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How the EU will change big tech

No other governing body has been as ambitious at passing regulation against big tech as the European Union. Case in point, it just passed the AI Act last week, the world's first AI regulation.

The EU’s raft of regulations not only has implications for its member countries and their citizens, but also for lawmakers around the world who are considering similar legislation, for global tech companies who need to comply, and for everyday consumers like us.

This week we’re exploring the global consequences of the EU's big regulatory push: how it’s worked and how it’s ushering in the era of responsible tech.

// The EU Laws

Where there is a risk of tech harm, there is an EU regulation.

• General Data Protection Regulation (GDPR): Effective in 2018, GDPR was designed to enhance an individual’s control and rights over their data. It is considered the world’s strongest set of data protection rules, and has changed how businesses globally process and handle data. Think of the privacy pop-ups when you first visit a website as the far-reaching impacts of this legislation.
• Digital Services Act (DSA): Approved in 2022, the DSA will become effective in 2024. Its goal is to moderate illegal content online, which means it regulates and enforces how online platforms, social media sites, search engines, and marketplaces manage their content, navigate illegal content and hate speech, address disinformation, and promote safety for children. 
• Digital Markets Act (DMA): Effective earlier this year, the DMA aims to create competitive digital markets in Europe by preventing big tech companies from abusing their power and enabling smaller tech companies to compete. The DMA targets 22 platforms run by six major tech firms: Alphabet, Amazon, Apple, ByteDance, Meta, and Microsoft.
• Artificial Intelligence Act (AI Act): The AI Act just passed last week. It is a legal framework that classifies AI systems by risk and strengthens rules around data quality, transparency, human oversight, and accountability of major AI systems.

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Between 2017-2019, the EU has fined Google for a total of $8 billion.

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// The response from big tech

The European regulations have changed how tech firms operate.

• Lawsuits and lobbying: Tech firms are filing lawsuits (Apple filed a challenge against being included in the DMA last month) and increasing lobbying efforts in the EU. Tech companies spent €113 million a year this year on digital lobbying in the EU, an increase of 16% since 2021.
• Making platform changes: Meta was forced to delay the launch of its microblogging platform, Threads, in Europe so it could ensure compliance with the region’s regulations. To align with the DMA and DSA, Meta will allow EU users the choice (and the privacy) of using Threads purely for consumption without a profile.
• Paying fines: Big tech companies have paid monstrous fines for failing to comply with regulations. Earlier this year, Meta was issued a €1.2 billion fine for non-compliance with GDPR. As part of a suite of antitrust lawsuits between 2017-2019, the EU has fined Google for a total of $8 billion for throttling competition and reducing consumer choice.

// Challenges of implementation & enforcement

The EU is flexing its lawmaking muscles, but implementation and enforcement have been challenging.

• The newly-passed DSA requires tech companies to submit regular transparency reports, but the quality and granularity of these reports vary dramatically, hampering enforcement.
• At the same time that the EU is advancing aggressive antitrust regulation with its DMA, the AI Act could unintentionally cement the tech firms with the most powerful AI as long-term incumbents.
• An article in Foreign Policy argues that GDPR has been flawed from the beginning and “a disaster in practice,” and an analysis from the Center for Strategic & International Studies cited a list of ongoing challenges—from enforcement to stifling business growth and innovation.

// The global implications of EU regulations

The EU regulations are setting global precedents that impact lawmakers, companies, and users around the world.

• The Brussels Effect: The Brussels Effect is the dynamic where corporations end up complying with EU laws even outside the EU. When the most stringent regulations become globalized, it’s easier for tech firms to comply with such laws than it is to comply with dozens of different regulatory regimes (a similar dynamic happens with California laws in the US). In this way, the EU’s regulations are not just governing behavior within the Union, but setting global precedents. It could become difficult for Meta and Google to defend their practices in the US when they behave differently in the EU.
• Clarifying its global role: One analysis in Foreign Policy is that the EU has simply conceded that it has lost the competition for tech innovation to the United States, and is therefore choosing to position itself as a leading regulator of American firms (of the 22 core platforms the DMA seeks to regulate, 21 are American, and one is Chinese). The analysis suggests that new laws like the AI Act could have further unintended consequences by stifling home-grown tech innovation across the continent and leading to a brain drain of talent.
• Domestic politics in the US: The US has failed to match the EU in terms of federal regulations against big tech. Lobbying, polarization, and different foundational laws like Section 230 have made it harder to pass federal laws. But the Brussels Effect might lead to better behavior by big tech firms in the US, even amidst the slow and sclerotic regulatory environment in Washington.

With a presence on both sides of the Atlantic, Project Liberty is advancing responsible tech research and innovation at US universities like Georgetown, MIT, Harvard, and Stanford, and European Universities like Sciences Po in Paris. Earlier this year, we hosted the Responsible Innovation Day in Paris aimed at fostering a collaborative dialogue to shape responsible and ethical technology development and use.

Throughout 2023, we’ve been tracking the growing swell of tech regulation, and we are eager to support the transition, led by the EU, from an unregulated era of big tech to a regulated era of responsible tech.

Project Liberty news

// Project Liberty’s CEO Martina Larkin shared her thoughts with The Next Web on how a decentralized internet will give power back to the people. 

// Founder Frank McCourt joined the hy podcast to discuss why we need a new internet protocol.

Other notable headlines

// 🤳 According to an article in The New York Times, Russia’s latest propaganda tactic is to create fake videos of American Celebrities like Taylor Swift, Beyoncé, and Justin Bieber making pro-Russia claims.

// 📱 After investigators with the state of New Mexico created test accounts with AI-generated photos of kids, they were deluged with sexual propositions and adult sex content. An article in The Wall Street Journal reported on how Facebook and Instagram steers predators to children.

// 🇬🇧 An article in iNews reported that social media is likely behind a record rise in extremism in schools, according to the UK’s leading terror expert.

// 🚄 An article in The Verge explored how engineers and major companies are pushing a technology called L4S that could make the web feel dramatically faster.

// 📝 An article in Project Syndicate discussed how AI’s copyright problem is fixable. Regulation is needed to hold tech companies accountable to respect copyright laws and compensate authors.

// 🏫 Big Tech funds the very people who are supposed to hold it accountable, according to an article in the Washington Post. As big technology companies like Google and Meta face increasing criticism from researchers, they are expanding their influence in academia.

// 🖥 According to an investigation by The Markup, across the rural South, 38% of Black households don’t have home internet, a higher percentage than White people in the same region and the national average.

// 🇪🇺 After the EU passed the AI safety act, an article in the Economist explored the implications and analysis of the world’s first AI regulation.

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