EU Approves Sweeping Tech Regulations for Big Companies and Online Platforms

The European Union's Digital Markets Act (DMA) establishes gatekeepers with significant power over consumers and technologies, representing a regulatory approach that other countries like Australia, Japan, Korea, and the UK are considering. The US approach has been more litigation-focused rather than regulatory. The US is living in a world with far more scrutiny and regulation toward big tech companies than ever before, starting with the DMA. This creates a patchwork of 130+ competition authorities worldwide, each with different approaches, creating challenges for big companies to navigate. The US approach of litigation in courtrooms allows for more public scrutiny of facts and records compared to other jurisdictions.

Countries around the world including Australia, Brazil, Japan, South Korea, the UK, and the EU have studied digital markets, found dominant tech companies abusing their power, and crafted rules and brought lawsuits against them. The claim that these actions unfairly target American companies ignores reality—these nations are addressing monopolistic power that poses dangers to markets, democracies, and public health, consistent with what Americans want from their own government.

Digital regulation has geopolitical dimensions. Most big tech companies are based in California, USA. Europe has been more aggressive in regulating tech companies, including the first comprehensive data protection law (GDPR). The EU has applied both data protection and competition laws to US tech companies. The US and China are main competitors in artificial intelligence. During the WhatsApp privacy policy change, Brazilian authorities (ANPD, CAD, Federal Public Prosecutor's Office) worked together to modify proposed terms. Users often become products rather than customers in digital markets.

Modern technology regulation cannot be separated from geopolitics because tech giants like Meta (Facebook) and TikTok (owned by Chinese company ByteDance) have become so large that they essentially act like states themselves. When discussing technology policy, policymakers often connect American tech companies with Chinese companies, viewing them as interconnected entities. This means that moves to curb tech giants' scope or data-gathering abilities are frequently linked to diplomatic relations and national security concerns.

Regulating tech giants is an obligation due to geopolitical alignment with US hegemony and the imposition of AI visions. Europe has legal tools including the DSA and DMA, with the Court of Justice successfully challenging Google on interoperability. Digital sovereignty exists on a spectrum: complete self-sufficiency is illusory due to digital interconnection complexity, while the liberal approach relying on market power fails geopolitically. Alternative approaches include catch-up sovereignty through technology investment, technological leadership in emerging sectors like quantum computing, and regulation design to maximize economic outcomes. The real challenge is political courage to apply these regulations.

The DSA creates significant compliance costs for technology companies, which explains why there are no German equivalents of Facebook, Instagram, WhatsApp, or X. The compliance burden is so high that companies fear lawsuits and financial problems, leading them to avoid offering services in the EU market. This regulatory burden effectively prevents the emergence of domestic tech companies and creates an uneven playing field where established global platforms face legal risks while smaller local competitors cannot afford the compliance costs.

The Digital Markets Act (DMA) was designed to help EU companies compete with US tech leaders but instead creates compliance burdens that disadvantage small businesses. Small companies rely on larger platforms for offloading overhead, accessing global markets, and building customer trust. The DMA threatens to force companies to remove features protecting against bad actors, potentially steering consumers toward larger established rivals. Small businesses want platforms to provide improving tools, features, and pricing models. Europe has injected regulatory walls including the DMA, Digital Services Act, Online Safety Act, GDPR, and AI Act, creating a culture of compliance rather than opportunity and innovation.

The EU Digital Markets Act (DMA) creates a wall of anti-regulation and compliance requirements from EU government that constantly asks how government can be more involved rather than less. Small businesses need to offload overhead, have access to a global market, and maintain customer trust. The DMA threatens to change this by forcing companies to roll out the red carpet for bad actors, causing consumers to steer away from startups and small developers toward larger, more established rivals that spend millions on marketing. The first business to take advantage of the DMA's requirements wasn't some brilliant startup being kept down by big tech; it was an app called Hot Tub, a porn aggregator that can now be sideloaded and could even operate without parental controls.

The DSA's authors do not understand technology or algorithms yet believe they can manage complex systems from Brussels offices. The DSA makes the environment more controlled rather than safer, as any content not aligning with political agendas can be flagged or removed. The DSA practically eliminates competition for small companies, as only massive corporations with armies of lawyers can comply with 500-page requirements. Startups either die at launch or leave Europe entirely. The EU writes laws at a pace of 60 years while technology changes every 6 months, creating an impossible regulatory environment.

For small and medium enterprises (SMEs), targeted advertising is crucial for selling products and services online. It is already deeply embedded within the market, and changes proposed by parliamentary committees could potentially lead to disruptions. SMEs represent approximately 50,000 members with half a million jobs in Poland, and they rely on targeted advertising to reach new audiences. The cost of reaching new audiences via social media is cheaper than advertising in traditional media, making targeted advertising particularly valuable for smaller companies that cannot compete with big players who have large marketing budgets. For startups, targeted advertising is essential because they are cash-strapped with far less resources but higher ambitions than established players, and targeted ads specifically level the playing field by giving them a chance to compete. The original purpose of the E-Commerce Directive was to set up a groundwork and separate liabilities, which fostered the growth of the internet. The DSA now seems to become a catch-all bucket for everything, making it incredibly complex.

The European Union employs a multi-tiered enforcement system to ensure its rules are applied consistently across all member states and actors: the European Commission initiates infringement procedures against non-compliant member states, potentially leading to financial sanctions or court cases; the Commission can also impose direct fines on large corporations (such as Google's 2.95 billion euro penalty for anti-competitive practices); national authorities handle enforcement for smaller entities and citizens; and the European Ombudsman addresses complaints against EU institutions while the Court of Justice of the EU serves as the final arbiter for all enforcement matters.

The European Commission employs two primary enforcement mechanisms when member states fail to comply with Court of Justice rulings: requesting financial penalties from the Court to ensure compliance with interim measures, and issuing formal notices to member states that have not taken necessary measures to comply with judgments. The Commission serves as the 'guardian of the treaties' and intervenes when national authorities undermine EU law. The EU has evolved significantly since 20 years ago, growing in size, number of member states, and policies incorporated into the treaty. The Commission reacts whenever something occurs that requires intervention to protect the integrity of the EU legal framework.

The European Commission has established unprecedented mechanisms to enforce rule of law standards across EU member states. When Poland and Hungary violated democratic principles, the Commission sent formal letters questioning political agreements and initiated infringement procedures. The Commission employs 'structured dialogue' by sending written questions to governments, creating documented trails that can lead to legal proceedings. Spain faces similar scrutiny due to its proposed amnesty law, which the Commission views as potentially covering serious crimes like terrorism and high treason. The Commission can initiate infringement proceedings, which would be the third such case in EU history, with significant political and reputational consequences for the affected government.

When EU member states fail to comply with court rulings, the EU has several enforcement mechanisms available. These include financial penalties (such as the one million euro daily fine), withholding of EU funding and subsidies, and potential legal action through the European Parliament against the European Commission. The EU cannot directly send court enforcers to member states, but it can apply financial pressure through these mechanisms.

The EU employs two distinct enforcement procedures: Article 7 political procedures conducted in the Council where states vote on violations, and violation procedures conducted at the Court of Justice of the European Union. Poland's case demonstrates how Article 7 procedures can transition to judicial enforcement, resulting in daily fines of one million euros for non-compliance. The Commission can initiate procedures but cannot withdraw them once started, creating ongoing procedural pressure on member states. This system creates financial consequences for states that fail to comply with international court decisions.

The AI Act is part of a broader digital regulatory framework including DSA, DMA, and Data Governance Act. The legislative process began in 2018 with Commission strategy, followed by High-Level Group guidelines, public consultation with 600+ comments, and a 2020 White Paper with 200+ comments. The Council adopted its general approach in December 2022. The European Parliament is expected to vote in committee by late April and in plenary by end of May, with implementation expected by 2027.

The EU AI Act emerged from 2018-2020 high-level expert group recommendations on trustworthy AI, combined with EU digital future strategies. This led to multiple legislative proposals including the EU AI Act, AI Liability Act, Digital Services Act (DSA), Digital Markets Act (DMA), and Data Act, which are interconnected and building on each other.

The EU AI Act follows the standard legislative procedure for regulations, which automatically apply across all member states without requiring additional national measures. The process began with a proposal from the European Commission, followed by the Council's general approach and the Parliament's negotiating position. Due to controversial issues, political trialogues were held under the moderation of the European Commission. After five political trialogues, a political agreement was reached in December 2023 after over 30 hours of negotiation. The final text is expected by early February 2024, with adoption anticipated in early 2024 and enforcement beginning in 2026.

The EU AI Act follows the standard EU legislative procedure: The European Commission proposes the regulation, the Council of the EU (representing member states) and European Parliament review and negotiate, and after reaching political agreement, the text is refined by legal and technical experts. The final version was published on January 26, 2024, and is awaiting final parliamentary approval before publication in the Official Journal.