The European Union is on a mission to curb the power of big tech. The block has been extinguished in recent years huge antitrust fines to Silicon Valley giants, set global data privacy standards, and proposed a set of digital prescriptions. Still, critics say the rules have been ineffective.
An important part of the plans is the new Digital Markets Act (DMA). The groundbreaking legislation prohibits platforms from ranking their own products more favorably than those of third parties, and from processing data collected from various services. Fines for single violations can be up to 10% of offenders’ global turnover and up to 20% for repeat violations. The new rules will come into effect in May 2023.
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The law is the cornerstone of two complementary objectives for the EU: to reduce the dominance of big tech and to boost European challengers.
To find out how these plans will unfold next year, Applied Sciences asked a range of technical experts about their predictions for 2023.
The impact of the DMA was a common topic in our experts’ forecasts. Amanda Le PapeCOO of secure messaging and collaboration app Elementand Matt Hodgsontechnical co-founder of the Matrix open standard, both lobbied for the regulation. The duo is optimistic about the impact on competition.
“Big tech is being forced to embrace interoperability, which will unleash a new era of innovation,” said Le Pape. “Consumers and businesses get more choice, better features and improved privacy. Messaging is finally catching up with the openness of the internet and e-mail.”
Hodgson, meanwhile, pointed to the effects on opening up access.
“The DMA stipulates that big tech must open up its APIs to enable widespread interoperability,” he said. “It’s a huge step forward, but the best interoperability comes from a widely accepted open standard rather than a maze of bridges – as evidenced by both the web and email.”
“The DMA will enforce a behavior change.
Supporters and opponents agreed that the DMA will have major consequences. Geoff Blaber, the CEO of analyst firm CCS insightforesees that its influence will extend far beyond European borders.
“We predict that the DMA will force a behavioral change among major technology players in Europe, which is likely to spill over into business operations globally,” Blaber wrote in a recent report. “It will also further motivate US politicians to avoid a scenario where Europe sets the antitrust agenda without US intervention. Some degree of harmony and consistency between US and EU law would be a clear advantage, but is by no means assured.”
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Increased competition could leave gaps for European challengers to enter. However, the EU has traditionally struggled to convert its leading research into major technology companies.
One barrier is the notoriously slow and inefficient transfer of IP from academia to the economy. This problem is illustrated by the fact that the EU produces more research papers than the US, but makes far fewer commercial applications of them.
According to Luigi Congedoventure capitalist and innovation advisor at marketing company Brightnessthis weakness can be mitigated by changing the EU’s investment framework. This, he says, could encourage more effective technology transfer — and prevent promising startups from being acquired by Silicon Valley giants.
“We need to create our Google, Facebook and Microsoft and, to do that, create a better environment to compete and do business across the continent,” he said. “If we fail to create a truly European platform for innovation and instead maintain the current country-based model, all of our emerging companies will eventually become M&A targets for US multinationals.”
“I expect more openness.
Another problem for technology companies in the EU is integration between member states. Companies have long complained about the complexity of navigating union tax and labor requirements. Congedo predicts the bloc will address these challenges.
“I expect more openness will make recruiting and hiring easier in all states, and also for foreigners such as US companies to hire in the EU,” he said.
In its effort to encourage home-grown businesses, the EU has focused legislation on specific technical areas. A notable example is the European Chip Act. The framework, proposed in February 2022, aims to encourage semiconductor manufacturing in the Union.
As of 2022, Europe will account for less than 10% of global semiconductor production. The European Commission wants to increase that to 20% by investing 43 billion euros in the sector.
Mark Lippett, CEO of chip specialist XMOS, has mixed expectations of the legislation. While he welcomes the investment, he fears the bloc will cloak the industry in bureaucratic red tape.
“Providing finance to companies in a supply-threat environment offers some obvious safety precautions in times of trouble,” he said. “However, EU projects can become somewhat mired in bureaucracy, with the result that speed can be sucked out.”
“This will stimulate innovation.
Another area of focus for the EU is artificial intelligence. The European Parliament is currently finalizing its flagship AI law, which will impose strict rules on high-risk artificial intelligence systems.
IT companies hope that the legislation will stimulate European innovation. Matt Peake, Global Director of Public Policy at Onfidoan ID verification company, believes it can provide regulatory clarity, without the burden of excessive compliance and operational costs.
“This will ultimately help drive innovation in AI, helping to reduce bias and drive more inclusive online services,” he said.
Ultimately, the EU hopes to stimulate innovation by leveling the playing field. It is an approach that attracts imitators all over the world.
“The question is whether innovation is best driven broadly through open competitive marketplaces or is defined by a minority of platforms operating at significant scale,” said Geoff Blaber, CEO of CCS Insights. “The consensus has undoubtedly shifted to the former.”