EU agrees on landmark law aimed at forcing Big Tech firms to tackle illegal content

The European Union agreed on new digital regulations Saturday that will force tech giants like Google and Meta to police illegal content on their platforms more aggressively, or else risk potential multibillion-dollar fines.

The European Parliament and EU member states reached a deal on the Digital Services Act, a landmark piece of legislation that aims to address illegal and harmful content by getting platforms to rapidly take it down.

Margrethe Vestager, the EU competition chief and a key architect of the bloc's digital reforms, said the deal is "better than the proposal that we tabled" back in 2020.

"It's not a slogan anymore that what is illegal offline should also be seen and dealt with online," Vestager said in a video posted on Twitter. "Now it is a real thing. Democracy is back."

European Commission President Ursula von der Leyen issued a statement calling the agreement "historic."

"The DSA will upgrade the ground-rules for all online services in the EU," she said. "It will ensure that the online environment remains a safe space, safeguarding freedom of expression and opportunities for digital businesses."

A key part of the legislation would limit how digital giants target users with online ads. The DSA would effectively stop platforms from targeting users with algorithms using data based on their gender, race or religion. Targeting children with ads will also be prohibited.

So-called dark patterns — deceptive tactics designed to push people toward certain products and service — will be banned as well.

Tech companies will be required to implement new procedures designed to take down illegal material such as hate speech, incitement to terrorism and child sexual abuse. E-commerce marketplaces like Amazon must also prevent sales of illegal goods under the new rules.

The law includes measures compelling tech giants to be more transparent about the algorithms they use to recommend content to users. Another provision would require very large online platforms and search engines to take certain measures in the event of a crisis, like Russia's invasion of Ukraine.

Failure to comply with the rules may result in fines of up to 6% of companies' global annual revenues. For a company like Meta, the parent company of Facebook, that could mean a penalty as high as $7 billion based on 2021 sales figures.

The law is now subject to formal approval by EU institutions. It's expected to come into force as early as 2024.

The DSA is separate from the Digital Markets Act, which EU institutions approved last month. Both come with the threat of hefty fines. But whereas the DMA seeks to curb Big Tech firms' market power, the DSA is all about making sure platforms get rid of toxic content quickly.

The law will affect user-generated content sites like Facebook, Instagram, Twitter, YouTube and TikTok.

A Google spokesperson said the company welcomes the DSA's goals, but added it wants to work with EU policymakers to "get the remaining technical details right to ensure the law works for everyone."

"We welcome the DSA's goals of making the internet even more safe, transparent and accountable, while ensuring that European users, creators and businesses continue to benefit from the open web," the spokesperson told CNBC. "As the law is finalised and implemented, the details will matter."

A spokesperson for Twitter said the company looked forward to reviewing the regulation in detail.

"We support smart, forward thinking regulation that balances the need to tackle online harm with protecting the Open Internet — while also understanding that a one-size-fits all approach fails to consider the diversity of our online environment," the spokesperson told CNBC.

"It's Twitter's top priority to keep people safe online and protect the health of the public conversation, and within the Digital Services Act, we welcome the increased focus on healthier digital spaces in the EU."

Brussels has a long history of taking internet giants to task over competition abuses and data privacy.

The bloc has leveled a combined 8.2 billion euros ($8.8 billion) in fines against Google over antitrust violations, and has active investigations into Amazon, Apple and Meta.

In 2018, the EU introduced the General Data Protection Regulation, a sweeping set of privacy rules aimed at giving consumers more control over their information.

The advent of new European rules for regulating Big Tech comes as policymakers in Washington wrangle with the question of how to rein in the power of large tech companies and get them to clean up their platforms of harmful content.

On Thursday, former President Barack Obama called for reforms to Section 230, a law that protects online platforms from liability for their users' posts, in order to combat the spread of online disinformation.

But how the EU manages to implement its new rules in practice is unclear. Critics say implementing such measures will create technical burdens and raise questions around what speech is or isn't acceptable online.

In the U.K., new laws designed to tackle unsafe content have been heavily criticized by some in tech industry — not least the Big Tech platforms — due to a vague description of material that is "legal but harmful."

Detractors argue this could heavily limit freedom of expression online. For its part, the British government said it won't require any legal free speech to be removed, and that "democratically important" content will be protected.