About: Antitrust laws, Laws drafted by European Union

Explained: Targeting Big Tech in US, EU

In News

  • Recently, the European Union (EU) has issued two draft digital-services laws that could increase scrutiny (inspection) over big technology (Big Tech) companies.
  • The UK regulator, Competition and Markets Authority has also announced its own plans to put limits on major technology companies.
  • Around the same time in the United States, the federal government has initiated antitrust cases against Google and Facebook, and a large number of US states have collectively launched action on the two companies for a range of alleged violations.
  • The efforts from regulators in various countries is now seen as a significant change in the policy governing the technology sector.

About: Antitrust laws

  • Antitrust laws also referred to as competition laws, are laws developed by governments to protect consumers from unjust business practices and to ensure fair competition.
  • Antitrust laws are applied to a wide range of questionable business activities, including market allocation, bid rigging, price fixing, and monopolies.
  • The goal of these laws is to provide an equal business environment to similar businesses that operate in a specific industry, while preventing them from gaining too much power over their competition.
  • If these laws didn’t exist, consumers would not benefit from different options or competition in the marketplace. Furthermore, consumers would be forced to pay higher prices.

About: Laws drafted by European Union

  • The two laws drafted by European Union are — the Digital Services Act, and the Digital Markets Act.

Digital Services Act:

  • The Digital Services Act aims to create a single set of rules for the EU to keep users safe online, protect their freedom of expression, and increase the accountability of technology companies.
  • An innovative idea is to introduce measures under which the larger and more influential technology companies will have to take up more responsibility.
  • They could also face annual scrutiny of their dealings with illegal and harmful content under new rules of the European Commission, the EU’s top policy making body.
  • There will be fresh restrictions to prevent the firms from promoting their own services above competitors’ services in search results and app stores.
  • In case of non-compliance, there will be large fines up to 6 percent of a company’s annual turnover. This fine, if levied (imposed) on Facebook, would amount to over $3 billion.
  • Further, repeat offenders may have to divest (sell) certain businesses, if there is no other equally effective alternative measure available to ensure compliance.

Digital Markets Act:

  • The Digital Markets Act, focuses on the regulation of “gatekeepers”, which includes the operators of search engines, social networks, chat apps, cloud computing services, and operating systems.
  • This could cover Google, Facebook, Apple, Amazon and Microsoft.

Developments in the US

  • Recently, Texas and nine other states in the US have taken legal action against Google.
  • The states have accused Google of working with Facebook in an unlawful manner that violated antitrust law to boost its already-dominant online advertising business.
  • The states have asked Google, to compensate them for damages. They have also sought structural relief – which could potentially force the company to sell some of its assets.
  • The Texas lawsuit is the second major complaint from regulators against Google and the fourth in a series of federal and state legal suits (cases) aimed at controlling violations by Big Tech platforms.

Difference between EU and US actions

  • According to analysts, the US broadly seeks penal action (penalty) for past violations, whereas the action by the EU has a wider scope, and aims to develop rules for future operations.
  • Experts believe that the motivation for taking action against Big Tech is lower in US compared to EU, as almost all the firms are American.
  • There is also an increasing view in the US in recent months, that a dominant US tech sector is a strategic advantage for US against China.
  • According to experts, this view is reducing the impact of efforts to increase accountability of Big Tech companies that control digital commerce and have the ability to manipulate what users read and watch.

Increasing scrutiny in India

  • In India as well there is increasing regulatory scrutiny of big technology firms.
  • In November, the Competition Commission of India (CCI) initiated an investigation into alleged abuse of dominant position by Google to promote its payments app, Google Pay.
    • Abuse of a dominant position occurs when a dominant firm in a market, takes various actions to eliminate or reduce competition.

  • Earlier in October, the CCI had received reports of Google abusing its dominant position in the Android-television market by creating barriers for companies that wanted to use or modify its Android operating systems for their smart TVs.
  • In June 2019, the CCI had said that Google had abused its dominant position in the domestic smartphone market.
  • It did this, by reducing the ability of mobile phone markers to opt for alternate versions of its Android mobile operating system. CCI had then asked for a detailed investigation.
  • In 2018, CCI had launched an investigation and fined Google Rs 136 crore for search bias and giving disproportionate space to its flights option on its search homepage, over other rivals in the market.
  • However, the regulator’s order was stayed by the National Company Law Appellate Tribunal, where the case is being heard.

Future Outlook

  • Both the proposed EU laws will only be passed by EU after they undergo a consultation process, which could take years.
  • Moreover, the EU laws would come into force only after the Brexit transition period has ended.
  • Also, antitrust action takes years to complete. For example, Microsoft’s antitrust case began in 1998, and reached a resolution only in 2004.
  • However, it is clear that the new rules in the EU could force tech companies to change some of their practices across countries. These changes could potentially have an impact on more than the 27 countries and 450 million people in the European Union.

 International Relations

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