EU proposals on ‘Big Tech’ could have significant impact on UK
27 April 2021
The European Scrutiny Committee publishes documents considered by the Committee on 21 April 2021.
The European Union’s Commission, or secretariat, has proposed wide-ranging new laws to control the activities of online platforms, including ‘Big Tech’ companies such as Amazon, Apple, Google and Facebook. The new legislation would address what the commission sees as market failures arising from the enormous financial power wielded by the largest tech companies, and the need for online platforms to remove illegal content they host more effectively.
The laws include potential fines of up to ten per cent of a company’s annual global turnover if the regulations are not adhered to.
The new laws could have a significant impact on the UK, not least because they will apply to companies exporting digital services from the UK into the EU. In 2019, the UK exported £51.9bn. worth of such services, 40% of which was to the EU.
The EU’s actions may also present risks and opportunities for the UK ‘s own approach to regulating tech companies through the government’s upcoming legislation under the Online Safety Bill and Digital Markets Unit.
An analysis of the EU Commission proposals is included in the latest report of the European Scrutiny Committee. This cross-party parliamentary committee regularly analyses the impact that new or proposed EU legislation may have on the UK. The full report about the proposed legislation on Big Tech companies is attached to this press release. The report also includes analysis of:
- Proposed legislation on the share of fish stocks in Europe and on discarding fish;
- Provisionally agreed EU ambitions for the reduction of greenhouse gases and future UK/EU cooperation in the area of climate change;
- New regulations on the importing into the EU of cultural goods such as ancient coins or artefacts; and
- Legislation aimed at stopping the dissemination in the EU of terrorist propaganda.
The proposed EU laws on Big Tech companies are grouped under two main headings.
The first of these, the Digital Services Act, creates new content moderation requirements for internet hosting services. The new rules are mainly to ensure that illegal content such as child sex abuse materials or adverts for counterfeit goods are taken down quickly.
The EU Commission estimates that the market for counterfeit goods in the EU’s Single Market area, made up primarily of individuals buying products online, was worth €121bn. in 2016 alone. It also says reports of child sex abuse material have increased significantly in recent years.
The EU Digital Services Act covers similar ground to the government’s forthcoming Online Safety Bill.
The second proposal, for an EU Digital Markets Act, is meant to address market failures arising from the enormous power wielded by some large online platforms like Facebook and Amazon in connecting businesses to consumers and shaping public discourse.
The Commission has proposed to address the market failures by designating the largest digital companies as “gatekeepers” who would be subject to new regulations on how they deal with their business partners and consumers - including a blacklist of unfair practices.
The Commission says the market for digital services does not deliver the best outcomes for consumers in terms of prices, quality, choice and innovation because of unfair practices and the difficulties faced by new entrants to these markets. Among the unfair practices mentioned by the Commission are:
- Online platforms ranking their own goods and services higher up in search engine results compared to competitors;
- Using data from competitors to target sales of similar goods and services (a common complaint against Amazon in particular); and
- Encouraging the use of pre-installed software on certain devices (for example iphones) that is difficult to remove.
The objectives of the EU’s Digital Markets Act are broadly similar to those of the UK government’s planned Digital Markets Unit which will oversee the enforcement of a new UK competition regime for large online platforms.
The European Scrutiny Committee report says the UK clearly has an interest in seeking to influence the final shape of the EU legislation, and, where appropriate, seek mutually beneficial convergence. The UK government has itself said that different regulatory practices between countries could see companies ‘flip’, or switch between jurisdictions, to take advantage of the differing rules. Indeed, the government has made regulatory diplomacy relating to standards in the digital economy a cornerstone of its recent foreign policy review.
The Committee has written to the Minister for Digital and Culture, Caroline Dinenage MP, to ask her to set out the government’s plans for engagement with the EU proposals.
The new laws on large online companies, the Committee’s report says, are likely to be subject to considerable lobbying efforts by the mainly American corporations involved. The laws have yet to be agreed by the European Parliament or the Council of Ministers.
The Commission hopes the legislation may come into force in 2023 but the parliamentary Committee report says this seems optimistic given the complexity and scope of the draft legislation.
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