Tech Companies Could Face Huge Fines Under New EU Content Rules

The world’s largest technology companies could face huge fines for breaches of new European Union (EU) legislation, which EU lawmakers are expected to agree upon as soon as today. The EU is set to pass the Digital Services Act (DSA) that will punish technology companies for failing to restrict illegal content on their platforms.

Noncompliance of the DSA could cost companies as much as 6% of their global annual sales when the rules go into effect as soon as 2024.  The new legislation could be costly for mega-cap technology companies.  For example, Amazon.com (AMZN) could face a theoretical fine of as much as 26 billion euros ($28 billion) for future noncompliance with the DSA, and Alphabet (GOOGL) as much as 14 billion euros.

The key rules expected to be announced in the DSA include a ban on sensitive data such as race or religion for targeting ads, a ban on targeting any ads to minors, and a ban on “dark patterns,” specifically tactics to push people into consenting to online tracking.  In addition, large companies, including TikTok and Pornhub, will face additional obligations, including opening their algorithms to enforcers and designated researchers.

All websites will be held accountable to the DSA, but platforms with more than 45 million users will have to abide by stricter rules such as paying the EU regulator a supervisory fee of as much as 0.1% of their global annual revenue to help pay to enforce the law.  Also, the websites will have to provide regulators with annual reports about illegal and harmful content on their sites.

The new regulations are in addition to the Digital Markets Act (DMA) passed by the EU last month that requires technology companies to adhere to strict antitrust rules.  Both laws were designed to address market dominance and internet safety.  But while the DMA legislation targets about a dozen, mostly U.S. tech companies, the DSA sets basic standards for all websites.