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Europe wields foam hammer at big U.S. tech groups

The European Commission is arming itself with a large hammer for its fight with U.S. technology groups like Amazon.com, Facebook and Alphabet. On contact, however, it could turn out to be made of foam.

Competition tsar Margrethe Vestager unveiled the Digital Markets Act and Digital Services Act on Tuesday. The first aims to place guard rails on the companies through a series of “do’s” and “don’ts” to keep them from squelching competition. It would require companies with over 6.5 billion euros of annual European revenue, a 65 billion euro equity value and at least 45 million monthly active users in the region to stop favouring their own services on their platforms, or risk fines of up to 10% total revenue.

The second regulation would force online behemoths to remove illegal and harmful social-media posts quickly. They’d also have to be transparent about the algorithms governing everything from social network news feeds to search-engine rankings. Serious infringements by “very large platforms” would be punishable by fines of up to 6% of sales. That means Facebook could in theory be fined $5 billion, based on 2020 Refinitiv median estimates, if it was found to be sluggish fighting misinformation or extremist content.

The first caveat is these rules could be watered down as they make their way through the European Parliament and eventually to the Council. Even if the harshest measures survive Brussel’s legislative process, they may not make a big difference. Vestager had fined Google a cumulative 8 billion euros in the years leading up to 2020, and yet it still dominates search with over 90% of the market in Europe, according to data collector Statcounter.

Second, the gist of Vestager’s approach is to regulate the behaviour of digital giants, rather than challenge their dominance. The latter goal could potentially have been achieved with stringent requirements on sharing data and basic technical standards, like forcing social networks to create technology that would enable them to interact with each other, eroding powerful network effects.

It suggests European regulators are just trying to needle big tech companies into making changes – a less radical approach than in the United States, where some authorities are trying to push for a breakup. Europe is figuring out how to live with tech behemoths, rather than trying to dismantle them. Chief executives like Facebook’s Mark Zuckerberg can probably deal with that. Reuters

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