A Changing Digital Landscape in Europe

The U.S. Congress is debating a series of technology policies, including anti-trust regulation, a national data privacy law and ways to manage online content. Progress has been slow, as Congress seeks to find the right balance between protecting consumers and encouraging growth in an industry where U.S. companies are among the world leaders.

Meanwhile, Europe is moving ahead to remake its digital regulatory landscape. Europe has passed two major new laws: the Digital Services Act (DSA) and the Digital Markets Act (DMA). These laws are intended to address changes that have altered the EU’s digital economy in recent years, including the spread of disinformation, electoral interference and the concentration of market share in the hands of a few multinationals.

Both laws will apply to U.S. companies operating in Europe — and some provisions may be an indicator for legislative action in Washington.

Understanding the Digital Services Act (DSA)

The DSA will ban targeted advertising aimed at children and allow European governments to tell social platforms to take down illegal content, with fines that could be in the billions if companies do not obey.

Companies will have to remove illegal online products and content that promotes gender-based violence and hate speech. They will also have to provide more information about their content moderation practices and use of algorithms. Certain types of advertising, like ads based on sensitive data such as race, sexual orientation and religious beliefs, will be banned.

Understanding the Digital Markets Act (DMA)

The DMA restricts anticompetitive activity by dominant “gatekeeper” platforms and companies, prohibiting use of non-public data and pre-installation of apps and more generally forbids “self-preferencing,” with similarly large fines. The EU will publish the list of “gatekeeper” firms that are impacted by the law, but in general, it will include all companies with a market capitalization of at least €75 billion or an annual turnover of €7.5 billion.

The European Union is opening an office in San Francisco to create a dialogue with U.S. technology industry. Gerard de Graaf, currently Director for Digital Transformation at DG Connect, will head the new office, opening September 1, where he will talk to U.S. firms about how new European rules apply to them.

The two laws, if forcefully implemented, may reshape the power balance between technology companies and governments in Europe. Unlike Europe’s GDPR privacy law, which is enforced by individual member states, the DSA and DMA will be centrally enforced by the European Commission in Brussels.

Europe is also seeking to set global standards around artificial intelligence (AI) ethics. In 2021, the European Commission drafted the Artificial Intelligence Act — the first European legal and ethical framework for AI solutions. The proposal aims to establish a framework for trustworthy AI and would require AI systems to respect for democratic values, human rights and the rule of law. The specifics of the law are still being debated. The act would have an extraterritorial scope, meaning it will be applicable to non-EU companies, too.

Both the United States and Europe are seeking to increase their share of global semiconductor manufacturing. President Biden has signed into law a measure that will provide $52 billion in incentives and subsidies for companies to build semiconductor facilities in the United States. Several firms already have projects under construction or in the planning stage. Europe is also mobilizing €43 billion to attract new investment in the sector by 2030.

In other areas of tech regulation, the EU and U.S. are negotiating a new data-transfer text that would allow companies to continue to transfer data across the Atlantic. Brussels and Washington have agreed to a preliminary deal at the political level, but negotiations on the legal fine print have stalled and a final agreement may not be reached before the end of the year.

Finally, the U.S. and EU have collaborated on technology-sector sanctions against Russia resulting from the war in Ukraine. A list of advanced technologies is subject to bans on export to Russia, including semiconductors, telecom equipment, software (including for encryption), lasers, aviation and space systems and oil-refining machinery.

With other important tech players such as South Korea, Japan and Taiwan participating in sanctions, Russia is largely cut off from the global tech industry. Russia’s cloud computing centers and advanced computers, as well as its aviation, space and defense systems, all require replacements and upgrades of microprocessors, controllers, sensors and materials. A lack of access to these technologies will set back the Russian economy and military capabilities.

This article is co-authored by James Meszaros and Oliver Drewes.

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