Analysis-Google, X next targets as Europe stays tough on tech regulation

By Foo Yun Chee

BRUSSELS (Reuters) -Alphabet's Google and Elon Musk's X may be the next to face fines from European regulators, as they stay tough on Big Tech despite concerns of retaliatory U.S. tariffs, according to three sources with direct knowledge of the matter.

EU antitrust regulators on Wednesday imposed the first penalties under landmark EU legislation aimed at curbing the power of Big Tech, doling out total fines of 700 million euros ($797 million) to Apple and Meta for violating the Digital Markets Act (DMA) and orders to stop anti-competitive practices.

U.S. President Donald Trump has taken issue with the new rules, believing they amount to a tariff on U.S. companies. But EU antitrust chief Teresa Ribera dismissed fears that she may cave to U.S. pressure and soften enforcement of the rules.

"Apple and Meta have fallen short of compliance with the DMA by implementing measures that reinforce the dependence of business users and consumers on their platforms," Ribera said in a statement on Wednesday. "All companies operating in the EU must follow our laws and respect European values," she said.

The DMA sets out a list of dos and don'ts for tech giants to make it easier for people to move between competing online services like social media platforms, internet browsers and app stores and for smaller rivals to compete.

Imposing the fines shows that the European Commission has "bite" despite Trump's threat to slap tariffs on EU countries that fine U.S. companies, said one senior Commission official, speaking on condition of anonymity.

FOCUS ON COMPLIANCE OVER SANCTIONS

Still, the size of the fines is modest compared to the eye-popping penalties handed out by Ribera's predecessor Margrethe Vestager in previous years. Commission sources say this is due to the short period of the breaches, a focus on compliance rather than sanctions and the Trump effect.

That leaves a question mark over whether Europe's future approach to regulating Big Tech could yet be impacted by political factors, the sources say.#

The litmus test for Ribera will be whether she goes ahead in the coming months with an order forcing Google to sell part of its lucrative adtech business to address concerns that it may be favouring its own advertising services in a case dating from 2021, according to EU lawmakers and consumer organisations worried about weakening EU competition enforcement.

It would be the first time that the EU watchdog issues such an order in an antitrust case, underlining its deep concerns about Google's market power, according to Commission sources. Even Microsoft in its two decade-long antitrust battle with the Commission was spared such a drastic step.

Ribera will be encouraged by a U.S. court judgment earlier this month which found that Google illegally dominates two markets for online advertising technology, the Commission sources say. That ruling could pave the way for U.S. antitrust prosecutors to seek a breakup of its ad products.

The U.S. investigation into Google and the Department of Justice's push for a breakup of Google's ad business may provide cover for Ribera to act, said Zach Meyers, director of research at the Centre on Regulation in Europe (CERRE).

'NO LEEWAY IN ENFORCEMENT'

"It would be difficult for the EU to justify withdrawing its own investigation given this, unless U.S. authorities imposed a set of remedies on Google which the Commission felt addressed its own concerns," he said. 

European Parliament lawmaker Andreas Schwab, who led the negotiations on the DMA at the assembly, urged Ribera to stay firm and not delay her decisions on Google and X.

"There can be no leeway in enforcement as this may also impact the importance of competition policy in general," he said.

Low fines should not be seen as weakening EU competition policy, Meyers added, noting that having companies make changes to their businesses practices is more important.

"The real test for the DMA is not whether or not the Commission is willing to levy large fines, but whether we see significant changes to levels of competition," he said. 

The Commission's probe into social media platform X has already drawn owner Elon Musk's ire. Last year, it charged X with breaching the Digital Services Act.

It is expected to issue a decision including a likely fine in the coming months.

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(Reporting by Foo Yun Chee; Editing by Matt Scuffham and Sharon Singleton)