Jul 6, 2022 - Technology

EU's regulatory iceberg bears down on tech's big ships

Illustration of the EU flag with downward facing cursor arrows in place of stars

Illustration: Annelise Capossela/Axios

Final European Parliament approval of sweeping, stringent tech regulations Tuesday put European regulators and tech-platform giants on a slow but inevitable collision course.

Driving the news: Europe's two new laws — the Digital Markets Act (DMA) and the Digital Services Act (DSA) — place tough constraints on how big tech standard-bearers like Apple, Amazon, Alphabet and Meta handle competition and online content.

Why it matters: U.S. efforts to pass similar laws have so far failed to gain traction. That leaves the EU's rules as the most significant efforts yet to rein in the companies' power, which critics charge has grown at the expense of smaller rivals, users' freedom and privacy, and the reliability of online information.

Details: The DMA lays out obligations and punishments for digital service "gatekeepers" who break the law's rules for promoting competition, as Axios previously reported.

  • The law says these companies must obtain "explicit consent" to target ads based on personal data.
  • It requires interoperability between messaging platforms like Apple's iMessage and Meta's WhatsApp.
  • It mandates that large platforms let users select a browser, search engine and personal voice assistant of their choice.

The DSA puts more responsibility on large platforms to police and take down illegal content, with fines if they fail to comply.

  • It generally states that whatever is considered illegal speech in Europe should also be considered illegal speech online.

Here are some of the laws' likely impacts on users:

  • Apple will be required to let iPhone users in the EU to make purchases outside of its official App Store via third-party app stores.
  • Tech giants won't be allowed to give their own their own products, apps, or services preferential treatment within the EU.
  • Companies will have to get consumer consent before moving the personal data of EU citizens around.
  • Through the DSA, companies will have more obligations to take down and report illegal content in the EU.

The penalties: Companies face a fine of up to 10% of annual global turnover for violations of the DMA and 6% for violations of the DSA.

  • "In the event of serious and repeated breaches, national courts can go as far as a ban on operating on European territory," Thierry Breton, EU commissioner for the internal market, wrote.

What they're saying: " "With size comes responsibility — as a big platform, there are things you must do and things you cannot do," EU executive vice president Margrethe Vestager said in a statement.

  • "We're turning the page on 'too big to care' platforms," Breton wrote. "The same predictable rules will apply, everywhere in the EU, for our 450 million citizens, bringing everyone a safer and fairer digital space."

Tech firms lobbied hard against both laws, especially on provisions around tracking-based advertising.

  • Apple said the EU requirement that it allow "sideloading" — the ability to download and use apps from sources other than its own App Store — would have devastating consequences for users' security.

Yes, but: Experts expect implementation and enforcement of these laws to take additional time and demand more personnel resources and money from the EU, and critics of the laws say European officials will come up short of what they need.

  • In a blog post, Breton detailed enforcement, saying teams from the European Commission will "supervise" large platforms, and platforms covered under the new laws must have a "legal representative" in Europe to call if there's a compliance question. The largest platforms will pay a fee "to cover the additional costs needed for their supervision."
  • European officials will also set up a "European Centre for Algorithmic Transparency" to help enforce the DSA.

What to watch: Tech companies are likely to try to abide by the letter of the new laws while changing their products and practices as little as possible.

  • One strategy: they could offer DSA- and DMA-compliant versions of their platforms in Europe, and keep their offerings the same elsewhere.

What's next: The Council of the European Union will adopt the laws, a formality expected by fall, and beginning then their provisions will kick in on a schedule that stretches through 2024.

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