The European Union has set itself the task of curbing the power of Big Tech. In recent years, the block has dealt out high antitrust fines to the giants of Silicon Valley global data protection standards, and proposed a set of digital regulations. However, critics say the rules have been ineffective.
Analysts claim Legislation has failed to protect competition while giving business Ways to evade enforcement. In 2023, the bloc has big ambitions to change that.
A key part of the plans is the new Digital Markets Act (DMA). The landmark legislation prohibits platforms from ranking their own products cheaper than third-party ones and from processing data collected from different services. Fines for single violations can reach 10% of the offender’s worldwide revenue, and up to 20% for repeated violations. The new rules will apply from May 2023.
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The law is the cornerstone of two complementary goals for the EU: reducing the dominance of big tech companies and boosting European challengers.
To find out how those plans will play out over the next year, TNW asked a number of technology experts for their predictions for 2023.
The impact of the DMA has been a common theme in our experts’ forecasts. Amandine the PopeCOO of a secure messaging and collaboration app elementand Matthew Hodgsontechnical co-founder of matrix open standard, both have campaigned for regulation. The duo is optimistic about the impact on competition.
“Big Tech is being forced to embrace interoperability, which will usher in a new era of innovation,” Le Pape said. “Consumers and businesses will have more choice, better features, and improved privacy. Messaging is finally catching up with the openness of the web and email.”
Amandine Le Pape, COO of Element.
Hodgson, meanwhile, pointed to the implications of opening up access.
“The DMA dictates that big tech must open up its APIs to enable broad interoperability,” he said. “It’s a big step forward, but the best interoperability comes from a widely adopted open standard and not from a tangle of bridges – as both the web and email demonstrate.”
“The DMA will force a change in behavior.
Proponents and opponents alike agreed that the DMA will have profound implications. Geoff Blaber, CEO of the analyst firm CCS insightsees its influence far beyond the European borders.
“We anticipate that the DMA will force a change in behavior at large technology companies in Europe that is likely to impact business operations globally,” Blaber wrote a recent report. “It will also further motivate US politicians who want to avoid a scenario in which Europe sets the antitrust agenda without US involvement. A certain degree of harmony and coherence between US and EU legislation would be a clear advantage, but is by no means guaranteed.”
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Increasing competition could leave gaps for European challengers to enter. However, the EU has historically struggled to turn its world-leading research into big tech companies.
One obstacle is the notoriously slow and inefficient transfer of intellectual property from academia to business. This problem is illustrated by the fact that the EU produces more research than the US, but converts far less into commercial applications.
Corresponding Luigi is leavingVenture capitalist and innovation consultant at a marketing firm clarity, this weakness can be reduced by changing the EU investment framework. This, he argues, could encourage more effective technology transfer — and prevent promising startups from being acquired by Silicon Valley giants.
“We need to build our Google, Facebook and Microsoft and create a better environment for them to compete and do business across the continent,” he said. “If we fail to create a true European platform for innovation and instead maintain the current ‘country-based model’, all of our emerging companies will eventually become M&A targets for American multinationals.”
“I expect more openness.
Another issue for technology companies in the EU is integration between member states. Businesses have long complained about the complexity of dealing with the union’s tax and employment rules. Congedo predicts the bloc will address these challenges.
“I expect more openness to facilitate recruitment and hiring in all states, and also for foreigners like American companies to hire in the EU,” he said.
Luigi Congedo, venture capitalist and innovation advisor at Clarity.
In an effort to encourage local businesses, the EU has targeted legislation at specific areas of technology. A notable example is the European chip law. The framework, proposed in February 2022, aims to boost semiconductor production in the Union.
As of 2022, Europe will account for less than 10% of global semiconductor production. The European Commission wants to boost that to 20% by investing €43 billion in the sector.
Mark Lippett, CEO of the chip specialist XMOS, has mixed expectations of the legislation. While welcoming the investment, he worries that the bloc will blanket the sector in red tape.
“Providing finance to businesses in an environment threatened by supply shortages offers some obvious resiliency in tough times,” he said. “However, EU projects can get bogged down in bureaucracy and thus slow down.”
“This will help drive innovation.
Another focus area of the EU is artificial intelligence. The European Parliament is currently finalizing its flagship AI law, which will set strict rules for high-risk artificial intelligence systems.
IT companies hope the legislation will boost European innovation. Matt Peake, Global Director of Public Policy Onfidoan ID verification company, believes it could provide regulatory clarity without the burden of excessive compliance and operational costs.
“This will ultimately help drive innovation in AI, which will help break down prejudice and drive more inclusive online services,” he said.
Ultimately, the EU hopes to stimulate innovation through a level playing field. An approach that is being copied around the world.
“The question is whether innovation is best fostered broadly through open, competitive marketplaces or driven by a minority of platforms operating at significant scale,” said Geoff Blaber, CEO of CCS Insights. “The consensus has undoubtedly shifted towards the former.”