The European Commission yesterday presented a draft of a large-scale reform of regulation of the digital services market. As part of this reform, the EU authorities intend to seriously tighten penalties in two main areas вЂ” monopoly in the digital industry and illegal content and goods on Internet platforms. Punishments can include multi-billion dollar fines and forced separation of operations of the guilty companies.
The reform of regulation of the digital industry in the EU is proposed in the framework of two bills вЂ” вЂњOn digital servicesвЂќ and вЂњOn digital marketsвЂќ. The publication of draft laws means the beginning of their discussions by the EU Member States and the European Parliament. After amendments and additions are made and if approved by the European Parliament, the laws will be adopted but will enter into force no earlier than the end of the process of Britain's secession from the EU.
The first bill is aimed at combating illegal goods on the largest Internet platforms, as well as content that incites hatred, violates human rights, calls for crimes, etc. The bill emphasizes that special attention will be paid to the operation of the platforms that are used by more than 10% of the total EU population of 450 million people. Although the companies themselves are not named, observers are already confident that this will mainly affect such major social networks and media platforms as Facebook, Twitter, and Google (YouTube).
Among the EU requirements for such companies are the following:
вЂ” combating illegal goods, services, or illegal online content by developing an effective mechanism that users themselves can use;
вЂ” new obligations to track business customers who sell illegal goods on the Internet sites of this company;
вЂ” increasing the transparency of the operation of Internet platforms, including the algorithm used for recommendations;
вЂ” providing researchers with access to analyze the operation of the largest platforms and understand potential risks.
The law provides for fines of up to 6% of annual turnover, which in the case of FB or Google can result in multi-billion dollar sums.
The second law, on digital markets, refers to companies that the EU designates as вЂњgatekeepersвЂќ of the digital market:
вЂ” large Internet platforms with significant economic weight, significant influence on the EU internal market, and active activity in several EU countries;
вЂ” have significant market power as service intermediaries вЂ” that is, they link a large user base with many different businesses;
вЂ” вЂњa significant weight in the digital services market that the company has enjoyed for a long time.вЂќ
The bill implies that such companies must:
вЂ” allow third parties the right to participate in the services of the вЂњcontrollerвЂќ company for the provision of services in вЂњcertain specific situationsвЂќ;
вЂ” provide their business customers with access to the data they generate using the platform of the вЂњcontrollerвЂќ company;
вЂ” to provide their business clients with the right to promote their goods and services and the right to conclude relevant contracts outside the platforms of the вЂњcontrollersвЂќ companies.
At the same time, the вЂњcontrollerвЂќ companies are not allowed to:
вЂ” prevent consumers from forging connections with businesses operating outside the largest platforms;
вЂ” prevent users from uninstalling any preinstalled programs or applications if users want to do so;
вЂ” make preferences for goods and services that are provided by the Internet platform itself.
The EU also does not name the companies to which the law will apply, however, the media suggest that this may refer to such large Internet platforms for the sale and advertising of goods, services, and applications, such as Amazon, Google, Apple. Possible penalties include a fine of up to 10% of the annual turnover or вЂњperiodicвЂќ fines of up to 5% of the offending company's average daily turnover.
In some cases, a compulsory division of operations is provided for a company that will be found guilty of monopoly.
Some leading Internet companies have so far refrained from commenting on the new EU proposals, while others have already voiced their reaction. Google, in particular, expressed concern that the new proposals from the authorities вЂњapply to a narrow circle of companies and may complicate the development of new products to support small businesses in Europe.вЂќ In turn, representatives of the Computer and Communications Industry Association, which includes companies such as Amazon, Google, eBay, Twitter, and others, said: вЂњWe support efforts to promote innovation and effective competition. We hope that the final version of the law will address more specific issues, and not just the size of companies.вЂќ