A study carried out by the European Centre for International Political Economy (ECIPE) shows that stricter legislation for large tech companies may cost the European economy tens of billions of euros.

The study, which is sponsored by Google, examines the consequences of the Digital Services Act. This proposal is intended to prevent a small number of tech giants from dominating the online services sector and preventing new parties from gaining market share. The study is due to be published, but Reuters has already seen it.

Tip: The EU’s new Digital Services Act takes aim at Big Tech

85 billion

The EU might cause the EU to miss out on up to 85 billion euros in economic growth, the study indicates. This is equivalent to 0.5 percent of its total GDP.

Moreover, the proposal could cost the EU about 101 billion euros in lost consumer welfare, based on a baseline value of 2018. Also, the labour force would shrink by 0.9 percent.

Ex-ante

Part of the new rules is the introduction of a number of ex-ante rules to prepare for future changes in online platforms.

These rules will do more harm than good, the ECIPE expects. The centre points at the risk that companies are told what to do before any competitive harm or market failure is proven.

The world of online platforms is developing in a rate that the EU legislative framework would not be able to keep up with, the centre thinks. It was also unclear what market failures the EU wants to address with the rules or that these couldn’t be resolved once the harm is proven.

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The ECIPE came to these conclusions by looking at existing ex-ante rules for general-purpose technology, like the telecom industry, and trying to replicate them for online platforms.

December

The new rules will be proposed to the European Commission on December 2nd. After that, EU countries and the European Parliament will judge them, before becoming legislation.

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