Proposed EU laws could force breakup of Big Tech

European Commissioner for Europe fit for the Digital Age Margrethe Vestager, left, and European Commissioner for Internal Market Thierry Breton during a news conference on Digital Services Act and the Digital Markets Act at the European Commission headquarters in Brussels, Tuesday, Dec. 15, 2020. AP Photo/Olivier Matthys

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On Tuesday, the European Union published a pair of long-awaited draft laws that seek to curb the dominance of “gatekeeper” platforms like Amazon, Apple, Facebook, Google and Microsoft, as well as restrict their ability to spread hateful and violent content online. It’s the most aggressive attempt yet to regulate Big Tech. Here’s what you need to know:

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The details: The proposed Digital Markets Act would require firms to improve transparency around operations like online advertising. They would also have to end self-preferencing, like favouring their own products in search results or preventing users from uninstalling their apps on their own devices. A second piece of legislation, called the Digital Services Act, calls for companies to do more to prevent the spread of hate speech and sale of counterfeit merchandise through their platforms. 

Who has to comply: The Digital Markets Act covers large internet companies that have had an annual turnover in the EU of at least €6.5 billion in the last three financial years, or that have a market value of at least €65 billion in the last year. Firms also have to provide a “core platform service” in at least three EU member states. The degree to which companies need to comply with the Digital Services Act varies by the size and type of company, with very large digital platforms subject to the most scrutiny under the law. For example, Google and Facebook might have to provide data to authorities and researchers, but a domain-name registrar would not. 

The possible consequences: Companies that don’t comply with the Digital Markets Act could face fines of up to 10 per cent of their global annual sales and periodic penalty payments of up to five per cent. In severe cases, the regulator could compel a firm to divest its assets, including business units, subsidiary firms, intellectual property rights or brands. Failing to comply with the Digital Services Act could lead to fines of up to six per cent of its annual turnover for the previous financial year. 

The bigger picture: The draft laws follow two landmark lawsuits filed in the U.S. last week accusing Facebook of sweeping antitrust violations and calling for the firm to unwind its Instagram and WhatsApp acquisitions. Regulators elsewhere are likewise cracking down on Big Tech. Also on Tuesday, Britain proposed laws to ban large platforms from facilitating the spread of harmful online content, like terrorism material and child abuse, while Irish regulators announced a €450,000 fine against Twitter for violating EU data-protection laws. On Monday, China’s antitrust regulator fined three of the country’s largest tech firms for monopolistic behaviour and failing to disclose acquisitions of smaller firms; the regulator is scrutinizing more deals, including Tencent Holdings’ US$3.5-billion plan to take search engine Sogou private. 

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What’s next: The proposed regulations still have to be approved by European governments and lawmakers. EU competition commissioner Margrethe Vestager said she hopes that will happen “as fast as possible,” but the process could take two years.