuesday, the European Antitrust Commission is to publish new rules that threaten US tech giants with up to 10% loss of annual revenue if breached. Extreme measures include a complete ban on the European market.
The EU’s Antimonopoly Commission is preparing to unveil a new Digital Services Act and its accompanying Digital Markets Act on Tuesday, which include strict rules for doing business for US Internet giants in a large market of 27 countries.
The changes will affect Google Alphabet (GOOGL, GOOG), Apple (AAPL), Amazon (AMZN), Facebook (FB), Microsoft (MSFT) and many others. The Digital Services Act targets large online platforms, for example, with over 45 million users.
The issue of adopting new legislation is long overdue, since existing laws date back to 2004, when many of today’s Internet giants either did not exist or were just starting to grow.
Unlike earlier EU antitrust investigations, which were followed only by fines, according to the new laws, the EU authorities can resort to “extreme measures”, up to denying access to the European market.
However, these measures will only follow against the tech giants “in the event of serious and repeated violations of the law that threaten the safety of European citizens.”
The laws also provide for higher fines, ranging from 6% to 10% of a company’s annual income, for breaking some of the most severe rules.
The Digital Services Act has a lot to target social media platforms to tighten controls over data collection, competition practices, and more to combat illegal content, disinformation and deliberate manipulation of platforms to influence elections and public health, among others.
Companies will be required to display the details of political advertising on their platforms and the parameters their algorithms use to offer and rank information.
The “EU Digital Markets Law” seeks to give Brussels new powers to better enforce competition laws and make its algorithms and the use of personal data more transparent.
Tech giants will need to keep the EU informed of any planned mergers or acquisitions under the rules, the block’s industrial commissioner Thierry Breton said Monday.
European and American regulators are increasingly concerned that large tech companies have used takeovers as a way to nip potential competitors. For example, the US Federal Trade Commission (FTC) and 48 state attorneys are currently filing two separate antitrust lawsuits against Facebook, which threaten Instagram and WhatsApp branches.
Google faces litigation over YouTube and Waze acquisitions.
The public presentation of the draft laws will reveal their details and the specific position of the EU antimonopoly body, however, it may take a long time before they are ratified and implemented – from several months to years.
The process is complicated by the different positions of the EU member states – some, such as France, Germany and the Netherlands, are in favor of stricter rules against large technology companies, while others are concerned about overregulation and influence on innovation.
In addition, the ratification process is complicated by the influence of company lobbyists and trade associations, which will influence the adoption of the final rules.
Technology companies, which have called for proportionate and balanced laws, are expected to take advantage of these circumstances to lobby for softer rules. Until now, US tech companies have received heavy fines from European regulators, but these have not significantly affected their revenues or profit margins.