The Walls Are Closing in on Big Tech as Global Regulators Crack Down

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  • New laws to police Big Tech are being announced by countries and regions at a rate of knots.
  • The likes of Google, Facebook, and Amazon could be fined billions of dollars under Europe's Digital Services Act and other pieces of legislation that have recently been announced.
  • Increasing competition and making online platforms responsible for the content they host are two of the main areas that the legislation targets.

U.S. tech giants have become too big for their boots and they need to be kept in line — that's the message that's been shared by governments around the world throughout 2020, with tensions building to a crescendo at the end of 2020.

For years, nations have allowed the likes of Google, Facebook and Amazon to "move fast and break things" with relatively little scrutiny or accountability. But now U.S. tech giants are being targeted more than ever by regulators in their home country, as well as in Europe and the rest of the world.

New laws to police Big Tech are being announced by countries and regions at a rate of knots that will force some of the world's most valuable companies to fundamentally change how they go about their business and make their billions. There's also talk of breaking up monopolies.

Dom Hallas, executive director at the Coalition for the Digital Economy, which is a U.K. tech lobbying group, told CNBC that other nations will likely follow in the footsteps of U.S. regulators.

"I think the game changer is the U.S.," said Hallas. "Ultimately, other jurisdictions will do what they do. If the U.S. go for them, that's the ball game. It's not clear we are quite there yet but we're certainly closer."

Europe's Digital Services Act

The European Commission, which is the executive arm of the EU, unveiled its proposals for the much-anticipated Digital Services and Digital Markets Acts on Tuesday. The proposals will only be enforced if the European Parliament votes in favor of them.

The measures are designed to "overhaul" the digital market in Europe and force tech giants to operate in new ways. The legislation, which is the biggest revision in decades, focuses on increasing competition and making online platforms responsible for the content they host.

If tech giants fail to comply, they could face fines of up to 10% of their annual turnover. For Google, that would be $16.2 billion, while for Facebook it would be $7.1 billion.

If they repeatedly engage in anti-competitive behavior then the EU could try to break them up, according to a report from The Financial Times on Tuesday.

"Big Tech must use its influence, power and potential both ethically and safely," said Tony Hughes, chief technology officer at Civica, which builds software for the public sector. "During one of the most challenging periods in human history, to move forward, both politically and economically, this is more important than ever and that includes legislation to act a solid deterrent for the misuse of information."

But Anders Borg, Sweden's former finance minister and an advisor to New York-headquartered enterprise software firm IPsoft said increased tech regulation is likely to be "counter-productive" for Europe.

"Europe has too weak an entrepreneurial climate, and underspends on STEM-education, digital infrastructure and R&D," Borg said. STEM is the abbreviation for science, technology, engineering and maths.

"Antitrust policy should be based on an assessment of consumer impact and ability to innovate," said Borg. "There is a clear risk that the regulatory ambition in the EU actually leads to less price pressure and even slower technological development."

Rich Pleeth, a former Google marketing manager who now works as a managing consultant, told CNBC that he thinks Facebook is going to be most affected by the legislation, followed by Twitter and YouTube, respectively.

"They just can't keep up with the amount of misinformation that is being shared on their sites," he said.

Ofcom fines for harmful content

Elsewhere on Tuesday, the U.K. announced that tech regulator Ofcom would fine social media firms up to £18 million ($24 million) or 10% of their annual global revenues, whichever is higher, if they fail to rid their platforms of illegal and toxic content. Executives could be held personally liable for failing to respect a legally-binding duty of care.

Social media services that host user-generated content or allow people to talk to others online will be required to remove and limit the spread of content that contains child sexual abuse, terrorist material or suicide, according to the government. They will also need to do more to ensure children aren't exposed to grooming, bullying and pornography.

Facebook, Instagram, TikTok, Twitter and other popular social networks will be required to establish clear terms and conditions which set out how they tackle content that is legal but could cause significant physical or psychological harm to adults, such as misinformation about coronavirus vaccines.

TikTok said Tuesday that it will start putting a banner on all posts that are related to vaccines. When clicked, the banner will take users to information published by reputable sources, such as the World Health Organization.  

FTC antitrust lawsuits

The Federal Trade Commission (FTC) and a coalition of attorneys general from 48 states and territories filed two separate antitrust lawsuits against Facebook last Wednesday.

The suits target two of Facebook's major acquisitions: Instagram and WhatsApp. Both lawsuits are seeking remedies for the alleged anti-competitive conduct that could result in requiring Facebook to divest the two apps.

Hussein Kanji, a venture capital investor at Hoxton Ventures in London, told CNBC that the lawsuit will likely drag on for a long time. "The FTC isn't looking for a small fine but a breakup, so it's war," he said. "I don't think we will have clarity anytime soon on how this plays out."

Pleeth said: "With Facebook's antitrust lawsuit, we're going to see a continued downward spiral in FB share price but in reality, Instagram is more valuable as a public company in its own right."

Another major battle has been brewing between Apple and developers that make apps for its App Store. Apple currently takes a 30% commission on in-app purchases but companies like Spotify and Fortnite-maker Epic Games feel this is unfair and anti-competitive. The latter has filed a lawsuit, while Apple is seeking damages for a breach of contract.

— CNBC's Ryan Browne and Meg Graham contributed to this article.

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