Multibillion-Dollar Fines: This Is How the European Union Imposes Its Sway Over Tech Giants

After discussions that lasted for nearly a year and a half, the European Union has passed landmark legislation regulating the work of the digital sector, which would improve the control efforts at various levels, including calls for violence, misinformation campaigns, or imitation of products.

The landmark legislation would force big tech firms like Facebook and Amazon to combat misinformation, reveal how divisive content is amplified, and stop targeting online ads based on race, religion, or sexual orientation.

The law called Digital Services Act (DSA) is the first of its kind in the world in terms of digital regulation, as confirmed by the statement of the European Council representing the 27 member states of the European Union on April 23, 2022.

It is noteworthy that the European Union has sought to reduce the impact of misinformation circulating online—such as immigration panic, the rise of the far-right and left, Islamophobia, and reluctance about vaccines—which has become a serious threat to it in ways that preserve freedom of expression.

 

Landmark Legislation

On April 23, 2022, negotiators from the European Parliament and the 27 member states agreed on a new law to tackle the societal harms of social media, by asking its owners to do more to research illegal content, cooperate with authorities or face multibillion-dollar fines.

Tech firms will have to put in place new policies and procedures to remove reported hate speech, terrorist propaganda, and other material that EU countries consider illegal.

Describing the agreement as "historic," European Commission President Ursula von der Leyen tweeted: “The new law will upgrade the rules for digital services in the European Union, and ensure greater protection for internet users in Europe, with protecting freedom of expression and business opportunities for companies.”

“Something illegal off the internet will be illegal on the internet. This is a strong sign to people, firms, and countries around the world,” she said.

The DSA, which was agreed upon 16 hours after final negotiations, represents the biggest reorganization of EU law in this area in nearly 20 years, as the law updates the memorandum on e-commerce, issued two decades ago when giant platforms were still in the Its beginnings, according to the New York Times in its report on April 22.

The newspaper pointed out that “the DSA is the second part of a plan proposed by the European Commission for the first time in December 2020 to regulate the digital sector.”

Last March, it completed the first part of it called the Digital Markets Act (DMA) to limit the influence of giant tech companies (Google, Amazon, Apple, Meta, and Microsoft) and their monopolistic practices in application stores, digital advertising, and online shopping.

European Competition Commissioner Margrethe Vestager, the architect of the bloc's digital reforms, said: “Under the legislation, democracy takes root in our countries, and we can hold online platforms accountable for the risks that their services pose to citizens in our societies.”

It is noteworthy that the new legislation to enter into force officially must first be ratified by the parliaments of the 27 European Union countries, then tech firms will have 4 months to comply with its rules, which means that the law will enter into force by 2023 or early 2024 at the latest, according to what Bloomberg revealed in its report on April 23.

“The DSA marks a watershed moment in the history of internet regulation and better respect for human rights by effectively curbing the undaunted and profit-based Big Tech’s unchecked power,” said Claudia Prettner, Legal and Policy Adviser at Amnesty Tech.

 

Digital Regulation

The excesses of social media platforms and selling often made headlines, examples include the attack by protesters on the United States Capitol in January 2021, in an operation that was partly planned on Facebook and Twitter.

The dark side of the internet also relates to sales platforms that are rife with fake or substandard products, which can be dangerous, such as children's toys that do not meet safety standards.

The new rules stipulate the obligation to quickly remove any illegal content (according to national and European laws) as soon as the platform becomes aware of its presence on its pages, as well as obligating social apps to suspend the accounts of users who violate the law repeatedly.

The law prohibits misleading interfaces that push internet users toward certain account settings or paid services, as well as the use of users' sensitive data such as race or religion to broadcast counter-advertisements to them.

The law also imposes new obligations on very large platforms, that is, which include more than 45 million active users in the European Union, twenty firms whose list has not been determined, but will include the five major groups (Google, Apple, Facebook, Amazon, and Microsoft), in addition to Twitter and possibly Tik Tok and Booking.

The law entrusts the European Commission with supervising and auditing giant platforms such as Google, which owns YouTube, and Meta, which owns Facebook, Instagram, and WhatsApp, and imposes penalties on violators of up to 6% of their global annual revenues.

For example, for Meta, this means a fine of up to $7 billion based on 2021 revenues, and for Amazon, this means a fine of up to $28 billion, while the penalties may reach a ban on work in the European market if the violations are repeated.

Amazon will face new rules to stop selling illegal products by verifying the identity of its suppliers before offering their products.

They will have to assess the risks associated with the use of their services themselves, add ways for users to report illegal content and remove problematic content.

The law does not order online platforms to remove certain forms of speech, leaving that to individual states to determine; some forms of hate speech and references to Nazism are illegal in, for example, Germany, but not in other European countries.

Inspired by the war in Ukraine and the COVID-19 pandemic, the law gives regulators additional power to force internet firms to respond quickly during crises in the areas of national security and health.

For example: This could include stopping the spread of certain government propaganda on social media during a war, or selling online counterfeit medical supplies and medicines during the pandemic.

The law will also require these companies to increase transparency about their data and the algorithms used to make recommendations to users.

Several provisions in the law follow recommendations made by the former Facebook employee who leaked internal firm data, Frances Haugen, who described the new law as a global gold standard for regulating social media firms.

 

The Power of Tech Giants

These European moves are matched by shortcomings in the United States, where all the federal privacy bills, security legislation, and antitrust laws that tackle the power of tech giants have failed to advance in Congress, despite intense pressure and bipartisan support for it, CNBC reported on April 23.

However, critics questioned the effectiveness of the European measures, noting that it could be easier to write laws than to implement them.

It is noteworthy that the European Union has a long history of pursuing tech giants and holding them responsible for violating the rules of fair competition and data privacy, but its procedures sometimes appear stricter on paper than in practice, the New York Times noted.

In March 2019, for example, the total European fines against Google for antitrust violations amounted to about $8.8 billion; currently, countries of the European Union are leading investigations targeting Amazon, Apple, and Meta.

CNBC and Bloomberg said that it is not clear how the European Union will implement the rules of the DSA in practice, as it obliges the Commission to annually audit the content of major platforms, in addition to permanent supervision of the platforms’ work, which means the need for more than 230 of its members to carry out the task, which adds new technical burdens to the Commission's work.

In turn, Tommaso Valletti, a former chief economist at the European Commission who has worked on antitrust cases against Google and other tech giants, confirmed that “employment figures are completely insufficient to tackle giant companies and new mega tasks,” warning that “without strict enforcement, the new laws will be tantamount to an unfulfilled promise.”

In this context, observers recalled the European Union's Data Privacy Law, or the General Data Protection Regulation (G.D.P.R.), as the law was widely welcomed around the world, but since it came into force in 2018, little action has been taken against Google, Facebook, and others over private data collection practices.

On the other hand, tech firms and industry trade groups have warned that the laws could have unintended consequences, such as hurting small businesses and undermining Europe's digital economy.

Google said, in a statement, that it supports the goals of the DSA, to make the internet more secure, transparent, and accountable, and confirmed that it plans to work with policymakers to get the remaining technical details right.

On the other hand, Twitter said, in a statement, that it supports any advanced regulation that balances the need to reduce harmful content online and protect the open internet sky, stressing its commitment to protecting the security of internet users.