Market news · Nov 9, 6:02 PM ET

EU draft would allow fines of up to 6% of global turnover for unfair digital practices

A European Commission draft seen by Reuters would let regulators fine companies up to 6% of annual global turnover for manipulative digital sales tactics and ads aimed at children. The measure would apply to Big Tech, e-commerce and social media firms, so US companies with EU operations could be affected, though the draft still needs approval from EU governments and the European Parliament.

By Flash Finance US desk (written with AI assistance) · Editor: Kokila

What the draft would do

According to a Commission draft that Reuters saw, firms found to use unfair digital trade practices could face penalties of as much as 6% of annual worldwide turnover. The practices in question include steering people toward buying more and targeting children with personalised advertising. Companies found guilty of using unfair digital trade practices to push people to buy more or target children with personalised advertising risk fines of as much as 6% of annual global turnover, according to a European Commission draft law seen by Reuters.

The proposal, called the Digital Fairness Act, would treat deceptive interface designs as unlawful. It would ban so-called business-to-consumer "dark patterns" — deceptive or manipulative interface designs on websites and apps that steer people into buying more — as unfair commercial practices, the document said.

Bloomberg's reporting, as cited by another outlet, adds a feature-level rule. The draft would let adult users switch off AI chatbot functions that simulate personal relationships to keep them engaged. The European Commission's draft Digital Fairness Act names "AI chatbot functions that simulate interpersonal relationships to prolong engagement" as a feature category that adult users must be allowed to switch off.

How the penalty compares with current rules

The proposed ceiling is higher than what EU consumer law requires today. EU consumer law today requires member states to allow fines of at least 4% of a trader's annual turnover in the countries concerned for widespread infringements, under the 2019 Omnibus Directive. The draft would change the calculation base. The draft counts global turnover, according to Reuters.

The 6% level is not new in EU tech regulation. The DSA allows fines of up to 6% of a provider's worldwide annual turnover in the preceding financial year.

Why it matters for US investors

Reuters describes the law's target as the latest legislative push by Europe to get Big Tech, e-commerce and social media giants to do more to police content on their platforms. Because penalties would be calculated on worldwide sales rather than EU sales alone, the exposure would extend beyond European firms. Companies violating the proposed rules could face penalties calculated on their worldwide annual turnover.

The reports reviewed did not name specific companies that would be affected, so the exposure of any individual US-listed firm has not been established.

Next steps and criticism

The draft is not yet law. EU Justice Commissioner Michael McGrath is expected to present the proposal Wednesday, Reuters reported. After that, the legislation would require approval from the European Parliament and EU member states before becoming law.

Consumer advocates have raised concerns about scope. Finance Watch said the measures did not provide sufficient safeguards for financial consumers. Its research officer, Peter Norwood, said the dark-pattern proposals lack ambition to sufficiently protect consumers in financial services.

European CommissionDigital Fairness ActMichael McGrathBig TechE-commerceSocial media platforms

Sources

Written with AI assistance on Nov 9, 6:02 PM ET from the reports listed under Sources, and reviewed by our editor after publication. Before it was published, every figure was checked against those reports, and passages with figures that could not be found there were left out. It can still contain mistakes: read the sources before acting on anything. How we review. Not investment advice.