Europe and BrexitPublic Affairs

EU to better regulate big tech

The European Union is progressing a ‘hit list’ of the largest big tech companies, aiming to curb their levels of market influence.

The Financial Times has reported that big tech giants such as Facebook, Amazon and Google are set to be subject to tougher regulations that go beyond those of the Digital Services Act currently being developed.

EU regulators are reportedly drawing up a list of 20 large companies whose immense market power, they believe, is skewing competition and seeing them act as market gatekeepers.

The list, which will see tech companies rated on a range of factors including market share revenue and number of users, will then be used to enforce stricter rules on data sharing with smaller rivals and greater obligations to be transparent on how they gather information.

Although the plans are still in development stage, the significance of the move lies in the enforcement powers the EU could seek to exercise on companies included on the list, mainly a move away from the existing culture of enforcement by fines, deemed to have minimal impact, and towards an ability to force tech giants to break up or sell their EU operations if their market dominance is assessed to threaten the interests of customers and smaller rivals. Exclusion from the single market entirely is another potential power being considered.

The creation of this list would also form the basis of another potential move being considered which would see a wider rating system made publicly available, allowing citizens and stakeholders to assess a company’s behaviour around issues such as speed of removing illegal content or tax compliance.

The EU has recognised the weakness of existing regulation in curbing the power of big tech companies and enabling competition and are hoping that greater powers will facilitate the change of business practices while negating the need for lengthy investigation processes.

Although not formalised, the powers would sit on top of the EU’s Digital Services Act, the shape of which is set to be outlined before the end of 2020. The Act is expected to dramatically change internet rules within the EU and increase the responsibility of platforms in relation to the products being sold online, disinformation and the policing of illegal content.

Many online businesses have struggled with systematic problems familiar to the platform economy regarding contestability, fairness and the possibility of market entry.

The Digital Services Act is the first update of the e-Commerce Directive, which was originally adopted in 2000, prior to the rise of many of today’s major market players.

The Act recognises the many benefits and opportunities new services, technologies and business models have brought for European citizens but also notes that these have “created new risks to citizens and society at large, exposing them to a new range of illegal goods, activities or content”.

In outlining the need for a modern legal framework, the EU have also recognised that many online businesses have “struggled with systematic problems familiar to the platform economy regarding contestability, fairness and the possibility of market entry”.

“Large online platforms are able to control increasingly important platform ecosystems in the digital economy. Typically, they feature an ability to connect many businesses with many consumers through their services that, in turn, allows them to leverage their advantages, such as their access to large amounts of data, from one area of their activity to improve or develop new services in adjacent markets,” the EU adds.

Modernisation of the regulations is set to take place via two pillars. The first is legal obligations for digital services to address risks and protect the rights of their users. The second is the use of “ex ante rules”, covering large platforms as gatekeepers and ensuring that those platforms “behave fairly and can be challenged by new entrants and existing competitors, so that consumers have the widest choice and the single market remains competitive and open to innovation”.

The ‘hit list’ initiative being developed by EU regulators is to enhance these additional regulations in a more targeted fashion, meaning that those at the top of the list will be required to comply with tougher regulation than that imposed on smaller competitors.

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