Big EU Brother is Watching You: Proposed Digital Services Act to increase EU oversight over tech giants

September 29, 2020

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3 min read

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What's going on here?

The European Commission is planning to propose a new Digital Services Act before the end of 2020, which would give the EU greater powers to monitor big tech companies.

What does this mean?

A new Digital Services Act would replace or amend the arguably outdated e-Commerce Directive from 2000, which was the first framework to regulate internet use. Primarily, the e-Commerce Directive laid the foundations for modern digital services, but its scope fails to address contemporary concerns, mainly surrounding the fairness of e-commerce in light of tech giants’ monopolisation.

However, the new Act would increase the authority of the executive (governmental) arm of the EU. Powers to force companies to break up or sell their European operations are on the cards if businesses are involved in anti-competitive practices. The consequence could be removal from the Single Market (the 27 EU member states’ trade agreement which seeks to guarantee free movement of goods, capital, services and labour) if their behaviour is considered severe.

What's the big picture effect?

This story highlights the increase in global tech monopolies, and the rapidly rising power that they hold. As nations have been forced into lockdown, it is no surprise that tech has seen an onslaught of business, with working from home and leisure time both on the upswing. This latest development has thrown an unwelcome spotlight on the industry.

Returning to the European matter, the proposed Digital Services Act is expected to change e-commerce in two ways:

  1. Clear rules will be put in place to confirm that digital service providers understand their responsibilities around user risk and protection of user rights;
  2. A new “level playing field” is to be established. This will address market imbalance by ensuring that dominant companies are fair, and are able to be challenged by smaller innovators and new players in the market.

What this means in practice is the Single Market remains competitive for the major players in tech, yet opens doors for new innovations. Since the birth of the e-Commerce Directive, new ways of accessing digital services have evolved in accordance with the modern consumer, and cross-border trading capacities have seen businesses gain access to new markets. A clear example of this is the rise in digital payment providers such as Klarna, who hold a 10% share in the E-commerce market in northern Europe. It is now one of the largest banks in Europe, and provides payment solutions for 85 million customers in more than 17 countries.

While an EU solution to curb tech monopolisation is paramount, it hasn’t gone unnoticed recently that tech companies are becoming hot topics of conversation among global competition regulators. Addressing whether current competition law is able to sufficiently regulate worldwide tech giants has become a pressing issue. Despite healthy Q2 results for Amazon (sales increased by 40%), Facebook (profits jumped by 98%), and Apple (raised $11.25bn in profit), the power of these titans along with Google came under heavy scrutiny in July. The argument put forward by the companies alluded to their level of innovation in comparison to smaller tech firms. It could be said that this justifies their standing in the industry and safeguards the companies against forceful dissolution. Therefore, it is perhaps unlikely that any kind of global antitrust solution will be arriving anytime soon.

The European Commission’s propositions are certainly a step in the right direction. However, the unyielding tech sector’s dominance may see changes taking far longer to be fully effective in practice than anticipated. A revival in global antitrust regulations to monitor the industry may take years to be proposed, let alone actioned in the interests of the smaller innovators.

Report written by Evangeline Taylor

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