The EU Published Major New Tech Regulations And Inditex Reported Earnings

The EU Published Major New Tech Regulations And Inditex Reported Earnings

about 3 years ago3 mins

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The European Union (EU) laid out the dos and the please, please don’ts for Big Tech on Tuesday, proposing two major new pieces of regulation 🇪🇺

What does this mean?

With these new rules, the EU is hoping to keep companies like Google, Facebook, and Amazon from hoovering up all their smaller rivals’ business – as well as to protect customers from the unfairly high prices those firms could charge if that happened 🚫 The regulations should also force them to take more responsibility for any illegal conduct on the platforms. They’ll be some of the strictest on Big Tech in the world if they’re passed into law in their current form – but with all the political back-and-forth that’ll be involved, that’s a very big if.

Key goals of the Digital Services Act
Source: European Commission

Why should I care?

For markets: Naughty step.

If Big Tech companies misbehave under the proposed regulations, they could have to pay fines of up to 10% of global revenues. The EU might be rubbing its hands at the prospect, with the five biggest tech companies – Apple, Amazon, Google, Facebook, and Microsoftboasting combined revenues of almost a trillion dollars last year 💵 And if they keep breaking the rules – the EU’s proposed a limit of three times in five years – they’re at risk of being broken up altogether.

Big Tech revenues rival some countries’ GDP
Big Tech revenues rival some countries’ GDP | Visual Capitalist

The bigger picture: Fighting the giants.

It can be hard to keep up with the regulators’ battle with Big Tech, with US, UK, and Chinese regulators all having announced new fines, rules, or investigations in the last few days alone 💻 But given regulators’ existing rulebooks weren’t written when data-hungry companies were something to think about, it’s easy to see why they’d be worried. The big challenge now, some experts reckon, is to rewrite the rules without hurting free speech and innovation in the years to come.

Keep reading for our next story...

Inditex Reported Earnings

Inditex image

Inditex has been taking the “Always Be Closing” tactic a bit too literally: the world’s biggest fashion empire reported lockdown-hampered quarterly sales on Tuesday 🧺

What does this mean?

Inditex’s sales fell 14% last quarter compared to the same time last year, but at least it was a noticeable improvement from the 31% drop the quarter before. Trouble is, there was another wave of lockdowns across Europe in November just as the company inched closer to last year’s sales numbers, forcing almost a quarter of its global stores – under brand names like Zara and Massimo Dutti – to shut.

Inditex's monthly sales as a percentage of the comparable period of 2019
Source: The Wall Street Journal

So when most of those stores were allowed to reopen in December, Inditex refused to rest on its laurels 👚 The company found ways to cut costs and reduce the number of clothes its brands stocked, keeping unwanted items from piling up. That should help keep profits up from here on out.

Why should I care?

For markets: Oh ship.

Rival retailer H&M said it was in a similar boat to Inditex on Tuesday, with sales down 22% between the end of October and the end of November compared to the same time last year 📉 That’s double the drop in sales it saw for the quarter as a whole, suggesting shoppers who had been refreshing their wardrobes went straight back to rocking their trusty sweats all over again in lockdown.

The bigger picture: Change is good.

There was one bright spot in Inditex’s earnings: its online sales grew by 76% in the first nine months of the year versus the same time last year. The retailer’s invested a lot in its digital business, and it can now deliver clothes to almost any country 🌎 And according to a recent study by McKinsey, it was right to double down on the transition: the consultancy firm found that more than 65% of the world’s consumers are doing more of their shopping online, and apparently they intend to keep it that way.

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