Welcome to EURACTIV’s Digital Brief, your weekly update on all things digital in the EU. You can subscribe to the newsletter here.
“With the European Chips Act, we are putting out the investments and the strategy. But the key to our success lies in Europe’s innovators, our world-class researchers, in the people who have made our continent prosper through the decades.”
– European Commission President Ursula von der Leyen
Story of the week: The European Commission presented the proposal for a Chips Act on Tuesday (8 February) to move closer to ‘digital sovereignty’. The package includes a mix of legislative and non-legislative initiatives to increase production capacity, relax state aid rules, invest in research, and boost international partnerships, as anticipated by EURACTIV last Friday.
The Chips Act introduces the concept of ‘first-of-a-kind’ facilities, fabrication plants meant to significantly advance the bloc’s technology and support Europe’s semiconductor supply chain. In case of crisis, the Commission could request these fabs or other chipmakers for a specific type of product. Meanwhile, the EU executive has put forth a toolbox to face the current global shortage.
The proposal also includes pilot lines to facilitate the uptake of new technologies and a virtual platform to support businesses and researchers to design advanced microchips. As is often the case, financing is a fanciful rebranding of existing funds and wishful private investments, all repackaged under Chinese boxes made of initiatives, programmes, schemes, and joint undertakings.
Some changes were introduced between the leaked version and the official one.
The crisis stage is triggered via implementing act rather than delegated act. New grounds for fines were included for breaching priority orders, together with limits on the penalty payments. A definition for ‘next-generation chips’ was introduced. Public support must be mentioned when submitting a plan for a first-of-a-kind fab.
The most controversial part of the proposal concerned the curbing of exceptions to cover up to all the costs for these first-of-a-kind fabs, which the Commission insists is a mere ‘clarification’ of existing rules. However, this battle over European champions was not a total loss for EU competition chief Margrethe Vestager, as there is no fast-tracking of state aid approval nor overall lenience on the competition rules. Read more.
Don’t miss: Google Analytics was dealt another blow this week after the French data watchdog (CNIL) ruled that the tool’s data protection falls short of EU standards due to its transfer via the US. The additional measures taken by Google to safeguard these transfers were found to be lacking by the CNIL, which concluded that they “are not sufficient to exclude the possibility of access to this data by US intelligence services.” The decision echoes that of the Austrian data protection authority, which ruled a month ago that Google Analytics’ US data transfers were illegal. Given the French authority’s overall influence among its European peers, the decision heralds further such rulings to come, with 100 complaints still pending across the EU. Read more.
Also this week:
- The French presidency circulated a new partial compromise on the AI Act
- The publishers are suing Google for its dominant position in the advertising market
- France and Germany were not impressed by Meta’s threat to withdraw from Europe
- Europe is the main hosting site for child pornography, according to NGOs
Before we start: EU lawmakers are pushing to include interoperability obligations for messaging services and social media platforms in the Digital Markets Act. The proposal has been met with great interest but also scepticism about its practical viability. We discuss the matter with Amandine Le Pape, chief operations officer & co-founder of messaging app Element and one of the principal architects of Matrix, a standard for open communications.
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New (partial) compromise. The French presidency’s partial compromise text for Art. 16-29 of the AI Act was circulated in the EU Council this week. The changes include more substantial obligations for high-risk AI system providers, notably for transparency, tracing, documentation and cooperation with users. At the same time, the exemption for credit institutions was weakened. The new measures also clarify the obligations for third-party service providers and how the liability would be attributed across the value chain. Additional responsibility for the authorised representatives of non-EU providers has also been introduced, making them jointly liable for defective systems. The compromise text also clarifies importers and distributors’ obligations and adds an obligation for qualified human oversight on the users.
Publishers vs Google. The European Publishers Council (EPC) today filed an EU competition complaint against Google over what it says is the company’s “end-to-end control of the ad tech value chain”. The issue, the EPC says, stems from Google’s 2008 acquisition of ad company DoubleClick, which it says allowed the tech giant to monopolise the ad tech ecosystem with “devastating” consequences for publisher revenues.
Tech-media merger. According to a competition filing this week, the Commission will decide by 15 March whether Amazon’s acquisition of MGM studios can go ahead. The $8.45bn purchase was announced in May last year, the tech giant’s second-largest acquisition to date. The Commission’s antitrust authority will decide whether to clear the deal, either with or without required adjustments or open an investigation into the merger.
Portugal paralysed. Vodafone Portugal said on Tuesday it had been the target of a cyberattack aimed at disabling the network and making it “as difficult as possible” to use the company’s services. The attack hit the company’s 4G and 5G network and its TV, voice and SMS services, and the ATM networks of some large banks. The country saw a sharp rise (+81%) in cyberattacks in 2021. The company’s chief executive described the incident as a “targeted attack” on the network and a “criminal act” designed to make the network unavailable. He added that everything “was undone” and restoring it would be a “lengthy job”. Read more.
Banks brace for attacks. The European Central Bank (ECB) has warned financial institutions of potential Russian cyberattacks as concerns mount over a possible invasion of Ukraine. The ECB, which has noted tackling cybersecurity vulnerabilities as a critical priority, has reportedly questioned banks in Europe over their readiness for a potential assault. Regulators across the continent are on high alert. On the other side of the Atlantic, the New York Department of Financial Services has also been preparing, issuing a warning to banks last month that cyberattacks could follow an invasion and the enforcement of US sanctions. Read more.
Data & privacy
British surveillance, Made in China. An investigation by Big Brother Watch has found a network of surveillance systems in operation throughout the UK, using thousands of cameras from Chinese companies Hikvision and Dahua. The report’s data suggests that over 60% of public bodies in the UK – from hospitals and universities to police forces and government departments – could be using these cameras. More than 10% of those who responded had advanced CCTV capabilities embedded, such as facial recognition or thermal scanning software. Three out of every five public bodies contacted by Big Brother Watch confirmed that they used the controversial tech, the use of which has attracted criticism for its part in normalising high-tech surveillance.
Investigation required. The European Parliament will launch an investigation into the Pegasus spyware scandal after it was revealed last year that governments had used the technology from Israeli company NSO Group to target the phones of politicians, activists and journalists around the world, including in Poland and Hungary. Following a proposal from Renew group, an inquiry committee will now be established to look into the allegations of surveillance of government critics.
More information needed. The EU Ombudsman has opened an inquiry into the Commission’s monitoring of GDPR enforcement in Ireland after a complaint by the Irish Council for Civil Liberties (ICCL) alleged that the EU executive had failed to gather sufficient information to ensure the data protection law’s implementation. The Commission will need to provide the Ombudsman with an account of the information collected so far. However, the Ombudsman will not investigate the broader concerns raised by the ICCL about whether enough is being done to ensure the application of the GDPR more widely.
Digital Markets Act
US democrats’ spat. A part of the Biden administration has written to MEP Andreas Schwab calling for watering down the EU’s Big Tech regulation efforts. The letter seems to be another initiative of US Commerce Secretary Gina Raimondo, lobbying for the law to have a broader scope to avoid focusing on US tech giants. Raimondo has come under criticism for her approach to the DMA, which US lawmakers have said could hurt efforts to introduce stricter rules for domestic companies. In his response, Schwab hit back against the US for leaning on “artificially created” security issues as a way of preventing action against the power of big tech.
What now? Some start thinking that the US pressure will ultimately result in watering down the DMA or at least reshaping it in a way that hits Chinese companies more and the Americans less. In particular, in a moment of tension with Russia, countries in Europe’s east see keeping close ties with the Americans as their top priority. Meanwhile, with support from the Germans, the Dutch are pushing again to revise the definition of end active users for online marketplaces to consider the transaction-based model better.
Planning ahead. Microsoft has released a new set of Open App Store Principles for the Microsoft store and future marketplaces built for games. The move follows the company’s acquisition of gaming company Activision Blizzard. It is part of efforts to win over regulators worldwide, whose approval of the deal is still required. Microsoft says the new principles contain measures on transparency, accountability and developer choice and are in response to legislation being considered globally. Among them, for example, are provisions to allow developers the choice of which payment systems they use for in-app purchases, a topic that has recently caused issues for other tech giants. Similar conditions are included in the DMA.
Digital Services Act
KYBC on the plate. Although not officially, the traceability of traders and know-your-business-customer obligations (Art.22) are to be discussed in the political trilogue next Tuesday (15 February). The Council is pushing for extending the obligations as requested by Spain and Italy. MEP Christel Schaldemose has always favoured extending the liability of online marketplaces and could play on the fact that the amendment was killed in the plenary by only one vote (with an MEP who made a mistake, apparently). Meanwhile, the technical level has ruled out the stay down mechanism.
European champions fallout. Analysts have said the Commission’s plan to make Europe more lucrative for chip production could land unequally, bringing much more significant benefits to larger countries like France, Germany, and Italy. Experts have found that the worry for smaller countries is that the next subsidy race is likely to favour states with more significant resources and that they may be overlooked by major international firms seeking to invest and set up production in Europe. Read more.
Sovereign ambitions. On the first day of the EU Digital Sovereignty Conference, one of the critical events of the French EU Council presidency, France reiterated its ambition to see the emergence of European tech giants. Digital regulation is at the top of France’s list of priorities. On Monday, the country’s economy minister, Bruno Le Maire, called for a “European technological awakening” in the face of the US and China and reaffirmed France’s ambition to boost investment in the cloud. Read more.
Scale-ups ahead. A new scheme launched on the second day of the EU Digital Sovereignty Conference is set to fund scale-ups for tech start-ups across Europe. A new “fund of funds”, managed by the European Investment Fund, aims to create 10 to 20 European funds, each worth over €1 billion. Both France and Germany have pledged an initial €1 billion each, with the other participants expected to announce their contributions in the upcoming weeks. Read more.
More and more funding. This week, the European Innovation Council released its 2022 work programme detailing funding opportunities worth more than €1.7 billion for innovators working on breakthrough technologies. The programme includes several new measures to simplify the funding application process and promote the work of women innovators. In addition, a new EIC Scale-Up 100 initiative is set to be launched to identify 100 EU deep tech companies that have the potential to become “unicorns”. The funding ceiling will be raised for companies working on technologies of strategic importance to the EU. Read more.
Not welcome. On Thursday, Deutsche Welle, Voice of America, and Euronews were all given 72 hours by the Turkish broadcasting authority to obtain operating licences or see having access to their platforms blocked. The decision by the Radio and Television Supreme Council has been criticised as an assault on media freedom in Turkey, which has extended government oversight of the media in recent years by giving the watchdog supervisory power over online content. Read more.
Equal representation. The EU has a long way to go before its words on diversity and inclusion (D&I) in the media sector become action, MEP Evin Incir told EURACTIV this week. The lack of D&I in the media reflects the lack of progress for society as a whole, she said, and the EU and member states need to push further for representation both on and off-screen. Moving forward, she concluded, the issue needs to be raised more in both traditional and social media and concrete goals for improvement need to be put in place. Read more.
Hollow threats. France and Germany were unimpressed by Meta’s threat to potentially withdraw Facebook and Instagram from the EU unless they could process personal data in its US services. At a joint press conference on Monday, the economy ministers of both countries seemed unfazed by the possibility of Meta’s exit, which the company raised as an option if an agreement is not reached on new EU-US data transfer rules. The tech giant has since clarified that it is “absolutely not threatening to leave Europe.” Read more.
Europe’s hosting problem. Europe hosts the most significant proportion of websites containing child sexual abuse material (CSAM) globally, NGOs have said, much of it “self-generated”. In an open letter to the European Commission from 20 child protection groups, signatories warned that the volume of this content has surged during the pandemic and called for immediate action from the EU. A Commission initiative to tackle online child pornography was scheduled for the end of last year but has reportedly been pushed back to the end of March following a series of delays and heated debate over its potential implications on privacy. Read more.
Tinder’s pricing. Tinder is deploying an “opaque and unfair” pricing algorithm, new research by Mozilla and Consumers International has found. The dating app, it has been found, can quote users within the same country vastly different costs for Tinder Plus subscriptions, with older users often charged more, and there is little transparency as to how these prices are determined. Tinder refutes the claims, however, describing the allegations as “completely false and outrageous” and says it’s already started moving away from age-based pricing.
Band scarcity. The frequency bands available for 5G are set to be expanded, the Commission announced this week. The process has already begun in some EU countries; therefore, the decision will ensure harmonisation across the bloc. Under the EU’s 5G Action Plan, 5G coverage should be accessible in all major urban areas by 2025. As more and more devices are connected to 5G, greater radio capacity is needed. Two options are on the table, both with sensitive implications. To leave space on already allocated bandwidth would require a phase-out from 2G and 3G networks, but that is resisted as there are still existing uses such as smart meters, eCalls and natural disaster alerts. The 6GHz band could also be allocated, but that would prevent it from being used for Wi-Fi networks, which are already conflicting in the most populated areas. Read more.
What else we’re reading this week:
Spotify’s attempt to use the Facebook playbook over Joe Rogan won’t wash (The Guardian)
New bill would force social media giants to embrace friction — or else (Protocol)
SoftBank’s plans for Arm IPO hit by legal battle over renegade China unit (FT)