The European Union is making life even more difficult for businesses around the world.
The 27-nation bloc is aggressively adopting new laws to crack down on personal data, social media content and Big Tech's control. A lawsuit was filed to block the merger. And we have prepared the world's first comprehensive law to crack down on artificial intelligence.
These developments are increasing risks to how companies operate within and outside the EU. Just last month, the EU's opposition to the merger of two U.S. tech companies, Amazon (AMZN) and robot vacuum cleaner maker iRobot (IRBT), was enough for the companies to call off the $1.4 billion merger. .
EU resistance also forced Silicon Valley-based Photoshop maker Adobe to abandon plans to acquire San Francisco-based web-based design platform Figma and sell cancer testing company Grail to U.S. biotech giant Illumina. That was enough to motivate me to do it.
Large companies in the United States and around the world are currently facing important decisions. Will they adapt the way they manufacture products and provide services to the EU's stricter laws, or bet on looser regulations taking hold in other countries in which they operate?
“Brussels effect”
Some giant companies with global operations are reluctant to take the chance to tiptoe around the EU, which remains the world's third-largest economy and home to some 450 million people.
“We've seen companies say, 'We're going to build our products, our widgets, our services to the most restrictive guidelines and not have a different jurisdiction approach.' '' said Jordan Fisher, a lecturer on cross-border intelligence. University of California, Berkeley Governance and Constantie College Partners.
Pressure to adopt the EU version of business compliance outside of EU jurisdictions is growing, but not new. This is known as the “Brussels effect”. The term was coined in 2012 by Anu Bradford, a professor at Columbia University Law School, and describes how the EU's aggressive legislation has given rise to an “unprecedented and deeply underappreciated global power.” This explains how well they are performing.
Brussels, Belgium, is unofficially considered the capital of the European Union.
“Companies that have customers in the EU, or wish to do business in the future, decide to comply with the regulations in order to continue selling within the EU and to be able to interact with potential EU consumers. ” said Meredith Kolsky-Lewis, Director of Cross Border Affairs. He studied law at the University at Buffalo School of Law.
The EU, founded in 1993, has a long history of regulating businesses more aggressively than the United States.
It even chalked up some early wins. In 2001, a proposed $42 billion merger between GE and Honeywell failed due to the company's antitrust position, even though the industry union had been approved in the United States. It adopted sweeping environmental laws in 2007, forcing chemical companies around the world to comply with new regulations.
“That's not a big problem for the Googles of the world.”
In recent years, the EU's attempts to rein in tech giants have become a central focus. The EU's first major technology law, the General Data Protection Regulation (GDPR), came into force in 2018.
It aims to protect consumer privacy and security and will impose obligations on businesses anywhere in the world as long as they “target or collect data relating to people in the EU”.
The EU has since added two more laws, the Digital Markets Act and the Digital Services Act, to try to curb the dominance of Big Tech companies such as Apple (AAPL), Amazon (AMZN), Meta (META), and Microsoft (MSFT). did. ), and content from major online social media and e-commerce sites.
“Regulations like GDPR will have the biggest impact really on countries outside of Europe, in the developing world,” said economist Charles Kenney, a senior fellow at the Center for World Development think tank in Washington.
“And I think that's sad. I think this is something that European rulemakers and regulators tend not to consider.”
Kenny said technology regulations, including GDPR, have no exceptions for startups, and a group of African Union countries has formed an alliance to advocate for more entrepreneur-friendly rules in poor countries like Sierra Leone and Ghana. Formed.
“It's not a big problem for the Googles and Facebooks of the world to follow. It's a big problem for small tech startups,” Kenney said, adding that he agrees some level of regulation is needed.
“I'm worried that the same thing will happen with this AI regulation.”
The EU intends to impose new legal restrictions on artificial intelligence this year after EU member states last week agreed on the world's first comprehensive law to regulate AI.
The new rules will focus on the use of AI technology, categorizing the degree of regulation depending on the risk of the application, and facial recognition and certain medical innovations will require approval before being made available to customers.
The United States does not yet have federal legislation specific to AI, and it is unclear whether that will ever happen.
The EU's additional technology regulations, combined with confusion in the United States about the EU's own intentions, mean more uncertainty and more complexity for global companies, Lewis said.
Fisher said that despite the EU's tough stance on technology laws, there are reasons for companies to expect greater cooperation between the EU and the US. He pointed to a framework signed with the United States this year known as the Trade and Technology Council.
“I think this will make a lot of businesses breathe a little bit easier. It's not going to be easy, but it's going to be easier,” Fisher said.
Alexis Keenan is a legal reporter at Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
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