EU plans to penalize tech companies

Big tech companies may be penalized by the European Union under plans that might force them to break up or sell some of their European operations.

The rules would come into play if the tech giants' market dominance is deemed a threat to the interests of customers and smaller rivals, the Financial Times reported on Sunday.

The proposed solution would also include the ability to exclude large tech groups from the EU's single market altogether, said EU Internal Market Commissioner Thierry Breton, in an interview with the newspaper.

A rating system is also being considered that would mean companies are measured by their behavior on tax compliance and the speed with which they remove illegal online content, the Financial Times said.

Breton, who is leading the overhaul of digital rules in the bloc, was quoted as saying that activities that could lead to tougher sanctions include when companies prevent users from switching platforms or force customers to use only one service.

Breton said: "There is a feeling from end users of these platforms that they are too big to care. Under certain conditions we may also have the power to impose structural separation."

Enforcement of the remedies would require a collective effort between national governments and the EU, he added.

Breton said regulation was needed and compared the power of the tech giants with that of the banks before the financial crisis.

He said: "It's like for small banks and big banks you don't have the same rules — you have more flexibility for the smaller players and of course when you become a systemic (bank) you have a (different) set of rules.

"We need better supervision for these big platforms, as we had again in the banking system (after the financial crisis)."

The companies' responsibility and liability for content on their social media platforms will increase through a Digital Services Act to be proposed by the EU commission, Reuters news agency reported.

After the proposals are finalized they will go through the European Parliament and the European Council.

Once enacted, the Digital Services Act would give Brussels more power to scrutinize the way technology companies gather information on users.

Breton told the Financial Times that draft legislation will be drawn up before the end of the year. He highlighted that the EU would not remove the limited liability companies have for the content published on their platforms.

"The safe harbor of the liability exemption will stay," he said. "That's something that's accepted by everyone."