Watchdog highlights shortcomings in EU rules to curb tech companies

BRUSSELS: A watchdog has criticised the EU's new rules that aim to curb the power of Alphabet unit Google, Facebook, Apple and Amazon , potentially providing scope for companies that are targeted to challenge them.

The Regulatory Scrutiny Board, which reviews policies and legislation proposed by the European Commission, eventually gave its green light to the draft rules, but also said they did not clarify how online gatekeepers are singled out.

The European Commission's draft rules, announced last week, are its most serious attempt yet to rein in tech companies, relied on by thousands of companies and millions of Europeans. The rules include potential fines up to 10% of annual turnover and break-up.

"The report should better justify the identification and selection of the core platform services. It should present evidence of what determines persistent misuse of gatekeepers' power vis-a-vis dependent business users and customers," the board said in an opinion seen by Reuters.

"It should consider the negative consequences of curtailing the size advantages following from network economies and economies of scale for consumers," the board said.

EU officials said stringent criteria, including turnover, revenue, number of users and control of key platform services are likely to produce for now a very short list of gatekeepers, which may expand to Chinese rivals in future.

The Commission should gird up for lawsuits once it starts levying fines, said Thomas Vinje, a partner at Clifford Chance.

"Some of these appeals might well succeed and some will likely fail. And they will in any event delay effective compliance with the rules," he said.

The Commission's plan could well be stymied by EU countries' own proposals, said Assimakis Komninos, a partner at White & Case.

"I can certainly see some member states trying to keep a role for ex ante rules of their own, so there will be some resistance. The current wording (of the draft rules) seems to allow the Germans to go ahead with their own planned reforms," he said.