On September 1, 2022, the European Union will officially open a new liaison office in California’s Silicon Valley. The new office – coined the “tech embassy” – follows the European Council’s adoption of the Conclusions of EU Digital Diplomacy, which is a broad framework aimed to enhance the EU’s regulatory capacity around the world. The office is aimed to liaise with Silicon Valley tech companies affected by the EU’s two new technology regulations: the Digital Markets Act (“DMA”) and the Digital Services Act (“DSA”).
The DMA and DSA – passed by the European Commission in March and April 2022 – aim to create a safer digital space for internet users, and a more competitive digital marketplace for tech companies. Both pieces of legislation are set to go into effect this Fall, and are expected to have global implications on tech giants like Google, Apple, Meta, and Amazon.
Specifically, the DMA aims to restrict anti-competitive practices by large tech companies through new prohibitions and requirements for search engines, social networks, mobile apps, and online marketplaces. The DMA imposes, most notably, platform interoperability and data-portability requirements. For example, messaging apps from Apple, Google, and Meta platforms will be required to make “end-to-end text messaging” interoperable upon request by competing services. The DMA also prohibits the use of non-public personal data for targeted advertising without user consent, and bars online marketplaces like Amazon from “self-preferring” their own products and services over those of their competitors.
The DSA imposes new regulations on tech companies aimed at protecting internet users. The DSA prohibits, among other things, advertising that targets children, and advertising that leverages sensitive personal data like race, religion, or sexual orientation. The DSA also requires online platforms to cooperate in the identification and removal of hate speech and illegal content. In addition, the act imposes heightened obligations for “very large online platforms and search engines,” defined to include those with more than 45 million active users in Europe. Under the DSA, the very large platforms and search engines must submit to independent audits, and facilitate access to their data and algorithms to authorities and vetted researchers. Both the DMA and DSA carry big fines for non-compliance – up to 10% of worldwide sales for violating the DMA (20% for repeat offenders), and up to 6% for violating the DSA.
The DMA and DSA will transform the regulation of digital markets in the EU, and carry significant compliance risks in light of their global reach, broad scope, and the severe penalties for violations. The new legislation also raises significant data privacy and security concerns due to, most notably, the DMA’s platform interoperability and data portability requirements.
Footnotes:
- https://data.consilium.europa.eu/doc/document/ST-11406-2022-INIT/en/pdf.
- https://ec.europa.eu/commission/presscorner/detail/en/QANDA_20_2349.
- https://ec.europa.eu/commission/presscorner/detail/en/QANDA_20_2348.