Big Tech Regulations & Its Impact On AI

Priorly tech-friendly governments around the globe are now cracking down on big tech companies, which is putting the economies through a wind whirl. Since tech companies are forced to comply with the government, it gives the latter more power to manage their image.

China has made good progress in the AI arms race in the last decade and is running almost in lockstep with the US. Recent research based on metrics such as patents and research publications ranked China as the top country for AI development, followed by the US and Japan. China’s big-tech friendly policies were instrumental in putting the country on the AI map. However, recent developments point to the Chinese government’s increasing bid to control and regulate big tech companies.

Chinese Big Tech Crackdown

China’s latest new data-security law that goes into effect in September will compel big tech companies to handle sensitive data with care. The consequences for firms found to be mishandling will be ceasing operations, having their licenses revoked, or be fined up to 10 million yuan, or $1.6 million. The government is amid changing rules to block Chinese companies from listing abroad even if the unit selling shares is incorporated outside China.

Created in 2020, The Cyber Security Review Office (CSR) looks into cybersecurity risks and is backed by 12 Chinese ministries. Its key cybersecurity regulation demands that companies undergo a review process for transactions CSR deems to be a threat to national security. The CSR, the Chinese Securities Regulatory Commission, and the State Administration of Foreign Exchange will together act as gatekeepers for overseas IPOs.

The new requirement for data security reviews ahead of foreign IPOs and the self-imposed curbs by the government have pummelled tech stocks and left analysts apprehensive about the future of China’s technology economy if the scrutiny is tightened.

These regulations have caused more than a trillion-dollar drop in the Chinese stock market, and last week’s latest regulations have only intensified the hit. As a result, Chinese tech shares have fallen sharply, with The Hang Seng Tech Index closing 1.9% lower in Hong Kong.

The law heavily restricts how big tech companies collect and share private information. Rui Ma, an investment banker, called the Chinese government to lean towards manufacturing rather than financialisation; the government is not succumbing quickly to the market value. Last month, regulators ordered Chinese vehicle-for-hire company Didi Chuxing from the app stores two days after Didi raised $4.4 billion in a New York IPO.

State-based Big Tech Regulations in the US

The US government themselves are controlling the big tech industry. The Democrats on the Antitrust Subcommittee have proposed several antitrust laws to curb the power of tech giants like Amazon, Apple, Facebook, and Google. The five-package bill would prohibit tech giants from discriminating against or acquiring potential competitors, meaning they would have trouble closing merger deals, banning them from owning businesses that pose conflicts of interest. These came in following a year-long investigation into competition in digital markets, led by the Subcommittee on Antitrust, Commercial and Administrative Law, and a 450-page report at the end of the probe.

The executive director of the New York City Hospitality Alliance, Rigie, has pushed for New York City’s new laws on food delivery apps such as Uber Eats. He believes that the local government should lead on regulating tech companies.

In 2018, California passed the Consumer Privacy Act, making it clear more states would follow suit on issues such as privacy requirements on ISPs, net neutrality, and cybersecurity breach notification.

The US Congress appears to be in a state of urgency for comprehensive online privacy, introducing bills related to privacy in California, Virginia, and Colorado, and more states looking into it. Players on all sides in Virginia are participating in the battle against big tech, with everyone pushing their agenda on content moderation, privacy, taxes, and AI through state legislatures.

The Washington Privacy Act, while still in the debates, would give consumers the right to access, correct and delete data that companies hold on them.

The New York Privacy Act would create extensive new requirements for businesses to obtain consumers’ consent before processing their data. The act was set aside last year amid COVID19 but seems to now be making a comeback. Its private right of action is what the tech companies lobby aggressively against. Last week, Maryland approved the US’ first tax on Big Tech’s ad revenue to get the tech companies to pay their fair share in taxes.

While the new phase of the AI Arms Race between the US and China is coming as a surprise given the tech-friendly governments of both nations, we are yet to witness if the impact of these policies is protective or repressive.

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