GÖTTINGEN, Germany — The European Union was set to finalize one of the world’s most far-reaching laws this week to tackle the power of the largest tech companies, introducing rules that will affect app stores, online advertising , e-commerce, messaging services and other everyday digital tools.
The law, dubbed the Digital Markets Act, would be the most sweeping piece of digital policy since the bloc enacted the world’s strictest rules in 2018 to protect people’s online data. The legislation aims to prevent the largest tech platforms from using their interlocking services and significant resources to bring in users and crush emerging rivals, creating space for new entrants and encouraging more competition.
What that means, in practical terms, is that companies like Google can no longer collect data from various services to serve targeted ads without users’ consent, and Apple may need to allow alternatives to its App Store on iPhones and iPads. Violators of the law, which is likely to come into effect early next year, could face hefty fines.
The Digital Markets Act is part of a one-two punch from European regulators. The European Union is expected to agree next month on another law that would force social media companies like Meta, the owner of Facebook and Instagram, to monitor their platforms more aggressively.
With these actions, Europe confirms its leadership as the most assertive regulator of technology companies such as Apple, Google, Amazon, Meta and Microsoft. European standards are often adopted globally, and the latest legislation is raising the bar even higher by potentially bringing businesses under a new era of scrutiny, as well as healthcare, transport and banking.
“Faced with major online platforms that acted as if they were ‘too big to care’, Europe took a foothold,” said Thierry Breton, one of the top digital officials in the European Commission. “We are putting an end to the so-called ‘wild west’ that dominates our information space. A new framework that can become a reference for democracies worldwide.”
On Thursday, representatives of the European Parliament and the European Council worked behind closed doors in Brussels to reach a final agreement. Their agreement would come after about 16 months of negotiations – a fast pace for the EU bureaucracy – and would pave the way for a final vote in parliament and between representatives of the 27 countries in the union. That final approval is seen as a formality after this week’s deal closes.
The movements of Europe contrast with the lack of activity in the United States. While Republicans and Democrats have held several high-profile congressional hearings in recent years to scrutinize Meta, Twitter, and others, and U.S. regulators have filed antitrust lawsuits against Google and Meta, no new federal laws have been passed to address what many see as the tech unchecked power of corporations.
Europe’s new rules could be a foretaste of what will happen elsewhere in the world. The region’s 2018 privacy law, 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 path of the Digital Markets Act encountered hurdles. Policymakers dealt with what watchdogs said was one of the fiercest lobbying efforts ever seen in Brussels as industry groups tried to water down the new law. They also brushed aside the Biden administration’s concerns that the rules were unfairly targeting US companies.
Questions remain about how the new law will work in practice. Companies are expected to look through the courts for ways to mitigate the impact of the law. And regulators will need new funding to pay for their expanded oversight responsibilities at a time when budgets are under strain from the pandemic.
“The pressure will be great to show results, and quickly,” said Thomas Vinje, an experienced antitrust lawyer in Brussels who has represented Amazon, Microsoft and Spotify.
The Digital Markets Act is expected to apply to so-called gatekeeper platforms with a market value of more than €75 billion or about $82 billion, including Alphabet, the owner of Google, and YouTube, Amazon, Apple, Microsoft and Meta.
Details of the law read like a wish list for rivals of the biggest corporations.
Apple and Google, who make the operating systems that run on almost every smartphone, should lose their grip. Apple should probably allow alternative app stores for the first time. The law is also expected to allow companies like Spotify and Epic Games to use Apple’s alternative payments on the App Store, which charge a 30 percent commission.
On Android devices, Google should probably offer customers the option to use other email and search services on handsets in Europe, similar to what it has already done in response to a previous EU antitrust ruling. On Wednesday, Google announced that Spotify and some other app developers may offer alternative payment methods for Google within its app store.
Amazon is expected to be barred from using data collected from third-party sellers on its services so it could offer competing products, a practice that is the subject of a separate EU antitrust investigation. Also, Meta probably wouldn’t be able to collect competitor data to develop competing services.
The law could lead to major changes for messaging apps. WhatsApp, which is owned by Meta, may need to provide a way for users of rival services such as Signal or Telegram to send and receive messages to someone using WhatsApp. Those rival services would have the option to make their products interoperable with WhatsApp.
The largest online ad sellers, Meta and Google, would likely be restricted from serving targeted ads without permission. Offering 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 also considered including a provision that could allow publishers in Europe to negotiate new fees with Google and Meta for articles posted on their platforms. A showdown over the issue in Australia briefly led Facebook to stop allowing news organizations to post articles in the country.
Meta and Amazon declined to comment. Google, Apple and Microsoft did not immediately respond to requests for comment.
Anu Bradford, a law professor at Columbia University who coined the term “Brussels Effect” to describe the influence of EU law, said European rules often become global norms because it is easier for companies to apply them across their organization. fit rather than in one geographic location.
“Everyone is looking at the DMA, be it the leading tech companies, their rivals or foreign governments,” said Ms Bradford, referring to the Digital Markets Act. “It is possible that even the US Congress will now conclude that they are done watching from the sidelines as the EU regulates US tech companies and moves from talking about legislative reform to actual legislation.”
President Biden has appointed Lina Khan, a prominent Amazon critic, to head the Federal Trade Commission, and a lawyer criticizing the tech giants, Jonathan Kanter, to head the Justice Department’s antitrust division.
But efforts to change US antitrust laws are slow. Congressional committees have passed bills that prevent technology platforms from favoring their own products or buying smaller companies. It is unclear whether the measures have sufficient support to allow the full House and Senate to pass.
European regulators now face enforcement of the new law. The GDPR has been criticized for its lack of enforcement.
The European Commission, the bloc’s executive branch, will also have to hire dozens of new employees to investigate the tech companies. Years of litigation are expected as companies file lawsuits against future fines imposed as a result of the new law.
“The gatekeepers,” said Mr Vinje, the Brussels antitrust lawyer, “will not be completely defenseless.”
David McCabe contributed reporting from Washington.
