Recently, the EU's most significant legislative effort in the digital field in the past 20 years has made new progress. On July 5, local time, the European Parliament passed the Digital Services Act and the Digital Markets Act respectively with an overwhelming majority. The two laws still need to be approved by the European Council, the highest decision-making body of the EU, and can only take effect after being signed by the President of the European Parliament and the President of the European Council.
Public opinion analysis said that the EU's goal in launching the Digital Services Act and the Digital Markets Act is to restrict technology giants such as Google, Twitter, and Meta. The EU said that the two bills are aimed at regulating the digital market order and restricting the unfair competition of technology giants.
Targeting the weak spots of technology giants
On July 5, the Digital Services Act was passed at a plenary session of the European Parliament with 539 votes in favor, 54 votes against, and 30 abstentions, while the Digital Markets Act was passed with 588 votes in favor, 11 votes against, and 31 abstentions.
The two bills have different focuses, but both are aimed at the weaknesses of technology giants. The Digital Services Act stipulates that large portals and social media companies operating in the EU must strengthen the review of illegal content and the protection of user data, and promptly delete illegal and harmful online content, including hate speech, false information, and fake goods trading information. Overall, the Digital Services Act aims to better protect consumers and their basic online rights, establish a strong transparency and clear accountability framework for online platforms, and promote innovation, growth and competitiveness in the EU internal market. In addition, after the introduction of the law, technology giants can no longer take refuge in the old "safe harbor principle" (that is, online platforms are not responsible for the content posted by their users).
The Digital Markets Act stipulates that technology giants that provide "core platform services" such as social networks and search engines are identified as "gatekeeper" companies and must be subject to strict market supervision in terms of openness, advertising, user rights, etc. Specifically, technology giants identified as "gatekeepers" cannot abuse their market dominance to suppress other competing companies, and cannot forcefully push advertisements or install application software without user permission.
In comparison, the Digital Services Act focuses on regulating the services provided by digital companies in terms of content and form, so as to better protect EU consumers; the Digital Markets Act aims to regulate the digital market, especially competition among digital companies, to prevent multinational technology giants from excessive expansion in the European market by relying on their monopoly advantages.
Companies that violate the above two bills will be subject to huge fines. Among them, companies that violate the Digital Services Act may be fined 6% of global turnover, and in the case of repeated serious violations, they may be banned from operating in the EU single market; companies that violate the Digital Markets Act will face a huge fine of up to 10% of their global annual turnover, and a fine of 20% of annual turnover for repeated violations. Systematic violations may face regulatory requirements such as restructuring.
The implementation of the two bills is not easy
At present, the legislative process has not been smooth since the drafts of these two bills were proposed in 2020.
In recent years, the EU's internal digital market has been severely squeezed by US technology giants. For a long time, the EU has hoped to regulate these companies' monopolistic economic behaviors such as controlling customer data, wantonly promoting advertisements and services, etc.
Against this backdrop, the EU launched the draft Digital Services Act and the draft Digital Markets Act in 2020. These two draft laws represent the first major reform of EU Internet legislation in the 21st century, aiming to help build a safer digital environment, protect users' fundamental rights, and establish a fair competition environment.
Margrethe Vestager, executive vice president of the European Commission for competition, bluntly stated that the Digital Services Act and the Digital Markets Act aim to reverse chaos, restore order, and restrain Internet "gatekeeper" companies that dominate the market.
However, it is not easy for the Digital Services Act and the Digital Markets Act, which seem to be strongly promoted by the EU, to be finally implemented.
First, the bill was opposed by American technology giants during the legislative process, which was not unexpected. Google, Twitter, Meta and other technology giants did their best to weaken the power of the draft law and called on EU regulators to introduce "appropriate and balanced regulations that will not slow down innovation."
Secondly, there are many concerns within the EU about the introduction of the bills. Some countries are worried that the bills may affect their attractiveness to investment from American technology companies, and some voices believe that strengthening market supervision may hinder innovation in the European digital economy. Therefore, both bills have encountered considerable resistance. It was not until March and April of this year that EU member states and representatives of members of the European Parliament reached consensus on the two bills.
After the European Parliament votes, the two bills still need to be approved by the European Council and signed by the President of the European Parliament and the President of the European Council before they can be published in the EU Official Gazette and take effect 20 days after publication. In addition, there will be a certain transition period before they are officially applied.
Some media predict that the Digital Services Act and the Digital Markets Act will come into effect around January 2024.
"Combination punch" ready to attack
In fact, curbing the improper behavior of technology giants in the digital field has become an important legislative activity in various countries in recent years. Previously, the EU and its member states have repeatedly introduced regulatory and fine measures to regulate Internet giants. The Digital Services Act and the Digital Markets Act are the most important legislation in the digital field of the EU in the past 20 years, providing a unified set of EU digital rules.
Some members of the European Parliament believe that the Digital Services Act and the Digital Markets Act are of milestone significance and will form a "combination punch" that is ready to strike and restrain the power of technology giants such as Google, Twitter, and Meta.
It can be predicted that after the implementation of these two bills, the game between the EU and American technology giants will become more intense.
It is reported that in order to better promote the implementation of the Digital Services Act and the Digital Markets Act after they come into effect, each EU member state will appoint a digital services coordinator to collaborate with EU institutions to carry out supervision. In addition, Margrethe Vestager has established a Digital Markets Act working group, which is expected to be joined by about 80 officials. Andreas Schwab, a member of the European Parliament, still thinks this is not enough and calls for the establishment of a larger special task force to "counter the strong financial power of large technology companies."
At present, just like the introduction of the "Pan-European Financial Regulatory Reform Act" during the European debt crisis in 2010 and the establishment of a regulatory agency under the European Central Bank to strengthen the importance of the regulatory system, the "Digital Services Act" and the "Digital Markets Act" will inevitably strengthen digital market supervision and promote platform compliance while providing support for the EU to establish a separate regulatory agency for large digital platforms.
Analysts pointed out that, to a certain extent, the EU's successive introduction of two digital bills has a positive effect on accelerating global digital economy legislation, protecting consumers and regulating market competition. However, it is obvious that if the EU's strong regulatory laws and subsequent supporting measures on US technology giants are implemented, it will inevitably increase trade frictions between Europe and the United States, making the prospects for trade between Europe and the United States and even the world more complicated.
Source: Legal Daily
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