The Big Tech regulation

European Union (EU) members have been calling for fair taxation on big-tech multinationals like Google, Amazon, Facebook and Apple that have been paying little tax, citing a lack of incorporated entities in their jurisdictions..

Bark Tae-ho The author is the president of Lee & Ko Global Commerce Institute and former Minister of Trade.

European Union (EU) members have been calling for fair taxation on big-tech multinationals like Google, Amazon, Facebook and Apple that have been paying little tax, citing a lack of incorporated entities in their jurisdictions. France was the first to announce in July 2019 a 3 percent digital tax on the income those companies earn in its borders. The United States responded with a 25 percent punitive tariff on French imports for allegedly discriminative action on American enterprises.

The Organization for Economic Cooperation and Development (OECD) struck an agreement with 136 countries in early October for a new international tax framework, where multinational enterprises with global revenues exceeding 20 billion euro ($23.1 billion) would be subject to the taxation of the market jurisdictions for 25 percent of their profit in excess from 2023 even if they lack a physical presence in each country. The two-pillar framework was signed at the G20 summit over the weekend.

Separately, the EU has been enforcing the General Data Protection Regulation (GDPR) since May 2018 to bind all companies to oblige with the rule controlling transfer of personal data inside and outside the EU. The regulation applies to basic personal information of EU citizens as well as residents, search data and all information related to individuals. Harsh fines of up to 4 percent of Big Tech’s global turnover or 20 million euro can be levied for violation of the privacy and security obligations.

In December 2020, the EU announced a draft of the Digital Services Act and Digital Markets Act encompassing a single set of new rules to create a safer and more open digital space. Platform operators would fall under various obligations or could face a fine of up to 6 percent of their annual revenue if they violate the rules. Also, a player of a sizeable presence would be designated as a gatekeeper to be targeted for watch and penalties on preferential or discriminative activities. Violations could bring a fine of 10 percent of their global revenue, and when repeated, a company’s services could be banned in the EU or even forced to separate businesses or liquidate assets.

The U.S. Congress in October 2020 also unveiled the findings of a 16-month investigation of antitrust activities in the digital market. It found big techs like Google, Amazon, Facebook and Apple abusing their monopolistic power to force preferential treatment to their services and products while blocking smaller companies from entering the market. Federal and state prosecutors have embarked on antitrust suits on big tech enterprises based on the report.

In June 2021, the U.S. House of Representatives reached a bipartisan agreement on “Anti-Monopoly Agenda for a Stronger Online Economy” comprised of five bills to regulate big tech’s anti-competitive behavior that denies choices and rights of businesses and consumers. The bills propose to ban discriminatory practices by dominant platforms, prohibit acquisitions of competitive and smaller platforms, eliminate the ability of dominant platforms to leverage their control to favor themselves while disadvantaging competitors, and ensure data interoperability to help lower barriers to newcomers’ market entry.

South Korea has been enforcing a revised Telecommunications Business Act from mid-September, banning app market operators from forcing a specific in-app payment system. From the first half of 2022, an Online Platform Act goes into effect to ensure a fair intermediary order in online platforms by outlining the obligations that platform operators must follow and the penalties they can face. But experts say the two acts can hardly cover big tech overall as their targets are not only different but also quite limited.

It has been an international trend to regulate anti-competitive behavior and expansion of big techs through corporate acquisitions. Korea must come up with more comprehensive national measures to address big-tech issues in line with international standards. In the digital economy, innovative companies must not be discouraged, and more must be encouraged to go global. Meanwhile, Korean tech companies must endeavor to comply with the new OECD tax rules and other regulations of the EU and the U.S.

Translation by the Korea JoongAng Daily staff.