Tech Firms Risk Fines of 10% of Sales in EU Power Curb Bid

Tech giants deemed to be gatekeepers could face fines as high as 10% of annual revenue if they don’t comply with new European Union rules on data usage to be unveiled Tuesday, according to a draft of the regulation seen by Bloomberg News.

Companies that could include Google, Amazon.com Inc., and Apple Inc. will be banned from using any data from business users to compete with them or from treating their own services more favorably in rankings, among other obligations. Nasdaq futures pared gains.

A company that “systemically infringes” the obligations could face orders by the European Commission to make behavioral and structural changes, such as divesting businesses. Companies will be considered to be in systematic non-compliance if the EU has issued at least three fines within a period of five years.

The rules are still in draft form and could be subject to revisions. A spokesperson from the European Union declined to comment. Representatives for Google, Apple and Amazon didn’t immediately respond for comment.

The new Digital Markets Act will target “gatekeeper” firms, defined by the European Commission by a number of criteria, including the number of users in the millions and overall revenue in the billions of dollars, as well as their significant impact on the single market, the document said. The designations will be updated by the commission every two years, according to the document.

The gatekeeper regulation is part of a wider package of tech policies due to be unveiled on Dec. 15. The EU will also propose separate rules that will force greater responsibility on platforms for what users post on their sites, threatening fines as high as 6% of global revenue for very large social media platforms if they don’t comply with orders to remove terror propaganda or other illegal posts.

The EU’s plans come as regulators around the world are bearing down on tech giants, which they see as having become too big, too powerful and too profitable. Facebook Inc. already faces the threat of a business break-up in the U.S. after it was sued by U.S. antitrust officials and a coalition of states that want to unwind its acquisitions of Instagram and WhatsApp.

EU digital chief Margrethe Vestager has said the gatekeeper rules should complement antitrust law, which grants regulators power to investigate firms for past behavior.

Despite years of probes and fines into companies such as Alphabet Inc.’s Google, smaller companies say EU regulators have failed to restore competition quickly enough. By contrast, the new rules are designed to head off bad tech behavior before it happens, EU officials have said.

The commission’s antitrust arm has previously sought to tackle some of the issues highlighted in the new regulation, including through several cases against Google.

In 2017, it fined the company for unfairly promoting its own shopping service in search results. Apple is currently being investigated by the EU’s antitrust watchdog over policies related to its app store, and Amazon in November was accused of violating rules over its use of business data from independent sellers on its marketplace for its own benefit.

Other obligations for gatekeepers outlined in the draft regulation include a requirement for gatekeepers to refrain from combining personal data across its services without providing users the chance to opt out. The EU will also require that business users or consumers be able to download and transfer their data to a new service.

Once the commission formally proposes the new rules, it could still take months, if not years, before they become law. It will still need sign-off from the bloc’s other lawmaking institutions, including the European Parliament and the Council of European member states.

©2020 Bloomberg L.P.

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