America’s Tech Giants Rush to Comply With New Curbs in Europe
Google, Meta Platforms and others are set to face regulations that resemble the detail and sweep of those imposed on banks
By Kim Mackrael and Sam Schechner
Wall Street Journal
Updated Aug. 20, 2023 2:55 pm ET
Some of the impact of new regulations in Europe will hit right away, changing how users scroll, search and shop online. PHOTO: LUDOVIC MARIN/AGENCE FRANCE-PRESSE/GETTY IMAGES
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BRUSSELS—The hammer is about to come down on some of the world’s biggest trch companies.
Meta Platforms, Apple, Alphabet’s Google and other large—and largely American—tech companies will by next week start facing the first of new European Union tech rules set to come into effect over coming months, marking the largest expansion in digital regulation ever in the West.
The new EU laws aim to push big tech companies to better police online content and to open them up to more competition—with regular oversight from regulators empowered to issue fines.
The hundreds of provisions resemble the detail and sweep of those the U.S. imposed on the financial sector nearly a century ago and again more recently.
While the new laws apply only in Europe, their effect will ripple globally. Brussels’ regulations are often templates for others, which typically leads tech platforms to implement some changes worldwide. And the breadth of the rules is feeding a shift toward a compliance culture within some companies that originated in the techno-libertarian hothouse of Silicon Valley.
“The key change,” said Martin Husovec, an associate professor of law at the London School of Economics, “is that big tech is losing its monopoly on how it designs services and interprets rules it sets for users.”
Big companies including Google and Meta say they have thousands of employees working on compliance. Microsoft has disclosed heavy spending on engineering efforts to comply.
“This is a Glass-Steagall moment for big tech,” said Brian Wieser, a tech analyst and former investment banker, referring to the Depression-era law that reined in banks. “They’re going from effectively no regulation to heavy regulation.”
Some of the impact will hit right away, changing how users scroll, search and shop online. Other changes could take years to sink in, as markets reshape around broader edicts for companies to identify and reduce systemic risks their services pose to fields from the electoral process to users’ mental well-being.
Google is working on a choice screen for smartphone internet browsers, a requirement that the EU hopes will open up competition against the company’s widely used Chrome browser. Apple is developing a way for users to install on their iPhones apps from outside its App Store, to comply with a provision aimed at prying open its mobile business model.
Meta is building tools to notify users, and allow them to appeal in some cases, when their content is made less visible to other users but not deleted. That is under a new transparency rule that experts say could lead to changes in how and when companies intervene on their platforms.
Amazon.com set up a new channel for customers to flag potentially illegal products and content, and is publishing more information about its third-party sellers.
And TikTok will give users an option of a feed that shows videos based on their local popularity, rather than personalizing them based on data about a user—such as videos the user has watched. That requirement to offer nonpersonalized recommendations could make services like Instagram and TikTok less addictive.
The timeline is short. The first slug of new rules, under a content-moderation law called the Digital Services Act, will apply to the biggest social-media and search companies beginning in late August. In early September, after months of behind-the-scenes lobbying by tech companies, the EU will inform them which of their services fall under a separate set of competition rules, under what is called the Digital Markets Act.
Meta is building tools to notify users and allow them to appeal in some cases when their content is made less visible to other users. PHOTO: RICCARDO MILANI/HANS LUCAS/REUTERS
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“More or less every different provision of these laws requires a process change, an architectural change, or both,” said Kent Walker, Google’s president of global affairs, who says the company has scores of work streams to get ready. “Senior people across the company are focused on this.”
The new laws are coming into effect as EU legislators complete other bills regulating areas such as industrial data and artificial intelligence.
The bloc made its first big swing at reining in tech giants with a privacy law that started enforcement in 2018. That law, called the General Data Protection Regulation, spurred changes in the way many companies handle personal information and inspired similar legislation elsewhere, including in some U.S. states.
The new laws differ because they focus on the biggest tech platforms. Analysts say that is in part because the GDPR imposed heavy compliance costs on many small businesses, putting them at a disadvantage compared with their better-resourced competitors.
This time around, some smaller tech companies see opportunities in the new laws, depending on how they are enforced. But Pinterest—which has enough European users to qualify for the toughest rules under the new content law but is much smaller than the giants—says the new obligations and restrictions will be a burden on its operations, product, engineering and business teams.
Apple is developing a way for iPhone users to install apps from outside its App Store to comply with new regulations. PHOTO: KRISZTIAN BOCSI/BLOOMBERG NEWS
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Officials have said they want digital markets to become more fair and open in the short- and medium- term. They also hope the new rules will eventually make it easier for disruptive ideas to emerge and potentially challenge established companies. “That is what we would really like to achieve, and this is a very, very long-term project,” said Alberto Bacchiega, one of the EU officials in charge of enforcing the Digital Markets Act.
Fines for breaching the online-content rules can go as high as 6% of a company’s global revenue, and as high as 20% for repeatedly breaking the digital-competition rules. The EU also has the power under the digital-competition law to force the breakup of companies if they repeatedly violate the rules.
Officials concede that enforcement will be challenging. The EU says it expects to need about 230 staff to enforce the online-content and competition laws—a fraction of the size of some big tech companies’ legal teams. The bloc also created a center in Seville, Spain, to help analyze technical data companies will be reporting, including details of their content-selection algorithms.
A spokesman said regulators will be ready to enforce the rules as soon as they take effect.
Company executives are also bracing for how EU officials decide in early September to define what falls within—and outside of—each of their so-called core platforms under the digital-competition law. Several elements of the law depend on those definitions.
One provision, for instance, requires so-called gatekeeper companies to keep user data between core platforms separate unless they get explicit user consent. That led Meta to argue in meetings with the EU’s executive arm that its Messenger service should be treated as fully integrated with the Facebook social-networking platform, people familiar with the content of those meetings said.
The continuing discussions with EU officials about how to interpret those and other elements of the laws are leaving companies scrambling to get ready. Some companies are already contesting whether some of the rules should apply to them.
Amazon and online fashion retailer Zalando have appealed their designations as being subject to the content law’s strictest rules. TikTok has urged the EU not to designate it as a gatekeeper under the competition law, saying that it is bringing more competition to social media.
Fights over how and to whom the EU rules apply are likely to continue for years. But even if American lawmakers never implement anything like them in the U.S., companies could face pressure to apply some changes for American consumers, says Anu Bradford, a Columbia Law School professor who popularized the term “Brussels effect” to describe the EU’s influence on global rule-making.
“Can they defend their practices when there’s a benchmark showing they behave differently in the EU?” said Bradford. “Many Americans are cheering for Europe and hope changes there will be felt in the U.S., too.”
Write to Kim Mackrael at kim.mackrael@wsj.com and Sam Schechner at Sam.Schechner@wsj.com
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Appeared in the August 21, 2023, print edition as 'U.S. Tech Scrambles To Abide By New EU Rules'.
America’s Tech Giants Rush to Comply With New Curbs in Europe - WSJ |
