European lawmakers approve regulations on big tech companies

Diving brief:

  • The European Parliament this week voted in favor of two important laws regulate tech giants, including Apple, Google and Meta, which have been deemed too dominant in digital media and e-commerce. The legislation creates potential legal conflicts over the application of the rules in a region of 450 million consumers.
  • The Digital Markets Act (DMA) takes aim at alleged anti-competitive behavior of what it calls “access control platforms” with its rules on digital advertising, app stores and online messaging. The law will likely go into effect later this year, giving tech giants until mid-2023 to comply.
  • The Digital Services Act (DSA) makes tech platforms liable for illegal content such as hate speech, misinformation and the promotion of dangerous products, and gives citizens a way to formally complain about content moderation. It will come into effect as early as January 2024, and possibly sooner for the largest social media and internet search providers.

Overview of the dive:

Depending on how the EU enforces its new laws on big tech companies, the effect on marketers will vary. The DMA requires companies to obtain explicit consent from consumers to use their personal data for targeted advertising. It also gives people more power to select different web browsers, virtual assistants, and search engines, which can affect how marketers reach target consumer groups that reduce their use of the most dominant platforms. App developers may have more ways to collect payments from mobile users and more latitude in their fee structures, such as the ability to offer discounts outside of app stores.

EU laws have teeth with their threats of stiff fines. DMA non-compliance fines can be up to 10% of a company’s annual worldwide revenue, or 20% for repeat violations. The DSA provides for a maximum fine for an online platform or search engine of 6% of worldwide turnover. EU officials are also setting up teams to implement different parts of the new laws and plan to add staff in the next two years, Thierry Breton, EU Internal Market Commissioner, said in a blog post.

“Ten years ago a page was turned on so-called ‘too big to fail’ banks,” Breton said in reference to the 2008 financial crisis which led to tougher rules for banks. “Today, a new page is turning, that of ‘too big to care’ platforms.”

The EU big tech law package is important not only because of its effect on a large economic region, but also in setting the tone for regulation in other regions. Previous legislation, such as the European General Data Protection Regulation (GDPR) which came into effect four years ago, has helped shape the framework of consumer privacy rules in several countries and US states.

The United States does not have similar federal regulations, although Democratic and Republican lawmakers have sponsored bills targeting alleged anti-competitive behavior by big tech companies. The US Online Choice and Innovation Act (AICO) would prohibit certain major online platforms from favoring their own products and services to limit competition. The Law on Competition and Transparency in Digital Advertising would likely force companies like Google to dismantle their ad businesses. The Open Application Markets Act would force companies like Apple and Google to relax their rules on how software developers can distribute apps.

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