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Big US tech companies face new EU regulations

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CNN

The world’s biggest tech companies must comply from Friday with a sweeping new EU law that affects everything from social media moderation to targeted advertising and counterfeit goods in e-commerce – with possible ripple effects for the rest of the world.

The EU’s unprecedented measures on online platforms will apply to companies such as Amazon, Apple, Google, Meta, Microsoft, Snapchat and TikTok, among others, reflecting one of the most comprehensive efforts and more ambitious moves by policymakers to regulate tech giants through legislation. This could result in fines for some companies and software changes affecting consumers.

The rules aim to address some of the most serious concerns raised by criticism of big tech platforms in recent years, including the spread of misinformation and misinformation; possible damage to mental health, especially among young people; burrows of algorithmically recommended content and a lack of transparency; and the distribution of illegal or counterfeit products in virtual markets.

Although the European Union’s Digital Services Act (DSA) was passed last year, businesses have had to prepare for its application so far. Friday marks the arrival of a key compliance deadline – after which technology platforms with more than 45 million users in the EU will have to meet the obligations set out in the law.

The EU also says the law aims “to establish a level playing field to foster innovation, growth and competitiveness both within the European single market and globally.” This action reinforces Europe’s leading position in the fight against the power of big American technology companies.

For all platforms, not just the largest ones, the DSA prohibits data-based targeted advertising aimed at children, as well as targeted advertising aimed at all Internet users based on protected characteristics such as political affiliation, sexual orientation and ethnicity. The restrictions apply to all types of online advertising, including commercial advertising, political advertising and topic advertising. (Some platforms had already implemented restrictions on targeted advertising based on protected characteristics in recent years.)

The law prohibits so-called “dark patterns,” or the use of subtle design cues that may be intended to trick consumers into giving up their personal data or making decisions other than a company might prefer. An example of a dark pattern commonly cited by consumer groups is where a company attempts to persuade a user to opt in to tracking by highlighting an opt-in button with bright colors, while simultaneously minimizing the opt-in option. indent by minimizing the font size or location of this choice.

The law also requires all online platforms to provide users with ways to report illegal content and products and to appeal content moderation decisions. And it forces companies to state their terms of service in an accessible way.

For larger platforms, the law goes further. Companies designated as very large online platforms or very large online search engines will be required to undertake independent risk assessments focusing, for example, on how bad actors might attempt to manipulate their platforms, or use them to interfere with elections or to violate human rights. and companies must act to mitigate these risks. And they will have to create repositories for the advertisements they have shown and allow the public to inspect them.

Only a handful of companies are considered by law to be very large platforms. But the list finalized in April includes the most powerful tech companies in the world, and for those companies breaches can be costly. The DSA allows EU officials to impose fines of up to 6% of a very large platform’s annual worldwide turnover. That could mean billions in fines for a company as big as Meta, which reported revenue of more than $116 billion last year.

Companies have spent months preparing for this deadline. Just this month, TikTok rolled out a tool to report illegal content and said it would give EU users specific explanations when their content was removed. He also said he would stop serving ads to teenagers in Europe based on data collected about them by the company, all to comply with DSA rules.

“We support the aims of the DSA and the creation of a regulatory regime in Europe that minimizes harm,” Nick Clegg, Meta’s chairman of global affairs and former deputy prime minister of the United Kingdom, said in a statement on Tuesday. He said Meta assembled a team of 1,000 people to prepare for the demands of the DSA. He pointed to several efforts the company is making, including limits on the data advertisers can see about teens between the ages of 13 and 17 who use Facebook and Instagram. He said advertisers can no longer target teens based on their activity on these platforms. “Age and location are now the only information about teens that advertisers can use to show them ads,” he said.

In a statement, a Microsoft spokesperson told CNN that the DSA deadline “is an important step in the fight against illegal content online. We are aware of our increased responsibilities within the EU as a large technology company and continue to work with the European Commission to meet the requirements of the DSA.

Snap, Snapchat’s parent company, told CNN it is working closely with the European Commission to ensure the company complies with the new law. Snap has appointed several dedicated compliance staff to check whether it is meeting its obligations, the company said, and has already implemented several safeguards.

And Apple said in a statement that the DSA’s goals “align with Apple’s goals to protect consumers from illegal and harmful content.” We are working to implement the DSA requirements with user privacy and security as our North Star continues.

Google and Pinterest told CNN they are also working closely with the European Commission.

“We share the DSA’s goals of making the internet even more secure, transparent and accountable, while ensuring that European users, creators and businesses continue to enjoy the benefits of the web,” a Google spokesperson said. .

A Pinterest spokesperson said the company would “continue to work with the European Commission on the implementation of the DSA to ensure a smooth transition to the new legal framework.” The spokesperson added: “The well-being, security and privacy of our users are a priority and we will continue to pursue our efforts. »

Many companies should be able to comply with the law, given their existing policies, teams and oversight tools, according to Robert Grosvenor, London-based managing director of consultancy Alvarez & Marsal. “Europe’s biggest online service providers aren’t starting from scratch,” said Grosvenor. But he added: “Whether they are ready to become a highly regulated industry is another matter. »

EU officials have said they will screen the companies for any breaches. Earlier this summer, European officials conducted preemptive “stress tests” on X, the company formerly known as Twitter, as well as Meta and TikTok, to determine whether the companies were ready to comply with the DSA. .

For much of the year, EU Commissioner Thierry Breton publicly reminded X of its upcoming obligations as the company downgraded some of its content moderation practices. Even as Breton concluded that X was taking its stress test seriously in June, the company had just lost a senior content moderator and pulled out of a voluntary EU misinformation pledge that , according to European officials, would be part of any compliance assessment of a platform. with the DSA.

X told CNN ahead of Friday’s deadline that he was on track to comply with the new law.

Analysts predict the EU will monitor the situation even more carefully after the deadline – and some hope the rules will encourage tech platforms to voluntarily replicate their practices in the EU around the world or spur policymakers to adopt measures similar.

“We hope these new laws will inspire other jurisdictions to act because they are, after all, global companies that apply many of the same practices around the world,” said Agustin Reyna, Head of Legal Affairs and economics at BEUC, a European consumer advocacy group. . “Europe led the way, but we need other countries to win the game against the tech giants. »

Amazon has already attempted to challenge the very large platform label in court, arguing that the DSA requirements are geared towards advertising-based online speech platforms, that Amazon is a retail platform, and that no of its direct competitors in Europe has been labeled in the same way. although it is bigger than Amazon in the various EU countries.

The legal fights could be the first major test of the DSA’s durability in the face of Big Tech’s enormous resources. Amazon told CNN it plans to abide by the EU General Court’s ruling in any case.

“Amazon shares the European Commission’s goal of creating a safe, predictable and trusted online environment, and we are investing significantly in protecting our store from bad actors and illegal content and in creating a a trustworthy purchase,” an Amazon spokesperson said. “We built on this solid foundation for DSA compliance. »

TikTok did not immediately respond to a request for comment on this story.

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