What Lessons Can Washington Learn From Europe About Regulation of Tech Firms?

U.S. lawmakers this week set the stage for a possible new era of regulation for big tech companies as they questioned


Chief Executive

Mark Zuckerberg

about the company’s handling of user privacy.

They offered few specifics about what type of oversight they would favor for an industry that has up to now been governed in the U.S. with a light touch. But as they mull how and whether to pursue regulation to address increasing concerns, including about digital privacy, they might look to Europe to seek answers and to avoid some pitfalls.

Across the Atlantic, both Brussels and European Union member states have pushed for a raft of different regulations of the tech industry in recent years—covering issues including privacy, hate speech, taxes and unfair trading practices.

That has led to accusations in the past by U.S. officials and companies that the EU is unfairly targeting American firms, while EU officials have said they are just trying to level the playing field for smaller players. Brussels’ regulation has also been accused of stymieing innovation.

Mr. Zuckerberg told U.S. lawmakers he was open to regulation, but warned against far-reaching rules that could harm innovation.

While regulation is arguably less of a problem for companies the size of Mr. Zuckerberg’s, it can risk hindering startups with fewer resources to ensure compliance with the law. Regulation can also take time to enter into force, meaning it struggles to keep up with fast-moving technologies.

But it could also help safeguard users’ trust in the internet—a valuable commodity for Silicon Valley firms pummeled by the global backlash against tech.

When crafting privacy regulation, lawmakers should learn from some of the pitfalls of the EU’s General Data Protection Regulation entering into force in May, said

Jan Dhont,

a Brussels-based partner in the data-protection practice at law firm Alston & Bird.

The GDPR is written in a way that is “very gray, very broad” that can lead to “absurd applications of the law,” said Mr. Dhont, adding that lawmakers should instead be as specific as possible when crafting privacy regulation, like catering it to specific industry—social platforms, for example.

Some tech executives have questioned whether the EU’s privacy laws could constrict the development of artificial intelligence, which use large amounts of data to train machines. The concern is that European and American companies could lose the AI race to players in Asia, who have freer access to enormous amounts of data about people.

Some of the GDPR clauses, such as requirements on data retention, are also extremely difficult and costly to implement, especially for smaller companies, Mr. Dhont said.

The unintended impact on smaller companies of the EU’s tech regulations is a recurring issue, according to

Lenard Koschwitz,

director for European affairs at Allied for Startups, a group aimed at linking startup companies with policy makers.

Mr. Koschwitz pointed to another such example in a legislative proposal on copyright from the European Commission, the bloc’s executive body.

The rules would make the practice of text and data mining—when companies crawl the web for images that they can feed into their algorithms—only available for noncommercial research.

Mr. Koschwitz said the rules were seemingly designed to rein in big internet giants who have lots of data but would also, as a result, “turn off the tap for any newcomers” who don’t have their own data sets.

Another development in Europe that has caused concern among internet advocates and tech firms is the increasing responsibility lawmakers are giving platforms for the content that shows up on their sites.

Germany recently implemented new rules that would fine platforms €50 million ($61.6 million) if they fail to delete from their platforms illegal content including slander and libel, neo-Nazi propaganda and calls to violence. The commission has also published recommendations urging tech firms to actively monitor their sites for terror propaganda and hate speech.

“The great innovation of the internet is the real-time communication,” said Julia Reda, a German lawmaker in the European Parliament from the Pirate Party. “If you want to have real-time communication infrastructure, then you can’t expect that infrastructure to act like a publisher.”

Overall the EU’s tech regulation initiatives are a boost for European consumers and can help restore trust in internet services, according to

Agustin Reyna,

chief competition adviser at BEUC, the European Consumer Organisation, an umbrella group of consumer associations. That is particularly true of the GDPR, which hands users more control of their data, he said.

Facebook has said it would roll out the new controls and settings required by GDPR globally, with minor nuances. “The EU with GDPR has set a very strong standard with data privacy,”

Carolyn Everson,

Facebook vice president for Global Marketing Solutions told the Journal’s CEO Council in London on Thursday.

The EU’s data-protection chief,

Vera Jourova,

had a “constructive and open discussion” with Facebook’s Chief Operating Officer

Sheryl Sandberg

on Thursday over the company’s data policies, the EU said.

Regulations based on European values can help restore citizens’ trust online, the EU’s digital chief

Mariya Gabriel


“If we don’t succeed to have the trust of our citizens [and] our enterprises, it will be impossible to achieve all those very positive results that the digital transformation can bring,” she said.

Write to Natalia Drozdiak at natalia.drozdiak@wsj.com

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