EU Passes Law to ‘Rein In’ Big Tech’s Domination Over Smaller Players

European Union lawmakers hailed a “new era in tech regulation” after passing legislation Friday that would enable massive fines on dominant players such as Alphabet's (GOOG) Google and Amazon (AMZN).

The Digital Markets Act has been cited by lawmakers as a major part of the EU’s plans to regulate the internet, alongside more targeted laws for specific innovations like cryptoassets.

The new law aims to help smaller players compete with the big beasts – but has raised hackles in the U.S., whose companies the law mostly targets.

Under the rules, finally hammered out in an eight-hour meeting between lawmakers and governments Thursday night, Google and Meta (FB) could face restrictions on their ability to issue targeted ads, Apple (AAPL) could need to offer app developers fair access to features like the iPhone’s near-field communication chip, and texting services like Meta’s WhatsApp and Apple’s iMessage will have to work together with smaller platforms.

Any tech giant that ranks its own products higher than competitors, misuses personal data or otherwise offers unfair access could face a merger ban, a forced break-up or fines as high as 20% of annual worldwide turnover.

“For companies that play a role as ‘gatekeepers,’ the Digital Markets Act will set the rules of the game,” EU Competition Commissioner Margrethe Vestager told reporters Friday, comparing the law to previous attempts to break up monopolies in sectors like telecoms, transportation and banking.

Agreement on the law “shows willingness for our democracy to say we will rein this in,” she added. “We will show the market is open and contestable.”

Vestager has taken a slew of high-profile digital antitrust cases. In 2018 she fined Google 4.34 billion euros ($4.78 billion), saying that requirements to install Google search on Android phones was unlawful. The company has challenged that finding in EU courts – but Brussels is tired of simply spotting and correcting individual cases of market malpractice.

“When things become systemic, we need regulation as well,” Vestager said.

Lead lawmaker Andreas Schwab, who negotiated for the European Parliament on the law, on Friday told reporters the plans were a “new era in tech regulation,” but added that he didn’t want to see the EU digital market break off from the rest of the world as a result of the new rules.

The plans, alongside a related, not-yet-agreed law known as the Digital Services Act, were in December criticized by U.S. Secretary of Commerce Gina Raimondo, who said she had “serious concerns that these proposals will disproportionately impact U.S. tech firms.”

The new law was hailed by consumer organizations for its potential to promote innovation.

“This legislation will rebalance digital markets, increase consumer choice and put an end to many of the worst practices that Big Tech has engaged in over the years,” said Ursula Pachl, deputy director general at Brussels consumer lobbyists BEUC in an emailed statement, citing practices like app stores that force the use of proprietary digital payment services.

But big internet players remain understandably skeptical. DIGITALEUROPE, a Brussels lobby group that represents all the major big tech companies, expressed reservations about the newly agreed framework.

“The aim of creating fairness and contestability is certainly valid,” Director-General Cecilia Bonefeld-Dahl told CoinDesk in an emailed statement, but said that proposals on requiring sharing of data and the interoperability of services “lack clarity” and still need more work.