The EU has absurd guidelines for fining American tech giants

Last week, Elon Musk’s X came under fire from the European Commission for violating its Digital Services Act, and the commission has threatened to fine the platform up to 6% of its global revenue. From Reuters:

The Commission said X's verified accounts which carry a blue checkmark do not correspond to industry practice and negatively affect users' ability to make free and informed decisions about the authenticity of the accounts they interact with.

After buying the platform then known as Twitter in 2022, Musk altered the use of the blue checkmark, which previously indicated that an account belonged to a public figure whose identity was verified but was changed to indicate it belonged to a paid subscriber.

The commission said X had also failed to comply with a DSA requirement to provide searchable and reliable information about advertisements in a library for easy access.

X was also charged with blocking researchers from accessing its public data. The company, which will have several months to respond to the charges, could face a fine of as much as 6% of its global turnover if found guilty of breaching the DSA.

This is the latest example of the European Union threatening to fine American tech companies a percentage of their global revenue for failing to comply with European mandates. 

In March, the EU launched an anti-steering investigation into Apple and Alphabet, claiming that the tech giants have violated its Digital Markets Act by making it difficult for companies using their app stores to steer customers to cheaper subscription options. Fines for violating the DMA can be 10% of a company’s annual worldwide revenue, and 20% for repeat infringements.

Apple also just settled a long-standing mobile payments probe concerning the company not allowing third-party developers to access Apple’s payment technology to build alternative mobile wallets, and the iPhone maker risked a fine of 10% of its annual revenue if it failed to comply.

To put the size of these proposed fines into perspective, Apple’s total net sales in 2023 were $383.3 billion, so a 10% fine of its global revenue would be $38.3 billion. Apple’s entire operating income in Europe is only $36.1 billion. If it failed to comply with the EU’s regulations, Apple would be fined more than it makes in the region.

It seems insane to me that American companies, whose largest markets are North America, could be subject to global revenue fines by European regulators that are more expensive than the companies’ operating incomes on the continent.

Beyond the questionable nature of the fines (while I think the current “pay-to-play” blue check model is inferior, threatening to fine the company that literally invented the “blue checkmark” for not corresponding with an “industry practice” regarding blue checkmarks is absurd), how does the European Union have the right to enforce fines on California-based companies’ revenue generated in New York, Tokyo, and Rio? It makes zero sense.