Tech Giants Risk Breakup Under Strict EU Digital Rules

U.S. and other major tech platforms that treat their own services more favorably, at the expense of rivals, could be forced to sell businesses and pay billion-dollar fines under strict rules unveiled by the European Union.

Under the EU’s new Digital Markets Act, companies deemed to be so-called “gatekeepers” won’t be allowed to rank their offerings above rivals on their own platforms, or use competitors’ data to compete with them, according to the new regulation released on Tuesday.

Companies like Amazon.com Inc, Apple Inc. or Alphabet Inc.’s Google could face fines of as much as 10% of their revenue if they don’t comply, while a company that has repeatedly breached the rules could face orders to divest businesses, confirming a Bloomberg report on Monday. Gatekeepers will also need to inform regulators about smaller acquisitions that would otherwise fall below traditional merger review thresholds.

The separate Digital Services Act could also foresee fines as high as 6% of revenue for social media platforms if they don’t comply with orders to remove terror propaganda or other illegal posts, along with other obligations such as carrying out reviews of systemic risks to their sites. The U.K., which left the bloc earlier this year, also announced similar rules on Tuesday.

”With today’s proposals, we are organizing our digital space for the next decades,” said EU Industry Commissioner Thierry Breton.

The regulations are some of the strictest set of technology rules to be proposed by the EU and aim to quash bad behavior by powerful platforms they see as posing a threat to the bloc’s society and economic markets. They could hamstring platforms from entering into new markets and tightly control how they develop new services.

The commission declined to list companies that would be determined gatekeepers, but an internal review published separately on Tuesday showed a list of unfair practices based both on antitrust investigations and complaints raised by interviewees responding to the EU’s survey.

The study lists, among others, unfair contract terms by Apple with its app store and by Booking.com, as well as anti-competitive use of third party data by Amazon in its marketplace. It also flags Apple, Amazon and Booking as charging potentially excessive commissions.

EU officials say the gatekeeper regulation will complement antitrust regulation, and hopefully speed up investigations, by putting the onus on large players to not to engage in anti-competitive behavior instead of placing the burden on antitrust enforcers to prove their practices breach the law.

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