The European Union Adopts a Law to ‘Contain’ Big Tech’s Dominance Over Smaller Players

Google, Apple, Amazon, and Meta could face fines of up to 20% of revenue as the EU aims to prevent “gatekeepers” from stifling competition from smaller firms.

Today, EU legislators heralded a “new era in technology regulation” by passing laws authorising huge fines against powerful firms such as Google and Amazon.
Legislators have mentioned the Digital Markets Act as a critical component of the EU’s efforts to regulate the internet, alongside more tailored legislation addressing specific technologies such as cryptoassets.

The new rule is intended to assist smaller players in competing with the big beasts — but has raised eyebrows in the United States, where the law primarily targets large corporations.

According to the rules, which were finalised Thursday night after an eight-hour meeting between lawmakers and governments, Google and Meta may face restrictions on their ability to serve targeted ads, Apple may be required to provide equal access to features such as the iPhone’s near-field communication chip, and texting services such as Meta’s WhatsApp and Apple’s iMessage may have to collaborate with smaller platforms.

Any digital behemoth that ranks its own products higher than competitors’, misappropriates personal data, or otherwise provides unfair access may face a merger prohibition, forced dissolution, or fines of up to 20% of annual global revenue.

“For businesses that act as ‘gatekeepers,’ the Digital Markets Act will establish the rules of the game,” EU Competition Commissioner Margrethe Vestager told reporters Friday, drawing parallels between the law and previous attempts to break up monopolies in sectors such as telecommunications, transportation, and banking.

Agreement on the law “demonstrates our democracy’s readiness to say, ‘We will rein this in,'” she added. “We will demonstrate that the market is competitive and open to competition.”

Vestager has presided over a string of high-profile antitrust trials involving digital technology. In 2018, she penalised Google 4.34 billion euros ($4.78 billion) for mandating the installation of Google search on Android phones. The corporation has appealed that decision to EU courts — but Brussels is weary of merely identifying and addressing isolated instances of market misconduct.

“When things become systematic, we also require regulation,” Vestager explained.

Andreas Schwab, the lead lawmaker who negotiated the law on behalf of the European Parliament, told reporters on Friday that the plans represented a “new era in technology regulation,” but he added that he did not want to see the EU’s digital market become isolated from the rest of the world as a result of the new rules.

The measures, along with a related but unratified law known as the Digital Services Act, were slammed in December by US Secretary of Commerce Gina Raimondo, who expressed “severe concerns” that the proposals would disproportionately affect US technology firms.

Consumer organisations lauded the new rule for its potential to spur innovation.

“This legislation will rebalance digital markets, expand consumer choice, and put an end to many of the worst practises that Big Tech has engaged in over the years,” Ursula Pachl, Deputy Director General at Brussels consumer lobbyists BEUC, said in an emailed statement, citing practises such as appstores that require users to use proprietary digital payment services.

However, it’s understandable that major internet players remain dubious. DIGITALEUROPE, a Brussels-based lobbying organisation that represents the world’s largest technology corporations, expressed reservations about the recently approved framework.

“While the goal of promoting fairness and contestability is unquestionably worthwhile,” Director-General Cecilia Bonefeld-Dahl told in an emailed statement, she added that ideas requiring data sharing and service interoperability “lack clarity” and require additional effort.

 

Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.

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