European Union Enforces New Digital Regulations while U.S. Curtails Agency Powers: Impact on Tech Giants’ Operating Models

EU’s Stringent Regulations Could Change Tech Giants’ Operating Models

As the European Union cracks down on digital regulations, the United States is moving in the opposite direction by limiting federal agencies’ regulatory powers. However, the EU’s actions may push tech giants to overhaul their operating models.

Recent developments in the EU have seen regulators finding social media behemoth Meta and tech titan Apple in breach of the Digital Markets Act (DMA). This law requires companies deemed as gatekeepers to open their ecosystems and promote more interoperability with third parties.

The DMA aims to foster a fairer and more competitive environment among digital platforms by targeting closed-off operating models that give companies like Meta, Apple, and Google control over aspects such as data collection and product placement. The potential impact of the DMA on tech giants’ operations has caught the attention of experts like Tom Wheeler, a visiting fellow at the Brookings Institution.

While the EU’s regulatory efforts may usher in significant changes in how tech giants function, the US appears to be lagging behind in digital policy advancements. Recent Supreme Court decisions limiting federal agencies’ regulatory authority suggest that comprehensive regulation of big tech may be a distant goal for the US.

Wheeler emphasized the importance of the US taking proactive steps in shaping digital policy, as countries like the EU and the UK are already leading the way in regulation. He highlighted the risk of the US being left behind in setting the rules that govern the tech industry.

The DMA currently targets seven companies, including Meta, Apple, Alphabet, ByteDance, Microsoft, Amazon, and Booking, identified as gatekeepers providing essential platform services. These companies were required to submit DMA compliance plans by March 2024.

The EU’s scrutiny of Meta and Apple’s compliance efforts revealed lapses in their adherence to the DMA. Meta’s “pay or consent” advertising model and Apple’s restrictive App Store rules were flagged as non-compliant with the legislation.

Wheeler noted that the EU’s DMA sets benchmarks that tech giants must meet, signaling a shift in power dynamics where companies can no longer dictate their operational rules.

However, critics have raised concerns about the EU’s approach to digital market regulation. Critics argue that forcing companies to offer free online services without subscription fees or targeted ads could lead to a global subsidy issue and unsustainable costs for internet services.

The EU’s investigation into Meta and Apple’s compliance is ongoing, with potential penalties of up to 10% of annual turnover for non-compliance. Continued violations could result in further remedies, including structural changes in the companies’ operations.

As the EU forges ahead with its regulatory agenda, the tech industry awaits potential shifts in operational models that could have far-reaching implications for digital platforms worldwide.