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How Europe’s decisions shape the tech world

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When we think about Big Tech, five companies come immediately to mind: Alphabet (more commonly known as Google), Amazon, Apple, Meta (Facebook in its pre-virtual reality days) and Microsoft.

Investors sometimes talk about FAANG, an ugly acronym that is almost identical to that group but substitutes Netflix for Microsoft. (The rebranding of some of those companies prompted Jim Cramer, the person who coined FAANG, to start talking about MAMAA.) Alibaba, Baidu, Samsung and Tencent make the cut as well.

One characteristic of that list is quickly apparent: None of them are European. Yet, Europe plays an increasingly important, if not defining, role in the future of big tech. Credit “the Brussels Effect” — the process by which the European Union sets global standards. Recent EU legislation to regulate Big Tech will have profound implications for the future of technology, but it’s also a lesson in the ways that power can be exercised in an interconnected world.

Columbia University professor Anu Bradford first identified the Brussels Effect in 2012, arguing that the EU had outsize influence over commerce because companies adopt European standards for their businesses even if they don’t operate in that market. She reasoned that it made more sense to internalize those rules for global operations than to differentiate between regulatory jurisdictions, even if EU standards were more stringent. In a world in which compliance has a reputational effect, that logic makes sense: Solutions scale and maintaining higher standards is a net plus for a company.

We got a taste of the EU’s power in 2016, following passage of the General Data Protection Regulation (GDPR), which conditions the use of EU-origin personal data on the maintenance of privacy protections that are essentially equivalent to those of the GDPR. That’s why every website you visit now has a warning about cookie settings.

This year, the EU has again taken the lead in the digital domain, passing the Digital Markets Act (DMA) a few weeks ago and the Digital Services Act (DSA) last week. That one-two regulatory punch is being heralded as transforming the digital........

© The Japan Times

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