As promised, the European Commission is getting tough on big tech. Buoyed by what it sees as the successful implementation of the General Data Protection Regulation, or GDPR, regulators are now going full tilt with their feistier legislation on anti-competitive behavior and improper use of personal data.
Europe’s efforts are way ahead of those in the US, with Congress yet to pass any legislation on data privacy, online child protection or abuses of artificial intelligence.
However, the trade-off, keenly emerging now, is that Europeans may find themselves months or years behind when it comes to having access to the latest technologies. Some products may never be able to launch in Europe at all.
Last week, Apple Inc. said that it would not launch its highly anticipated Apple Intelligence features, which will be available in the US later this year, until at least 2025 in the European Union. Fresh off the back of a €1.8 billion fine for breaking competition rules, and with threats of other penalties to come, Apple said the “uncertainties” over interoperability rules meant it was too great a risk to implement some of its new AI features in Europe just yet.
European users may have to get used to this. Last month, Meta Platforms Inc. said it would delay the launch of its AI in Europe because of regulator scrutiny of the use of public posts to train its AI model. Meta’s president, Nick Clegg, a staunch supporter of the EU, warned that “Europe’s regulatory complexity and the patchwork of laws across different member states often makes companies hesitant to roll out new products here.”
Some believe the companies are bluffing, using a new product cycle as a useful opportunity to poke regulators in the eye. Even if that is the case, the result is the same: European users must wait.
EU competition head Margrethe Vestager called Apple’s move “stunning” and an “open declaration that they know 100% that this is another way of disabling competition where they have a stronghold already.” I don’t follow her logic. Just because Apple is big doesn’t always mean it’s winning. Apple is lagging behind in AI and doesn’t have a monopoly on smartphones. Adding AI to the iPhone would represent more competition in the European market, not less. The company’s hesitancy stems from not knowing how to interpret the EU’s demands.
With the penalty for getting it wrong being so steep, caution is to be expected to avoid the kind of predicament Meta finds itself in with its new subscription model. Introduced to appease regulators’ demands to give users a way to avoid being targeted with advertising, the company has since been told it doesn’t go far enough. The EU, ultimately, is asking Meta to dismantle its business model. No wonder the company is getting frustrated.
This may be what Europeans want. In the vacuum created by a sore lack of adequate protections in the US, it has been left to the bloc to stand up for the user against some of the adverse effects of big tech power. But the sweeping powers of the Digital Markets Act and the Digital Services Act mean the EU’s demands seem increasingly complex to understand and appease. Companies are being asked to provide answers without knowing regulators’ precise questions.
This scrutiny will get even heavier with the bloc’s new AI Act, which came into force in June (but has a two-year grace period for compliance with many of its provisions). Attempting to build useful AI tools that learn about the user, combine data from various sources, and interact with a potentially unlimited number of other AI interfaces seems hopelessly complex under the EU’s regulatory glare.
All this presents a significant problem for Europe. Regulators thought its bold measures would mean Europe would set the global agenda on competition, privacy and AI. Some early victories, like forcing Apple to change its App Store policies and opening up access to its payments tech, seemed to show the hard-line stance was working.
But the AI race is different. European officials have underestimated the degree to which nothing can stand in the way of Silicon Valley’s ambitions. While the tech giants clearly value the European market and its 450 million potential customers, they value the unconstrained development of groundbreaking AI even more. As Clegg has warned, the result may be a widening gap between Europe and the rest of the world. Instead of setting the agenda, the EU seems at risk of being cast aside.
A message from Advisor Perspectives and VettaFi: Join us on July 25th for the Q3 Fixed Income Symposium, where advisors will gain insights into essential fixed income strategies and market trends to navigate 2024's challenges.
Bloomberg News provided this article. For more articles like this please visit
bloomberg.com.
Read more articles by David Lee
