The New Tools the EU Wants to Crack Down on Big Tech: QuickTake
(Bloomberg) -- The European Union has long been the world’s most aggressive regulator of the world’s biggest technology firms -- and perhaps the most frustrated. Heavy fines can easily be shrugged off by these cash-rich giants, regulations aimed at specific practices often fall behind in a fast-moving sector and traditional approaches like antitrust investigations can be too slow to prevent the market consolidation they’re meant to prevent. Determined to do more, the EU has unveiled sweeping legislation to enable regulators to head off bad tech behavior before it happens or to respond with more potent punishments -- including the ability to break firms up -- when it does.
1. What is the EU planning?
Laws that will target so-called “gatekeeper” tech firms -- platforms with the power to control the markets they operate in. In particular, the legislation will be aimed at marketplaces, app stores and social networks as well as online search engines, operating systems and cloud services. That would hit companies including Alphabet Inc.’s Google, Apple Inc., Amazon.com Inc. and Facebook Inc.. Companies deemed to be gatekeepers would be banned from certain practices, including favoring their own services in search rankings or on mobile devices, and could be forced to share customer data with business rivals. Break the rules and they could be fined up to 10% of global turnover; keep breaking the rules and they could be ordered to sell off business units or technology.
2. Why are they doing this?
Failure to move quickly in the past still haunts regulators, along with the relative ineffectiveness of fines and conventional antitrust measures. It took nearly a decade for the EU to find that Google had discriminated against rival shopping search services -- and an order to give them equal treatment hasn’t hugely changed the fortunes of Google’s competitors. Meanwhile, the large platforms have been able to set the terms for how their rivals access their own customers, amassing a wealth of data while doing so and making it hard for competitors or new market entrants to compete. The EU wants to intervene more quickly to stamp out such behavior before a market “tips,” or falls under the dominance of one or a few players.
3. Hasn’t the EU done enough already to crack down on tech giants?
It’s true, the EU has spent two decades targeting tech giants. A long battle against Microsoft Corp. was followed by record-breaking fines for Google of more than $9 billion. It’s currently got antitrust probes going into Amazon and Apple as well as an early-stage probe of Facebook. But antitrust investigations are by their nature backward-looking, and any changes they extract don’t always make a real difference for the future. New rules would set guard-rails for how companies can behave going forward. For instance, Google couldn’t require exclusive pre-installations of its search app on Android devices, while Amazon wouldn’t be allowed to use data on sellers on its platform to help its own products.
4. Who’s pushing for the EU’s new rules?
Other tech firms that compete with the internet giants, like U.S.-based Yelp Inc., have been urging the EU to intervene in markets earlier to prevent abusive behavior, so that rivals have a better chance of challenging them. Apple’s app store is a target for numerous complaints over the terms it imposes. Consumer groups have called for the same, saying the lack of competition hurts users by limiting their choices. So far there are signs of early support among EU member nations. France and the Netherlands issued a joint paper backing many of the measures, and the European Parliament’s legal and industry committees have both called for rules to contain platforms with market power in reports that will be put to a vote before the full parliament this week.
5. What do tech giants say about the plans?
In a submission to the EU, Google has warned that overly broad remedies prescribed in the new gatekeeper law could end up hurting users. The search giant also urged EU officials to avoid discriminating against particular businesses, noting that some firms have dominant positions in one market but not in others. Meanwhile, Apple has said the EU should only consider new regulation where necessary and avoid overlaps with existing legislation. Some tech executives say they worry the legislation could end up being unworkable, given that companies like Facebook have very different business models with very different problems compared to a company such as Apple, for example.
6. Who else might oppose this?
American officials in the past have frequently criticized the EU’s plans to rein in Big Tech, accusing their European counterparts of discrimination and seeking to boost their own homegrown competitors without showing enough evidence that intervention is needed. But sentiment has shifted. The Justice Department filed an antitrust suit Oct. 20 accusing Google of abusing its power in internet searches to create and maintain an illegal monopoly. The Federal Trade Commission followed on Dec. 9 with lawsuits targeting Facebook’s takeover of social media services. Democrats in charge of the House antitrust committee in October urged consideration of legislation that would prevent large tech companies from owning different lines of businesses, a step that could effectively lead to breaking them up. This new aggressiveness could make it more difficult for U.S. officials to push back on the EU’s initiatives, if they want to.
7. What else is the EU planning in this area?
Other EU measures seek to hand online platforms more responsibility for users’ posts, including violent hate speech. The new obligations are part of an update to longstanding legal protections for internet platforms, which have protected social media companies and other platforms from liability for what users post on their sites. The protections were designed more than 20 years ago to promote growth in the then-nascent internet sector. EU officials are looking to provide clearer responsibilities for platforms to cut back on hate speech and disinformation without scrapping the liability protection altogether.
8. What are the next steps and will it work?
The European Parliament and European governments must examine the draft legislation and can make changes, before negotiating a final text of the law, a process that can take months, if not years. The final version of the law always risks getting watered down and it could also take some time before the EU’s watchdogs can deploy their new powers, allowing the giants to further solidify any dominant positions. But once in place, legislation could have a broad impact: As with Europe’s General Data Protection Regulation, the rules could also serve as a model for action elsewhere in the world.
The Reference Shelf
- A Bloomberg News article on tech giants warning of how the new rules may risk innovation
- America’s Tech Antitrust Trend Is So European: from the Fully Charged newsletter.
- Europe has the motivation, but not the means, to break up Big Tech, Alex Webb writes for Bloomberg Opinion.
- QuickTakes on European tech regulation, U.S. antitrust rules, the EU’s Copyright Directive and ongoing efforts to levy digital taxes on the industry.
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