Key Takeaways

  • The European Commission advanced two proposals to create a fairer, more open digital market
  • Big Tech could face fines, divestitures if they don't adhere to the rules

Tech giants like Google and Facebook could soon face hefty fines as part of a comprehensive new set of regulations for all digital services in the European Union.

The European Commission advanced two proposals on Tuesday to better protect consumers and their fundamental rights online in an effort to create a fairer and more open digital market.

“The two proposals serve one purpose: to make sure that we, as users, have access to a wide choice of safe products and services online. And that businesses operating in Europe can freely and fairly compete online just as they do offline,” said Margrethe Vestager, executive vice-president for the Commission’s Europe Fit for the Digital Age.

The European Parliament and the Member States will discuss the proposals in the ordinary legislative procedure. 

Digital Markets Act

The Digital Markets Act addresses the negative consequences of Big Tech companies utilizing unfair practices while serving as “gatekeepers” to the online marketplace, the Commission said, noting that these unfair practices can prevent competitors from reaching the consumer. 

Under the act, companies that operate search engines and social media networks are required to implement measures to allow the software of third parties to properly function. The “gatekeepers” are also prohibited from blocking users from un-installing any pre-installed software or apps.

The Commission said it will impose sanctions for non-compliance, which could include fines of up to 10% of the company’s turnover. For recurrent infringers, these sanctions may also involve taking structural measures, potentially extending to divestiture of certain businesses.

Digital Services Act

The Digital Services Act, meanwhile, introduces rules for the removal of illegal goods, services or content online, provides safeguards for users whose content has been erroneously deleted by platforms, and creates new obligations for large platforms to take risk-based actions to prevent abuse of their systems. The proposal also presents transparency measures related to online advertising and algorithms. 

“Many online platforms have come to play a central role in the lives of our citizens and businesses, and even our society and democracy at large. With today's proposals, we are organizing our digital space for the next decades,” Commissioner for Internal Market Thierry Breton said. “With harmonized rules, ex ante obligations, better oversight, speedy enforcement, and deterrent sanctions, we will ensure that anyone offering and using digital services in Europe benefits from security, trust, innovation and business opportunities.”

What Big Tech Thinks

Big Tech had previously expressed concerns about new rules. Google, for example, said it was worried that the potential legislation would prevent it from combining certain data, such as the location of a restaurant, its menu, and the option to book a table.

In addition, other tech companies have warned that a new set of competition rules could hurt innovation, or said onerous content-moderation obligations could push companies to remove legal content and stifle free expression.

Facebook, which has previously complained about harsh content-moderation rules in Germany, said on Tuesday that it welcomed the EU’s rules on the issue. The proposals are “on the right track to help preserve what is good about the internet,” Facebook said.

More Regulation

The proposals come as Big Tech also faces backlash from other parts of the world. The U.K. announced Tuesday that tech giants could be fined up to £18 million ($24 million) or 10% of their annual global turnover, whichever is highest, if they don’t remove illegal content quickly. 

Meanwhile, last week Facebook was sued by the Federal Trade Commission and a coalition of 48 state attorneys general who demanded the unwinding of its acquisitions of Instagram and WhatsApp, claiming the deals made it harder for new entrants to gain scale.

In addition, the House Judiciary subcommittee on antitrust in October released its recommendations on how to reform laws to avoid the continued emergence of digital monopolies following a 16-month investigation into the business practices of tech behemoths Apple, Amazon, Facebook and Alphabet.

That same month, Twitter CEO Jack Dorsey, Alphabet CEO Sundar Pichai, and Facebook CEO Mark Zuckerberg faced regulators to defend Section 230 of the Communications Decency Act, which shields these Internet giants from liability from false advertising and any claims made on their platforms by any of their users.