Global regulation threatens to take a bite out of the FAANGs

A raft of new laws and closer regulatory scrutiny will be one of the biggest challenges for the FAANGs (Facebook, Amazon, Apple, Netflix and Google, and similar companies) in 2019 and beyond.  These companies are viewed as having increasing amounts of influence -politically and culturally-, market dominance and revenue which this places them front and centre of regulators' target lists.

Data protection has been an intense regulatory focus, particularly in Europe, of late.  The GDPR legislation has particularly affected online giants, who trade on three main inter-dependent offerings – user data, content and advertising.  The GDPR (and also the NISD, another EU-wide law focussing on IT and network security) was the first signal to US tech companies that they are expected to accept greater accountability for their European activities, whether they have a physical presence there or not.   As recent developments have proved, however, it is not the only measure being introduced to clip the wings of that little Twitter bird…

The next battlefield is harmful online content.  Controls being imposed include:

  • The Code of Practice against Disinformation – a voluntary measure entered into by online platforms and advertisers, committing to measures to tackle disinformation. Steps taken remain under review by the European Commission which has not ruled out introducing regulation if the platforms do not go further, faster by the end of 2019.
  • A proposed Regulation on the Prevention of Terrorist Content Online – this draft bill was recently approved by the European Parliament and is expected to become law during 2020.  It will impose stringent obligations upon online companies such as a duty to remove terrorist content within one hour of notification, and adopts a penalty regime reminiscent of the GDPR (e.g. fines of up to 4% of global turnover for failure to comply).
  • National laws – some countries have taken matters into their own hands.  Examples include Germany's Netz DG law, which requires online platforms to remove "obviously illegal" content within 24 hours of notification under threat of fines of up to €50m. France too has recently passed a law regulating disinformation, Australia passed a strict criminal law on content depicting violent criminal acts following the New Zealand terror attacks, and the UK has this month proposed an new regulatory framework aimed at tackling a wide range of online harms in its Online Harm White Paper. 

The above measures chip away at the long-held immunity that online intermediaries have enjoyed against liability for user-generated content they host, and the stiff penalties proposed will significantly increase such companies’ operating costs in order to ensure compliance.

Another aspect of the EU’s war with US tech is its flexing of its anti-trust muscles.  This has been witnessed in various areas , but the heftiest fines have been in relation to market dominance –such as the record €4.3 billion fine against Google for misuse of the mobile operating system, and a €1.5 billion fine also against Google last month for anti-competitive behaviour in the online advertising market.  Competition law challenges seem likely to increase, with an EU report issued in early April announcing that “vigorous competition policy enforcement” was on its way targeted at “dominant digital firms”. 

Tax is another method of attack. We’ve already seen European authorities ordering recovery of tax benefits from US tech companies (such as the €13 billion recovered from Apple by Ireland and the €250m from Amazon by Luxembourg), but again the EU has recently announced proposed changes to the taxation system including anti tax avoidance measures to be implemented in each Member State.

So what can the FAANGs do to fight back?  

  • As with disinformation, in areas where regulation doesn’t yet exist, there may be opportunities to propose voluntary measures to stem off stricter requirements and sincere commitment to such plans could do the trick. 
  • Where laws are on the horizon, engagement at EU/national policy level is the best way forward – for example, the Online Harms White Paper is short on concrete solutions and is being viewed as an open invitation by the government to work with it to identify the best solutions.
  • Paying attention to which way the wind is blowing in specific policy areas and taking steps to future-proof the business streams most affected is better than being reactive when new stringent obligations are introduced with tight deadlines for compliance. Seek advice on what’s coming down the road.
  • Be prepared to fight where it matters most. Wherever there’s legislative change, disputes inevitably arise.  Areas where this seems particularly likely include online speech (where the rights under debate are so fundamental) and competition/taxation (where the amounts at stake are eye-watering).  Time spent understanding the latest decisions from national and EU courts, and identifying the best grounds for defence, will be time well-spent.