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EU drafts rules to rein in tech giants with fines, break-ups

Published: Updated:

US technology firms including Amazon, Apple, Facebook, and Google face fines of up to 10 percent of annual turnover and could even be broken up under draft European Union rules announced on Tuesday aimed at curbing their powers.

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The rules are the most serious attempt by the 27-country bloc to rein in tech companies that control troves of data and online platforms relied on by thousands of companies and millions of Europeans for their work and social interactions.

They show the European Commission’s frustration with its antitrust cases against the tech giants, notably Alphabet’s Google, which critics say have not addressed the problem.

But they risk inflaming tensions with Washington, already irked by Brussels attempts to tax US tech firms more.

“It seems Europe is intent on punishing successful companies that have made deep investments in Europe’s economic growth and recovery,” Myron Brilliant, executive vice president of the US Chamber of Commerce said in a statement.

Regulatory scrutiny has been growing worldwide of tech giants following a string of scandals over privacy and misinformation, as well as complaints from some businesses that they abuse their market power.

The logo of Amazon is pictured inside the company’s office in Bengaluru, India. (File photo: Reuters)
The logo of Amazon is pictured inside the company’s office in Bengaluru, India. (File photo: Reuters)

EU Internal Market Commissioner Thierry Breton dismissed suggestions the rules could be discriminatory.

“Everybody is welcome in Europe. Our responsibility is to give direction, rules to protect what is important to us,” he told a news conference.

One set of rules, the Digital Markets Act (DMA), targets so-called online gatekeepers - defined among other things as firms with more than 6.5 billion euros in annual European turnover in the last three years, 65 billion euros in market value and providing a core platform service in at least three EU countries.

This sets out a list of dos - such as sharing certain kinds of data with rivals and regulators - and don’ts - among them a halt to favoring their own services on their platforms, and calls for fines of up to 10 percent of annual global turnover for firms that don’t comply, or a break-up order as a last resort.

Gatekeepers will also be required to report merger bids to the authorities, a move aimed at preventing acquisitions to kill off rivals.

A Google building is shown at one of the company's office complexes in Irvine, California, US, July 27, 2020. (Reuters)
A Google building is shown at one of the company's office complexes in Irvine, California, US, July 27, 2020. (Reuters)

Twin approach

A second set of rules, the Digital Services Act (DSA), also targets very large online platforms, defined as those with more than 45 million users.

They will be required to do more to tackle illegal content, misuses of their platforms that infringe fundamental rights and intentional manipulation of platforms to influence elections and public health, among other requirements, or face fines of up to 6 percent of global turnover.

The companies will also have to show details of political advertising on their platforms and the parameters used by their algorithms to suggest and rank information.

“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 European Competition Commissioner Margrethe Vestager, who has taken on all the four US tech giants.

Google warned the new rules could hit innovation and growth.

“We are concerned that they appear to specifically target a handful of companies and make it harder to develop new products to support small businesses in Europe,” said Karan Bhatia, Vice President of Government Affairs & Public Policy.

The Facebook logo is displayed on a mobile phone in this picture illustration taken December 2, 2019. (Reuters/Johanna Geron/Illustration)
The Facebook logo is displayed on a mobile phone in this picture illustration taken December 2, 2019. (Reuters/Johanna Geron/Illustration)

Amsterdam-based booking.com, which could end up being classified as one of the few European gatekeepers, called for broader criteria.

“It cannot just be about the size or the number of users of a platform. It must be about its lock on consumers,” it said.

The draft rules need to be approved by EU countries and EU lawmakers, some of which have pushed for tougher laws, while others are concerned about regulatory over-reach.

Tech companies, which have called for proportionate and balanced laws, are expected to take advantage of this split to lobby for weaker rules, with the final draft expected in the coming months or even years.

Differences between the tech giants could dilute the opposition. Facebook for one has urged the EU to rein in Apple.

“We hope the DMA will also set boundaries for Apple. Apple controls an entire ecosystem from device to app store and apps, and uses this power to harm developers and consumers, as well as large platforms like Facebook,” the US social network said in a statement.

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