Why Investors Shrugged Off Europe’s Big Tech Rules
Greetings!
Go figure. Late Thursday, European policymakers agreed on new competition rules that could soon force the most powerful tech companies on the planet to make big changes to their businesses. What was the reaction from investors in Alphabet, Meta Platforms, Amazon and Apple—four of the “gatekeepers,” in EU parlance, who could face the most serious consequences?
They shrugged it off.
Shares of all four companies rose modestly on Friday. It’s a curious reaction to an ambitious set of policies that could, in theory, blow holes in the protective moats around some of their biggest franchises. The Digital Markets Act, as the European rules are known, could force Apple to make iMessage work with Facebook Messenger, and could compel Facebook to make WhatsApp work with Signal. It could force Apple to allow alternatives to the App Store on the iPhone, and make Google get user permission to use personal data to target ads.
That sounds serious, but then again so did an earlier effort by Europe to clip the wings of big tech companies: the General Data Protection Regulation, a tough privacy law that went into effect in 2018. Except GDPR hasn’t turned out to be so tough for the biggest tech companies.
“At the time, there were a lot of concerns over what this would do to business models,” Mark Mahaney, an analyst at Evercore ISI, told me on Friday. “From a financial perspective, it’s hard to see that it did anything [to the big tech companies]. It made it more expensive to compete with them.”
DMA could be different, of course. But there are still a lot of questions about the law, which is expected to come into effect in October. Will consumers want to load apps on their iPhones from sources other than Apple’s App Store? Will interoperability between iMessage and other apps make people less likely to buy iPhones in the future? Can these tech giants even figure out how to make encryption work securely across their messaging apps (some security experts have their doubts)? How vigorously will DMA’s rules be enforced?
For now, it appears, investors are taking a wait-and-see attitude.
Transatlantic Relations
When it comes to Europe, Friday was a love-hate day for some U.S. tech groups and lawmakers. Sure, there was the passage of DMA, which U.S. critics view as a not-so-subtle effort by Europe to kneecap America’s digital powerhouses while giving the continent’s own tech companies a lift.
But the U.S. and EU on Friday also resolved a separate issue that will allow U.S. companies to store the personal data of Europeans in data centers in the U.S. An earlier ruling by a European high court on the matter determined that the U.S. wasn’t doing enough to let Europeans challenge U.S. surveillance of their data. The earlier ruling was a concern for big tech companies like Google and Meta, which warned that it could cause the global internet to fracture.
President Joe Biden and European Commission President Ursula von der Leyen looked positively chummy in a press conference in Brussels on Friday, in which they announced a new process for letting Europeans appeal surveillance of their data. It’s good to know Europe and the U.S. can still bridge their digital divisions.
In Other News…
- Apple paid select engineers stock bonuses of up to $200,000 in an effort to keep its top technical talent from leaving the company, Bloomberg reported.
- The Federal Communications Commission added Kaspersky Lab, a Russian antivirus software maker, to its list of communications equipment and service providers viewed as U.S. national security threats, according to Reuters.
New From Our Reporters
Sequoia Capital’s China Arm Seeks $8 Billion in New Funds, Defying Tech Rout
Weekend: The Technology 1,000-Plus Tech Leaders Do (and Don’t) Give Their Kids
Weekend: ‘You’re Grounded’: Home Security Cams and GPS Trackers Are Killing the Teenage House Party
Weekend: From CodeSpark to ‘Shark Tank,’ the Apps, Shows and Devices Silicon Valley Parents Swear By
What We’re Reading
Sony to Unveil PlayStation Subscription as Soon as Next Week