July 14, 2024

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EU targets big tech companies with sweeping new antitrust rules

EU targets big tech companies with sweeping new antitrust rules

European Commission Executive Vice President for a Europe Fit for the Digital Age Margrethe Vestager.

Thierry Mons | Getty Images News | Getty Images

The European Union has approved important new antitrust regulations that could reshape business models for US tech giants deadAnd the an AppleAnd the Amazon And the google Significantly. The rules are expected to take effect in October.

The European Parliament and European Union member states on Thursday reached a landmark agreement on the Digital Markets Act, a comprehensive set of rules aimed at curbing the market power of companies by tightening their grip on the internet economy.

The rules will apply to so-called “gatekeepers”, tech companies with a market capitalization of at least 75 billion euros ($83 billion) or annual revenue within the European Union of at least 7.5 billion euros in the past three years. They must also have at least 45 million monthly users or 10,000 business users in the EU.

The legislation was not passed. The final version has not been officially adopted by the European Parliament and the 27 countries that make up the European Union.

Margrethe Vestager, EU competition chief, said she expected the rules to come into effect “sometime in October”. She compared the DMA to historic antitrust reforms in the banking, energy and telecoms sectors.

“What we’ve learned over these years is that we can correct specific cases, and we can punish illegal behavior,” Vestager said at a Friday morning news conference.

“But when things get systemic, we need regulation as well, because if there is systematic misconduct, if there are entrenched attitudes, we need regulation.”

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“For companies that play the role of gatekeepers, the law on digital markets will now set the rules of the game,” she added.

What does that mean for big tech companies

The reforms’ main goal is to prevent tech giants from abusing their market position to the detriment of smaller competitors. Large Internet companies are often criticized for operating “walled gardens”, which are closed systems that make it difficult for a user to abandon another service provider.

Companies eligible to act as gatekeepers will be required to avoid setting their most important software – for example, Google’s Chrome web browser – as the default when a user sets up their devices. They will also be prevented from giving preference to their own services over others.

In addition, gatekeepers must ensure “interoperability” – or the ability of different applications to work with each other – between instant messaging services. That could mean forcing Apple’s iMessage to share data with Meta Facebook Messenger or WhatsApp, for example.

“Big tech companies are being forced to embrace interoperability, which will unleash a new era of innovation,” said Amandine Le Pape, chief operating officer of encrypted messaging app Element. “Consumers and businesses will have more choices, better features, and improved privacy.”

Apple said it was concerned that some elements of DMA could create “unnecessary privacy and security vulnerabilities” for users and “prevent us from charging for intellectual property.”

“We believe strongly in competition and creating thriving competitive markets around the world, and we will continue to work with stakeholders across Europe in the hope of mitigating these weaknesses.”

Meta and Amazon declined to comment on the EU agreement. Google was not immediately available for comment when contacted by CNBC.

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The consequences of breaking the rules can be dire. Gatekeepers who violate DMA face potential fines of up to 10% of their global revenue. For repeat offenders, this percentage will increase to 20%. To put that in context, that would be as much as $23 billion for a company like Meta.

Gatekeepers who break the rules at least three times in eight years risk facing market investigation and, if necessary, “behavioral” or “structural” remedies, including potential corporate collapse.

“Europe is keen to take a leading role in digital law enforcement,” said Bernd Meiring, partner at law firm Linklaters.

“Eyes will now turn to how the Commission will implement what is a massive new rulebook for the digital sector, while gatekeepers and other market participants will need to start confronting how the rules are applied in practice.”