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ALPHABET INC.

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U.S. Tech Giants Face Tighter Regulation in Europe

12/03/2020 | 05:45am EST

By Valentina Pop in Brussels and Sam Schechner in Paris

The European Union plans to introduce in coming weeks new proposals aimed at changing behavior -- and, in some cases, business models -- at large online platforms, reasserting the bloc's role as global tech cop.

The European Commission, the bloc's executive arm, is completing regulatory plans outlining how online platforms should remove illegal content quickly and refrain from using their power to quash rivals or push their own products on their sites. The commission plans sanctions for violators that include fines and possible separation of assets, according to people familiar with the matter.

Under the plans, the bigger and more influential a company -- based on criteria including market share and revenue -- the more obligations it will shoulder. The rules, though not targeting any specific company, are likely to apply to U.S. tech companies including Alphabet Inc.'s Google, Facebook Inc. and Amazon.com Inc., according to EU officials.

In response to the coming regulations, tech companies and industry groups have warned against creating a new set of competition rules that could hobble innovation.

"We're at risk of limiting entire ecosystems because of concerns that a handful of U.S. companies have gotten too big," said Kayvan Hazemi-Jebelli, competition and regulatory counsel for the Computer & Communications Industry Association, a lobbying group that represents companies including Amazon, Facebook and Google.

The new proposals are slated for presentation by mid-December and will be subject to negotiations with national governments and the European Parliament before coming into force, in a process that could stretch to several years.

A Facebook spokesman pointed to the company's prior comments during the EU's public consultations about some of the legislative proposals. In September, Facebook said it favored preserving the current rules and that any changes shouldn't make companies liable for removing content before it is flagged.

In a blog post Wednesday about the EU's regulatory plans, Xavier Garambois, Amazon's vice president for EU retail, said that the bloc should ensure "the same rules apply to all companies." An Amazon-funded research paper Friday also echoed the lobbying group's comments that the EU proposals could hurt innovation.

Apple Inc. declined to comment, and Google didn't immediately comment.

Google, in its own September submission, said the EU should refrain from blurring the line between illegal content and content that is legal but potentially harmful "through backdoor regulation of amorphously-defined harms."

Apple, in a late-June submission on potential new EU rules for large platforms, said any law should account for the "diversity of platforms' business models," noting that different companies that could fall under such rules "are active in fundamentally different markets and monetize their services in very different ways."

The EU regulatory push comes on the back of similar discussions in the U.S., where a Democrat-led panel in the House of Representatives recently recommended curbing platforms' alleged abuse of market dominance and as Republicans and Democrats are increasingly considering making social media more liable for their content.

The U.K., which is transitioning out of the EU, last week announced plans to create a dedicated unit within its competition authority to govern the behavior of dominant online platforms. The new unit will begin work in April and could block decisions by tech giants, order remedies and impose fines in case of noncompliance.

European Commission Executive Vice-President Margrethe Vestager said in a recent interview that the new rulebook is necessary because of the power online platforms are gaining in society and the need to enforce European values in how they run their marketplaces.

"It's fair to say that if you have market access, we should set the rules of how those markets work," she said. "It cannot be that there are autocratic regimes that decide, or that it is in company boardrooms where decisions are made. This is the moment for our democracy to catch up."

Among the requirements will be an obligation to ensure that data gathered on the platform isn't used to drive out competitors and that platforms don't use algorithms to push their own services to the detriment of their competitors.

Ms. Vestager recently filed formal charges against Amazon alleging that sort of abuse, after three separate probes into Google ended with fines of more than $9 billion in recent years for similar behavior. Both companies deny any wrongdoing.

Ms. Vestager has spent the past six years probing Google, Amazon, Facebook and Apple. Her pursuits have resulted in fines and changes to the industry's business practices. In parallel, the EU has implemented new data-protection rules that have led to a spate of investigations from the bloc's national privacy regulators into large tech companies, and may force such companies to stop sending data about EU residents to U.S. soil.

Under the new proposals, Ms. Vestager will also have the power to investigate and impose remedies on an entire market, not just individual companies, as it is currently the case.

"The point of being able to do market investigations and impose remedies is for that market to stay open," she said. "Otherwise the risk is that as more markets become digital, more and more markets would be prone to be monopolized."

The EU also plans to harmonize rules on how to police illegal and harmful content online, after some EU countries, including Germany, have adopted national obligations for illegal content to be removed within 24 hours. The EU proposals will also seek to set up recourse mechanisms for people or companies to be able to challenge those takedowns.

The proposed new EU law will clarify what is illegal and seek to streamline the definition of harmful and untrue content, while preserving freedom of expression.

While obligations regarding illegal content will be punishable with fines, the rules on disinformation will continue to be mainly voluntary, but the EU is also moving toward regulation in this area in coming years, EU officials say.

The enforcement and fines will stay in the hands of national authorities, but the European Commission will seek to coordinate among national enforcement agencies and carry out regular audits into how the sector complies, said internal market commissioner Thierry Breton.

Online platforms will also be obliged to be more transparent about their content-ranking algorithms. When used to boost content that attracts the most clicks and engagement, to maximize revenue, such algorithms can also end up accelerating the spread of hate speech or baseless allegations.

The proposals may give the bloc the ability to break up a company that is a frequent violator, but legal experts and Ms. Vestager have said that they doubt the EU would be in a position to use that power.

Write to Valentina Pop at valentina.pop@wsj.com and Sam Schechner at sam.schechner@wsj.com

(END) Dow Jones Newswires

12-03-20 0544ET

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ChangeLast1st jan.
ALPHABET INC. -0.19% 1727.62 Delayed Quote.-1.43%
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Financials (USD)
Sales 2020 179 B - -
Net income 2020 35 870 M - -
Net cash 2020 118 B - -
P/E ratio 2020 33,6x
Yield 2020 -
Capitalization 1 171 B 1 171 B -
EV / Sales 2020 5,89x
EV / Sales 2021 4,81x
Nbr of Employees 132 121
Free-Float 90,3%
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Number of Analysts 45
Average target price 1 932,17 $
Last Close Price 1 727,62 $
Spread / Highest target 30,2%
Spread / Average Target 11,8%
Spread / Lowest Target -28,4%
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John LeRoy Hennessy Chairman
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