Europe's General Data Protection Regulation, or GDPR, enacted in May, set a precedent for privacy legislation that has sparked debate around the globe in 2018. The GDPR's sweeping new data protection rules govern how EU citizens' personal information can be collected and stored. The rules also set a 72-hour window for companies to notify data protection authorities once they become aware of any security breaches.
Heading into 2019, the EU is considering a number of other legislative proposals impacting the technology, media and telecommunication industries, including laws introducing new taxes on big tech companies and local content quotas on streaming media giants. The policy proposals are not without pushback, however, with some big tech companies calling for a global solution versus state-by-state legislation.
In this policy outlook, S&P Global Market Intelligence provides an overview of the key legislative decisions awaiting action in Europe.
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Technology companies that operate in the EU could face new taxes and regulations in 2019. The European parliament is pushing to approve a 3% digital services tax aimed at tech companies with an annual global revenue of more than €750 million. This follows unilateral policies announced by the U.K., France and Germany.
Policymakers recently widened the scope of the tax, which they hope to approve by April 2019, to target international streaming giants such as Netflix Inc. and Amazon.com Inc. Following the changes, the digital service tax would apply to all suppliers of online content, including video, audio, games, or text on a digital platform, regardless of whether they own the content or have acquired the rights to distribute it. Politicians also voted to lower the minimum threshold for EU revenues liable for taxation from €50 million to €40 million.
The policy will, however, remain a temporary framework until a global solution is agreed by the Organisation for Economic Co-operation and Development, or OECD, and the United Nation's G-20. That agreement is not expected until 2020.
In another move that impacts multinational tech companies, the European Commission set a Feb. 28, 2019, deadline for the U.S. government to nominate a key official to address complaints about access to personal data by American authorities for compliance with the Privacy Shield, a set of laws governing transatlantic data transfers between the U.S. and EU. Companies like Facebook, Alphabet Inc., Microsoft Corp. and Twitter Inc. could face legal costs and operational challenges if the agreement were to unravel.
Media companies face new content rules
The Council of EU ministers will review amendments to media laws in 2019, including a new requirement for Netflix and other video-on-demand platforms to include a minimum of 30% of European content in their catalogs. The proposed law would apply to both broadcasters and online platforms such as Alphabet's YouTube and Facebook.
As part of the new measures, regulators plan to impose stricter rules on any content inciting violence, hatred and terrorism, as well as pornographic material and proposals to restrict children's exposure to content showing unhealthy food and beverages, tobacco, electronic cigarettes and alcohol. The legislation would also limit advertising content for broadcasters between 6 a.m. and 6 p.m.
Should the EU ministers agree to the revisions, member states will be given 21 months to adopt the new rules.
Also coming in early 2019 are negotiations over copyright reform across the EU's 28 member states. If the measure known as the Directive on Copyright in the Digital Single Market receives approval, it will take two years to take effect, a parliamentary spokesperson said. The law's most contentious issue has been Article 13, which places an obligation on internet platforms and websites to police user-posted content for copyright infringements, making the site owners liable for content posted without the correct licenses. Article 11, another highly contested part of the directive, would require online platforms to compensate news organizations before linking to their articles.
The legislation has received strong support from the music industry, which struggles with illegally uploaded content on online platforms with user-generated content such as Facebook and YouTube. Critics have said the law could have unintended consequences for creativity and freedom of expression.
Facebook faces further scrutiny
Facebook will continue to face scrutiny in 2019. The European parliament recently voted to launch a full audit of Facebook's privacy practices in the wake of various data breaches acknowledged by the social media company in 2018. While Facebook's Cambridge Analytica LLC privacy scandal — in which Facebook acknowledged that 87 million global users had their personal data improperly shared with third parties — occurred before the enactment of GDPR, a more recent breach could trigger a GDPR penalty. The latter incident, discovered on Sept. 25, impacted up to 5 million European users and could result in a fine as high as $1.63 billion, or 4% of Facebook's $40.7 billion global revenue for the prior financial year, under GDPR rules.
Facebook is also facing potential sanctions for failing to comply with EU consumer rules and could be penalized by as much as 4% of annual turnover under new proposals being discussed by the European Parliament and the Council.