If enacted — a process that could take years — the rules would touch every company that conducts business on the Internet within the 27-nation European Union, from the smallest to the gargantuan. The very biggest companies, almost all of them American, would be singled out for particularly aggressive rules. Enforcement — at its most extreme — could come in the form of breaking up businesses.
“The two proposals serve one purpose: to make sure that we, as users, have access to a wide choice of safe products and services online. And that businesses operating in Europe can freely and fairly compete online just as they do offline,” said European Commission Vice President Margrethe Vestager, a Danish politician who has pursued aggressive regulation of the digital world during her six years as the E.U.’s digital enforcer, in a statement. “We should be able to do our shopping in a safe manner and trust the news we read. Because what is illegal offline is equally illegal online.”
Tuesday’s proposals are part of a trifecta of European initiatives that take aim at digital giants and could pose challenges for President-elect Joe Biden, who has promised a fresh U.S. effort to regulate the digital world but may want to move in a different direction than Europe.
Policymakers are trying to sort out the implications of a July ruling by Europe’s highest court that may force U.S. companies to overhaul how they handle the data of E.U. customers. And the E.U. is seeking to impose a new tax on digital businesses that could unsettle Washington, though E.U. policymakers say they hope to do so in cooperation with the White House and not in opposition to it.
All three E.U. initiatives are already the subject of a furious transatlantic lobbying effort, as companies and advocates seek to shape the digital world for years to come.
Europe has regulated tech companies more aggressively than the United States has. But it has often done so after-the-fact, through antitrust measures that punish behavior that has already taken place. Vestager has sought huge fines against some of the biggest tech companies — but her efforts at times have been batted down by courts. Skeptics of the current approach say that the damage is often done before the enforcement comes, since smaller companies that have been locked out of markets cannot easily have that access restored.
The new measures would create ground rules proactively, seeking to shape how businesses grow and make strategic decisions.
The E.U. unveiled the proposal less than a week after the U.S. government and 48 attorneys general filed a landmark antitrust lawsuit against Facebook, setting the stage for its possible breakup, a marker of the growing skepticism about digital giants on both sides of the Atlantic.
The proposal would make major online platforms legally responsible for the content that users post on their services, requiring them to take far more active measures to police abuse, misinformation and other legal violations than they do now. The goal is to empower E.U. countries to counter illegal content online.
Companies that allow other businesses to sell services through their platforms would have to allow equal access to their rivals rather than prioritize their own products. Amazon would need to give equal treatment to third-party sellers on its Marketplace. (Amazon founder Jeff Bezos also owns The Washington Post.) Apple could need to allow other companies to use the payment technology built into its iPhones, instead of locking it to Apple Pay.
And digital giants would have to make more of their algorithms transparent, to allow independent scrutiny of their business practices. Violations could be punished with fines of up to 10 percent of their European business turnover. And repeated violations could be punished with a breakup.
The rules could have the effect of taking back some ground for Europe in the digital economy, a field where its companies have lagged behind the United States.
With E.U. policymakers facing doldrums elsewhere, including in Brexit negotiations and their handling of the pandemic, leaders presented the tech proposals as one of the most important focuses of their policymaking for the coming years. Since they are moving faster than the United States, some policymakers hope that they will set the standard across the world.
“Since the global market is adopting our standards, if we push forward, we’ll be the first ones crafting the rules,” said Eline Chivot, a senior policy analyst at the Center for Data Innovation, a Brussels think tank, describing some of the European thinking on the area. “Everyone will follow our lead.”
Experts said the effort is not directly solely at U.S. technology giants. Many companies that operate solely within Europe would also have to revisit their business practices. Policymakers are also hoping to regulate Chinese businesses as they expand their presence within the European Union.
“The E.U. at some point has woken up to the fact that all of this digital stuff is of great strategic importance,” said Christopher Kuner, a law professor and director of the Brussels Privacy Hub, a research center at the Free University of Brussels. “The E.U. has no military clout, but where it does have a lot of clout is regulatory areas.”
Already, the E.U. has forced significant changes in behavior with a 2018 legal measure on data privacy that gives European users much more control over how their data is used, stored and sold by companies.
Privacy advocates complain that enforcement has been relatively lax so far — a criticism that was in some ways punctuated by an announcement on Tuesday that the very first fine for a violation of the rule was issued. Ireland’s data regulator issued a $550,000 fine against Twitter for breaking data privacy rules – a drop in the bucket for a company that reported $936 million in revenue in the third quarter of 2020 alone.
Tuesday’s E.U. proposal would result in far more sweeping changes than those created by the 2018 effort, known formally as the General Data Protection Regulation.
Birnbaum reported from Riga, Latvia. Quentin Ariès in Brussels contributed to this report.