EU lays out plans for new digital regulatory regime

The EU Commission has outlined its long-awaited plans to overhaul ageing regulations for digital companies. Under the sweeping plans, the largest tech companies could face hefty fines and the threat of being broken up.

 The Digital Markets Act and Digital Services Act will update the 20-year-old e-Commerce Directive, which regulates digital services in the EU.

The plans set out strict rules aimed at the largest tech companies such as Facebook, Apple, Google and Amazon. These “digital gatekeepers” will be defined – among other criteria – as companies with more than €6.5bn in annual European turnover over the past three years; that are rated at €65bn in market value, and which provide a core platform service in at least three EU member states.

These companies will be prevented from imposing unfair conditions on other companies, such as blocking businesses from accessing their own sales data; strong-arming consumers into using their services by limiting their options to switch, or favouring their own services on platforms they control. They will be required to report merger bids to authorities, in an effort to prevent these companies using acquisitions to neutralise competition.

Digital gatekeepers could face fines of up to 10 per cent of annual global turnover for failing to comply with their responsibilities. A break-up order could be issued as a last resort.

The Digital Services Act – which is targeted at platforms with more than 45 million users – will make online platforms take greater responsibility for their own goods and services. For instance, online marketplaces will be forced to take action against shady third-party sellers, illegal content such as terrorist propaganda, and disinformation for electoral manipulation. Users will be given the right to challenge content removal. They will also have to share details of political advertising on their platforms and the parameters used by their algorithms to order posts.

Violations of this act could lead to fines of up to six per cent of annual global turnover.

The rules will need to be approved the European Parliament and the European Council, which includes the heads of state of government of all member states.

The EU has taken the leading role in holding US tech giants to account for anti-competitive behaviour, with billions of euros in fines issued to Silicon Valley’s biggest players.

“The two proposals serve one purpose: to make sure that we, as users, have access to a wide choice of safe products and services online and that businesses operating in Europe can freely and fairly compete online just as they do offline. This is one world,” said Margrethe Vestager, the EU Competition Commissioner.

Reuters reported that there is some concern across the Atlantic that the rules could unfairly target US companies: “It seems Europe is intent on punishing successful companies that have made deep investments in Europe’s economic growth and recovery,” said Myron Brilliant, executive VP of the US Chamber of Commerce.

During a press conference, Thierry Breton, EU Internal Market Commissioner, said: “Everybody is welcome in Europe. Our responsibility is to give direction, rules to protect what is important to us.”

This week, the UK government also published the details of its plans to hold tech companies to higher standards. The Online Safety Bill expands the responsibilities of tech companies, particularly with regards to protecting users from harmful content. Companies which fail their duty of care to users could be punished with multi-million pound fines and, as a last resort, an outright ban in the UK.