Leaked draft EU law reveals tech giants could face huge 6% turnover fines if they don't play by Europe's rules

As UK govt mulls eye-watering 10% penalties for goliaths that don't scrub away illegal content


Tech giants Google, Facebook, Amazon and Apple will face massive fines under proposed European Union rules, up to six per cent of annual turnover, if they abuse their market dominance to crush competition.

That’s the headline figure in the draft Digital Services Act, which is due to be unveiled officially Tuesday after five years of work, but a leaked copy of which was shared online on Monday. It affirmed the tech industry’s fears of severe sanctions. In the case of Google, a six per cent annual turnover fine would amount to $9.6bn.

“The Commission may impose on the very large online platform concerned fines not exceeding 6 per cent of its total turnover in the preceding financial year where it finds that that platform, intentionally or negligently: (a) infringes the relevant provisions of this Regulation; (b) fails to comply with a decision ordering interim measures under Article 55; or (c) fails to comply with a voluntary measure made binding by a decision pursuant to Articles 56,” the proposed text reads.

In addition, the companies could be fined up to one per cent of their annual turnover if they provide “incorrect, incomplete or misleading information” to European investigations. Together they put tech giants on the line for tens of billions of dollars in fines if they don’t play by EU rules.

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Twitter, Mozilla, Vimeo slam Europe’s one-size-fits-all internet content policing plan

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The regulation is the result of what the draft said has been the failure of the EU’s e-Commerce Directive, passed in 2000, to deal with “the dynamic growth of the digital economy and the appearance of new types of service providers” – something it puts down to “legal fragmentation.” The idea of the Digital Services Act is to introduce a set of standards across Europe while allowing the different EU member states to set the exact definitions of things like illegal content.

As a result, for example, the proposed law doesn’t differentiate between different types of content. Terrorist images, child abuse images, copyright, defamation and so on are all just content with nation states left to draw distinctions.

Pain point

Article 55 refers to interim measures that the EU can place against a tech giant – rather than waiting for the lengthy regulatory process to play out – and Article 56 refers to commitments made by companies to the EU. The rules are designed to make it painful financially for US-based giants to move policy goalposts or stretch out proceedings.

There is much more in the draft, including requirements for greater transparency in advertising, requirements to tackle disinformation, illegal content, content moderation and much else. The overall goal is to “set a robust and durable governance structure for the effective supervision of providers of intermediary services,” the act says.

The publication of the act is just the first step in what could be a lengthy process as the rules pass through the European Commission and European Parliament for review and approval, but it is the first critical draft. Tech giants have already responded by flooding Brussels with lobbying money and drawing up attack plans.

Even before it’s been published, the internet industry is worried about what the impact may be – and it’s not just the likes of Google and Facebook. Internet infrastructure companies have pleaded with the EU not to put them in the same bucket as Facebook and friends, and smaller platforms like Twitter, Vimeo and Wordpress are worried about harmful content been seen as “a solely stay up-come down binary” which could see them disadvantaged compared to the giants. ®


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