The EU Is Taking on Big Tech. It May Be Outmatched

The EU Is Taking on Big Tech. It May Be Outmatched 1

This story originally appeared in WIRED Italia and has been translated from Italian.

The latest in a series of duels announced by the European Commission is with Bing, Microsoft’s search engine. Brussels suspects that the giant based in Redmond, Washington, has failed to properly moderate content produced by the generative AI systems on Bing, Copilot, and Image Creator, and that as a result, it may have violated the Digital Services Act (DSA), one of Europe’s latest digital regulations.

On May 17, the EU summit requested company documents to understand how Microsoft handled the spread of hallucinations (inaccurate or nonsensical answers produced by AI), deepfakes, and attempts to improperly influence the upcoming European Parliament elections. At the beginning of June, voters in the 27 states of the European Union will choose their representatives to the European Parliament, in a campaign over which looms the ominous shadow of technology with its potential to manipulate the outcome. The commission has given Microsoft until May 27 to respond, only days before voters go to the polls. If there is a need to correct course, it may likely be too late.

Europe’s Strategy

Over the past few months, the European Commission has started to bang its fists on the table when dealing with the big digital giants, almost all of them based in the US or China. This isn’t the first time. In 2022, the European Union hit Google with a fine of €4.1 billion because of its market dominance thanks to its Android system, marking the end of an investigation that started in 2015. In 2023, it sanctioned Meta with a fine of €1.2 billion for violating the GDPR, the EU’s data protection regulations. And in March it presented Apple with a sanction of €1.8 billion.

Recently, however, there appears to have been a change in strategy. Sanctions continue to be available as a last resort when Big Tech companies don’t bend to the wishes of Brussels, but now the European Commission is aiming to take a closer look at Big Tech, find out how it operates, and modify it as needed, before imposing fines. Take, for example, Europe’s Digital Services Act, which attempts to impose transparency in areas like algorithms and advertising, fight online harassment and disinformation, protect minors, stop user profiling, and eliminate dark patterns (design features intended to manipulate our choices on the web).

In 2023, Brussels identified 22 multinationals that, due to their size, would be the focus of its initial efforts: Google with its four major services (search, shopping, maps, and play), YouTube, Meta with Instagram and Facebook, Bing, X (formerly Twitter), Snapchat, Pinterest, LinkedIn, Amazon, Booking, Wikipedia, Apple’s App Store, TikTok, Alibaba, Zalando, and the porn sites Pornhub, XVideos, and Stripchat. Since then, it has been putting the pressure on these companies to cooperate with its regulatory regime.

The day before the Bing investigation was announced, the commission also opened one into Meta to determine what the multinational is doing to protect minors on Facebook and Instagram and counter the “rabbit hole” effect—that is, the seamless flood of content that demands users’ attention, and which can be especially appealing to younger people. That same concern led it to block the launch of TikTok Lite in Europe, deeming its system for rewarding social engagement dangerous and a means of encouraging addictive behavior. It has asked X to increase its content moderation, LinkedIn to explain how its ad system works, and AliExpress to defend its refund and complaint processes.

A Mountain of Laws …

On one hand, the message appears to be that no one will escape the reach of Brussels. On the other, the European Commission, led by President Ursula von der Leyen, has to demonstrate that the many digital laws and regulations that are in place actually produce positive results. In addition to the DSA, there is the Digital Markets Act (DMA), intended to counterbalance the dominance of Big Tech in online markets; the AI Act, Europe’s flagship legislation on artificial intelligence; and the Data Governance Act (DGA) and the Data Act, which address data protection and the use of data in the public and private sectors. Also to be added to the list are the updated cybersecurity package, NIS2 (Network and Information Security); the Digital Operational Resilience Act, focused on finance and insurance; and the digital identity package within eIDAS 2. Still in the draft stage are regulations on health data spaces and much-debated chat measures which would authorize law enforcement agencies and platforms to scan citizens’ private messages, looking for child pornography.

Brussels has deployed its heavy artillery against the digital flagships of the United States and China, and a few successful blows have landed, such as ByteDance’s suspension of the gamification feature on TikTok Lite following its release in France and Spain. But the future is uncertain and complicated. While investigations attract media interest, the EU’s digital bureaucracy is a large and complex machine to run.

On February 17, the DSA became law for all online service operators (cloud and hosting providers, search engines, e-commerce, and online services) but the European Commission doesn’t and can’t control everything. That is why it asked states to appoint a local authority to serve as a coordinator of digital services. Five months later, Brussels had to send a formal notice to six states (Cyprus, Czechia, Estonia, Poland, Portugal, and Slovakia) to urge them to designate and fully empower their digital services coordinators. Those countries now have two months to comply before Brussels will intervene. But there are others who are also not in the clear. For example, Italy’s digital services coordinator, the Communications Regulatory Authority (abbreviated AGCOM, for Autorità per le Garanzie nelle Comunicazioni, in Italian), needs to recruit 23 new employees to replenish its staff. The department told WIRED Italy that it expects to have filled all of its appointments by mid-June.

The DSA also introduced “trusted flaggers.” These are individuals or entities, such as universities, associations, and fact-checkers, committed to combating online hatred, internet harassment, illegal content, and the spread of scams and fake news. Their reports are, one hopes, trustworthy. The selection of trusted flaggers is up to local authorities but, to date, only Finland has formalized the appointment of one, specifically Tekijänoikeuden tiedotus- ja valvontakeskus ry (in English, the Copyright Information and Anti-Piracy Center). Its executive director, Jaana Pihkala, explained to WIRED Italy that their task is “to produce reports on copyright infringements,” a subject on which the association has 40 years of experience. Since its appointment as a trusted flagger, the center’s two lawyers, who perform all of its functions, have sent 816 alerts to protect films, TV series, and books on behalf of Finnish copyright holders.

… and a Mountain of Data

To assure that the new commission is respected by the 27 states, the commission set up the DSA surveillance system as quickly as possible, but the bureaucrats in Brussels still have a formidable amount of research to do. On the one hand, there is the anonymous reporting platform with which the commission hopes to build dossiers on the operations of different platforms directly from internal sources. The biggest scandals that have shaken Meta have been thanks to former employees, like Christopher Wylie, the analyst who revealed how Cambridge Analytica attempted to influence the US elections, and Frances Haugen, who shared documents about the impacts of Instagram and Facebook on children’s health. The DSA, however, intends to empower and fund the commission so that it can have its own people capable of sifting through documents and data, analyzing the content, and deciding whether to act.

The commission boasts that the DSA will force platforms to be transparent. And indeed it can point to some successes already, for example, by revealing the absurdly inadequate numbers of moderators employed by platforms. According to the latest data released last November, they don’t even cover all the languages spoken in the European Union. X reported that it had only two people to check content in Italian, the language of 9.1 million users. There were no moderators for Greek, Finnish, or Romanian even though each language has more than 2 million subscribers. AliExpress moderates everything in English while, for other languages, it makes do with automatic translators. LinkedIn moderates content in 12 languages of the European bloc—that is, just half of the official languages.

At the same time, the commission has forced large platforms to standardize their reports of moderation interventions to feed a large database, which, at the time of writing this article, contains more than 18.2 billion records. Of these cases, 69 percent were handled automatically. But, perhaps surprisingly, 92 percent concerned Google Shopping. This is because the platform uses various parameters to determine whether a product can be featured: the risk that it is counterfeited, possible violations of site standards, prohibited goods, dangerous materials, and others. It can thus be the case that several alerts are triggered for the same product and the DSA database counts each one separately, multiplying the shopping numbers exponentially. So now the EU has a mass of data that further complicates its goal of being fully transparent.

Zalando’s Numbers

And then there’s the Big Tech companies’ legal battle against the fee they have to pay to the commission to help underwrite its supervisory bodies. Meta, TikTok, and Zalando have challenged the fee (though paid it). Zalando is also the only European company on the commission’s list of large platforms, a designation Zalando has always contested because it does not believe it meets the criteria used by Brussels. One example: The platforms on the list must have at least 45 million monthly users in Europe. The commission argues that Zalando has 83 million users, though that number, for example, includes visits from Portugal, where the platform is not marketed, and Zalando argues those users should be deducted from its total count. According to its calculations, the activities subject to the DSA reach only 31 million users, under the threshold. When Zalando was assessed its fee, it discovered that the commission had based it on a figure of 47.5 million users, far below the initial 83 million. The company has now taken the commission to court in an attempt to assure a transparent process.

And this is just one piece of legislation, the DSA. The commission has also deployed the Digital Markets Act (DMA), a package of regulations to counterbalance Big Tech’s market dominance, requiring that certain services be interoperable with those of other companies, that apps that come loaded on a device by default can be uninstalled, and that data collected on large platforms be shared with small- and medium-size companies. Again, the push to impose these mandates starts with the giants: Alphabet, Amazon, Apple, Meta, ByteDance, and Microsoft. In May, Booking was added to the list.

Big Tech Responds

Platforms have started to respond to EU requests, with lukewarm results. WhatsApp, for instance, has been redesigned to allow chatting with other apps without compromising its end-to-end encryption that protects the privacy and security of users, but it is still unclear who will agree to connect to it. WIRED US reached out to 10 messaging companies, including Google, Telegram, Viber, and Signal, to ask whether they intend to look at interoperability and whether they had worked with WhatsApp on its plans. The majority didn’t respond to the request for comment. Those that did, Snap and Discord, said they had nothing to add. Apple had to accept sideloading—i.e., the possibility of installing and updating iPhone or iPad applications from stores outside the official one. However, the first alternative that emerged, AltStore, offers very few apps at this time. And it has suffered some negative publicity after refusing to accept the latest version of its archenemy Spotify’s app, despite the fact that the audio platform had removed the link to its website for subscriptions.

The DMA is a regulation that has the potential to break the dominant positions of Big Tech companies, but that outcome is not a given. Take the issue of surveillance: The commission has funds to pay the salaries of 80 employees, compared to the 120 requested by Internal Market Commissioner Thierry Breton and the 220 requested by the European Parliament, as summarized by Bruegel in 2022. And on the website of the Center for European Policy Analysis (CEPA), Adam Kovacevich, founder and CEO of Chamber of Progress, a politically left-wing tech industry coalition (all of the digital giants, which also fund CEPA, are members), stated that the DMA, “instead of helping consumers, aims to help competitors. The DMA is making large tech firms’ services less useful, less secure, and less family-friendly. Europeans’ experience of large tech firms’ services is about to get worse compared to the experience of Americans and other non-Europeans.”

Kovacevich represents an association financed by some of those same companies that the DMA is focused on, and there is a shared fear that the DMA will complicate the market and, in the end, benefit only a few companies—not necessarily those most at risk because of the dominance of Silicon Valley. It is not only lawsuits and fines, but also the perceptions of citizens and businesses that will help to determine whether EU regulations are successful. The results may come more slowly than desired by Brussels as new legislation is rarely positively received at first.

Learning From GDPR and Gaia-X

Another regulatory act, the General Data Protection Regulation (GDPR), has become the global industry standard, forcing online operators to change the way they handle our data. But if you ask the typical person on the street, they’ll likely tell you it’s just a simple cookie wall that you have to approve before continuing on to a webpage. Or it’s viewed as a law that has required the retention of dedicated external consultants on the part of companies. It is rarely described as the ultimate online privacy law, which is exactly what it is. That said, while the act has reshaped the privacy landscape, there have been challenges, as the digital rights association Noyb has explained. The privacy commissioners of Ireland and Luxembourg, where many web giants are based for tax purposes, have had bottlenecks in investigating violations. According to the latest figures from Ireland’s Data Protection Commission (DPC), 19,581 complaints have been submitted in the past five years, but the body has made only 37 formal decisions and only eight of those began with complaints. Noyb recently conducted a survey of 1,000 data protection officers; 74 percent were convinced that if privacy officers investigated the typical European company, they would find at least one GDPR violation.

The GDPR was also the impetus for another unsuccessful operation: separating the European cloud from the US cloud in order to shelter the data of EU citizens from Washington’s Cloud Act. In 2019, France and Germany announced with great fanfare a federation, Gaia-X, that would defend the continent and provide a response to the cloud market, which has been split between the United States and China. Five years later, the project has become bogged down in the process of establishing standards, after the entry of the giants it was supposed to counter, such as Microsoft, Amazon, Google, Huawei, and Alibaba, as well as the controversial American company Palantir (which analyses data for defense purposes). This led some of the founders, such as the French cloud operator Scaleway, to flee, and that then turned the spotlight on the European Parliament, which led the commission to launch an alternative, the European Alliance for Industrial Data, Edge and Cloud, which counts among its 49 members 26 participants from Gaia-X (everyone except for the non-EU giants) and enjoys EU financial support.

In the meantime, the Big Tech giants have found a solution that satisfies European wishes, investing en masse to establish data centers on EU soil. According to a study by consultancy firm Roland Berger, 34 data center transactions were finalized in 2023, growing at an average annual rate of 29.7 percent since 2019. According to Mordor Intelligence, another market analysis company, the sector in Europe will grow from €35.4 billion in 2024 to an estimated €57.7 billion in 2029. In recent weeks, Amazon web services announced €7.8 billion in investments in Germany. WIRED Italy has reported on Amazon’s interest in joining the list of accredited operators to host critical public administration data in Italy, which already includes Microsoft, Google, and Oracle. Notwithstanding its proclamations about sovereignty, Brussels has had to capitulate: The cloud is in the hands of the giants from the United States who have found themselves way ahead of their Chinese competitors after diplomatic relations between Beijing and Brussels cooled.

The AI Challenge

The newest front in this digital battle is artificial intelligence. Here, too, the European Union has been the first to come up with some rules under its AI Act, the first legislation to address the different applications of this technology and establish permitted and prohibited uses based on risk assessments. The commission does not want to repeat the mistakes of the past. Mindful of the launch of the GDPR, which in 2018 caused companies to scramble to assure they were compliant, it wants to lead organizations through a period of voluntary adjustment. Already 400 companies have declared their interest in joining the effort, including IBM.

In the meantime, Brussels must build a number of structures to make the AI Act work. First is the AI Council. It will have one representative from each country and will be divided into two subgroups, one dedicated to market development and the other to public sector uses of AI. In addition, it will be joined by a committee of technical advisers and an independent committee of scientists and experts, along the lines of the UN Climate Committee. Secondly, the AI Office, which sits within Directorate-General Connect (the department in charge of digital technology), will take care of administrative aspects of the AI Act. The office will assure that the act is applied uniformly, investigate alleged violations, establish codes of conduct, and classify artificial intelligence models that pose a systemic risk. Once the rules are established, research on new technologies can proceed. After it is fully operational, the office will employ 100 people, some of them redeployed from General Connect while others will be new hires. At the moment, the office is looking to hire six administrative staff and an unknown number of tech experts.

On May 29, the first round of bids in support of the regulation expired. These included the AI Innovation Accelerator, a center that provides training, technical standards, and software and tools to promote research, support startups and small- and medium-sized enterprises, and assist public authorities that have to supervise AI. A total of €6 million is on the table. Another €2 million will finance management and €1.5 million will go to the EU’s AI testing facilities, which will, on behalf of countries’ antitrust authorities, analyze artificial intelligence models and products on the market to assure that they comply with EU rules.

Follow the Money

Finally, a total of €54 million is designated for a number of business initiatives. The EU knows it is lagging behind. According to an April report by the European Parliament’s research service, which provides data and intelligence to support legislative activities, the global AI market, which in 2023 was estimated at €130 billion, will reach close to €1.9 trillion in 2030. The lion’s share is in the United States, with €44 billion of private investment in 2022, followed by China with €12 billion. Overall, the European Union and the United Kingdom attracted €10.2 billion in the same year. According to Eurochamber researchers, between 2018 and the third quarter of 2023, US AI companies received €120 billion in investment, compared to €32.5 billion for European ones.

Europe wants to counter the advance of the new AI giants with an open source model, and it has also made its network of supercomputers available to startups and universities to train algorithms. First, however, it had to adapt to the needs of the sector, investing almost €400 million in graphics cards, which, given the current boom in demand, will not arrive anytime soon.

Among other projects to support the European AI market, the commission wants to use €24 million to launch a Language Technology Alliance that would bring together companies from different states to develop a generative AI to compete with ChatGPT and similar tools. It’s an initiative that closely resembles Gaia-X. Another €25 million is earmarked for the creation of a large open source language model, available to European companies to develop new services and research projects. The commission intends to fund several models and ultimately choose the one best suited to Europe’s needs. Overall, during the period from 2021 to 2027, the Digital Europe Program plans to spend €2.1 billion on AI. That figure may sound impressive, but it pales in comparison to the €10 billion that a single company, Microsoft, invested in OpenAI.

The €25 million being spent on the European large language model effort, if distributed to many smaller projects, risks not even counterbalancing the €15 million that Microsoft has spent bringing France’s Mistral, Europe’s most talked-about AI startup, into its orbit. The big AI models will become presences in Brussels as soon as the AI Act, now finally approved, comes into full force. In short, the commission is making it clear in every way it can that a new sheriff is in town. But will the bureaucrats of Brussels be adequately armed to take on Big Tech? Only one thing is certain—it’s not going to be an easy task.

This story was translated by John Newton.