EU targets big tech power with landmark digital law

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GÖTTINGEN, Germany — The European Union is finalizing one of the world’s most ambitious laws to tackle the power of the biggest tech companies, potentially reshaping app stores, online advertising, e-commerce , messaging services and other everyday digital tools.

On Thursday, officials were putting the finishing touches on legislation, called the Digital Markets Act, which would be the most sweeping digital policy since the bloc enacted the world’s toughest rules to protect people’s online data in 2018. The legislation aims to prevent the biggest tech platforms from using their nested services and massive resources to lock in users and crush emerging rivals, creating room for new entrants and fostering increased competition.

Concretely, this means that companies like Google could no longer collect data from different services to offer targeted advertising without users’ consent and that Apple may have to authorize alternatives to its App Store on iPhone and iPad. Violators of the law, which would most likely come into force early next year, could face significant fines.

The Digital Markets Act is part of a punch from European regulators. As early as next month, the European Union is expected to reach an agreement on a law that would force social media companies such as Meta, owner of Facebook and Instagram, to police their platforms more aggressively.

With these actions, Europe consolidates its leadership as the strongest regulator of technology companies such as Apple, Google, Amazon, Meta and Microsoft. European standards are often adopted around the world, and the latest legislation raises the bar even further by potentially placing businesses under a new era of scrutiny, just like the healthcare, transport and banking sectors.

“Faced with big online platforms behaving as if they are ‘too big to care’, Europe has given up,” said Thierry Breton, a senior digital officer at the European Commission. . “We are ending the so-called Wild West that dominates our information space. A new framework that can become a reference for democracies around the world.

On Thursday, representatives of the European Parliament and the European Council were working behind closed doors in Brussels to reach a final agreement. Their agreement would come after around 16 months of talks – a fast pace for EU bureaucracy – and set the stage for a final vote in parliament and among representatives of the 27-nation union. This final approval is considered a formality.

Europe’s movements contrast with the lack of activity in the United States. While Republicans and Democrats have held several high-profile congressional hearings to scrutinize Meta, Twitter, and others over the past few years, and U.S. regulators have filed antitrust complaints against Google and Meta, no new federal laws have was adopted to deal with what many consider to be technology. unchecked corporate power.

The new European rules could offer a glimpse of what is to come elsewhere in the world. The regional privacy law of 2018, the General Data Protection Regulation, which restricts the online collection and sharing of personal data, has served as a model in countries from Japan to Brazil.

The journey of the Digital Markets Act has encountered obstacles. Policymakers dealt with what watchdogs called one of the fiercest lobbying efforts Brussels has ever seen as industry groups tried to water down the new law. They also dismissed concerns raised by the Biden administration that the rules unfairly targeted U.S. businesses.

Questions remain about how the new law would work in practice. The companies are expected to seek ways to reduce its impact through the courts. And regulators will need new funding to pay for their expanded oversight responsibilities, when budgets are strained by the pandemic.

“The pressure will be intense to show results, and quickly,” said Thomas Vinje, a seasoned antitrust lawyer in Brussels who has represented Amazon, Microsoft and Spotify.

The Digital Markets Act is expected to apply to so-called gatekeeper platforms, which include Google-owner Alphabet and YouTube, Amazon, Apple, Microsoft and Meta.

The details of the law read like a wish list for rivals to the biggest companies.

Apple and Google, which make the operating systems that run on nearly all smartphones, would be bound to loosen their grip. Apple should most likely allow alternative app stores for the first time. The law should also allow companies such as Spotify and Epic Games to use an alternative payment to Apple’s in the App Store, which charges a 30% commission.

On Android devices, Google is most likely expected to give customers the option to use other messaging and search services on handsets in Europe, as it has already done in response to a previous EU antitrust ruling. . On Wednesday, Google announced that Spotify and certain other app developers would be allowed to offer alternative payment methods to Google in its app store.

Amazon should be banned from using data collected from outside sellers on its services so it can offer competing products, a practice that is the subject of a separate EU antitrust investigation. Meta also could not collect competitor data to develop competing services.

The law can lead to major changes for messaging apps. WhatsApp, which is owned by Meta, could be required to offer users of competing services like Signal or Telegram a way to send and receive messages from someone using WhatsApp. These competing services would have the ability to make their products interoperable with WhatsApp.

The largest online advertising vendors, Meta and Google, would most likely be limited to serving targeted ads without consent. Delivering ads based on data collected from people as they move between YouTube and Google Search, or Instagram and Facebook, is hugely lucrative for both companies.

Policymakers were also considering including a provision that could give publishers in Europe the ability to negotiate further compensation with Google and Meta for articles published on their platforms. A standoff over the issue in Australia briefly led Facebook to stop letting news organizations publish stories inside the country.

“Major enforcement platforms have prevented businesses and consumers from reaping the benefits of competitive digital markets,” Margrethe Vestager, the European Commission’s Executive Vice-President for Digital Policy and Competition, said in a statement. communicated. Companies, she said, will now have to “comply with a well-defined set of obligations and prohibitions”.

Meta, Microsoft and Amazon declined to comment. Google and Apple did not respond to requests for comment.

Anu Bradford, a law professor at Columbia University who coined the term “Brussels effect” on the influence of EU law, said EU rules often become global standards because it is easier for businesses to apply them across their entire organization rather than just one geography.

“Everyone is watching DMA, whether it’s major tech companies, their rivals or foreign governments,” Ms Bradford said, referring to the Digital Markets Act. “It’s possible that even the US Congress will now conclude that it’s done looking aside when the EU regulates US tech companies and will move from discussing legislative reform to legislation.”

President Biden appointed Lina Khan, a prominent Amazon critic, to head the Federal Trade Commission and a lawyer critical of tech giants, Jonathan Kanter, to head the Justice Department’s antitrust division.

But efforts to change US antitrust laws have moved slowly. Congressional committees have approved bills that would prevent tech platforms from promoting their own products or buying up smaller companies. It’s unclear whether the measures have enough support to pass the full House and Senate.

European regulators are now faced with the application of the new law. The GDPR has been criticized for its lack of enforcement.

The European Commission, the bloc’s executive arm, will also have to hire dozens of new staff to investigate tech companies. Years of litigation are expected as companies challenge in court future penalties imposed as a result of the new law.

“The gatekeepers,” said Mr Vinje, the Brussels antitrust lawyer, “will not be entirely defenseless.”

David McCabe contributed reporting from Washington.

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