This past year, the European Union (EU) policymakers have trained their sights on regulating Big Tech companies. Big Tech refers to the four most dominant information technology companies in the world, comprising Amazon, Apple, Facebook and Google (owned by Alphabet). The new draft legislation will be ready by the end of the year, according to EU Commissioner, Thierry Breton. It will give the EU sweeping new powers to take on Big Tech. Among them include:
- The ability to force Big Tech companies to ‘structurally separate’ some of their European operations should their market dominance be deemed threatening to the interests of consumers and smaller rivals.
- The ability to remove Big Tech groups from the EU single market altogether.
- A potential ratings system allowing public investors to evaluate tax behaviour, compliance and a company’s ability to take down illegal content.
- Creating a blacklist of activities that companies would be required to stamp out.
- An EU-wide digital services tax (DST)
It must be noted that some of these powers will only be used in extreme circumstances when companies have been found to breach compliance.
The EU previously implemented the General Data Protection Regulations (GDPR) in May 2018, which aims to protect consumers by handing them more control over their data. However, the GDPR can be said to have empowered Big Tech at the expense of smaller companies. This is because Big Tech can afford the number and quality of technologists, product specialists and lawyers needed to ensure compliance with regulation. Even when a fine of USD$5 million was imposed on Facebook for user privacy violations, they managed to recover that amount within hours on the trading floor.
Compliance with the GDPR represents additional costs that are hurting revenue for small-to-midsize companies. The regulation requires explicit consent from users before their personal data is collected. Therefore, the user needs to jump through additional hurdles to subscribe. More of them will opt-out of subscribing altogether, damaging the company’s profits. The cost of non-compliance may also dissuade smaller companies from data collection practices, meaning their businesses cannot benefit from the user data analysis that Big Tech has thrived on for many years.
What is the impact of more stringent regulation for consumers and the wider EU tech market? Firstly, good governance practices will become an expectation amongst users. Smaller companies which could more flexibly implement consumer-friendly policies would see increased user migration to their platforms.
Part of the EU’s strategy involves creating a ‘single European data space’. Here, legally harnessed digital information can flow freely between technology firms. Since everyone would have access to the same data, a thriving European tech sector could be developed. Many start-ups would be able to scale-up their operations and finally compete with Big Tech.
EU tech regulation walks a fine line between further empowering Big Tech and controlling its dominance. Only time will tell whether the EU can get it right.