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Set to release a proposed “Digital Omnibus Package” November 19th, the EU’s European Commission has made an unexpected pivot to deregulatory efforts after years of slow growth and dwindling competitiveness in the world’s largest customs union. Laws such as the General Data Protection Regulation (GDPR), the AI Act (AIA), Digital Services Act (DSA), and Cybersecurity Act are among the most notable set to be altered. These laws combine to represent one of the world’s most restrictive regulatory regimes, which has for the last half-decade limited businesses and stifled innovation. The EU’s new push for cutting regulation and reducing its burden is an important step for rekindling growth.
The Omnibus package is centered on efforts to reduce headaches for AI developers and small- and medium-enterprises (SMEs). EU law often suffers from being overly complex while lacking technical definitions of key requirements. For instance, the AIA requires companies developing AI models of “systemic risk” to adhere to stricter transparency requirements. Unfortunately, what constitutes systemic risk is poorly defined, leaving developers in the dark on what requirements are expected to be met. The European Commission’s proposal seeks to address these issues, standardizing terminology between its major digital regulations. This change could help clarify expectations, reducing overall burdens and the risk of facing hefty fines from regulators.
The alterations also aim to minimize compliance costs, standardizing filing between each act. Currently, companies must file a risk assessment, compliance report, and forms for other transparency requirements for all major digital regulations. The costs of filing this paperwork add up: the Computer & Communication Industry Association estimates that complying with the 16 most notable European digital regulations costs large American companies on average $430 million annually per company, with legal costs and potential fees driving this cost to $4.3 billion and $12.5 billion, totaling $2.2 trillion in lost revenue and a $325 billion reduction in R&D by 2030.
These costs are even more prohibitive for Small and Medium Enterprises whose lack of internal legal expertise requires the costly outsourcing of compliance functions. The Omnibus package hopes to solve this issue by unifying filing and streamlining the reporting process. Backers of the package argue that the changes reduce reporting requirements to be consolidated in a single binder, significantly reducing compliance burdens. The European Commission is especially hopeful, setting a goal to reduce administrative burden by 25% and by 35% for SMEs.
Finally, the package reduces the scope of reporting requirements while narrowing key definitions. This change is particularly useful for the AI industry who suffer from the broad scope of “sensitive-data” requirements under GDPR and aforementioned “systemic risk” labels. As it stands, these definitions prevent AI developers from accessing the training data necessary to develop cutting edge models: regulatory requirements are estimated to raise AI development overhead by 17% while reducing total investment into AI technologies by 20-30%.
The European Commission’s change of heart has been motivated by consistent pushback from U.S. and EU leadership in addition to private industry. U.S. companies have often borne the brunt of EU regulation. Arbitrary reporting requirements often place the burden of compliance squarely on American companies, motivating President Trump to take a hardline stance against such discriminatory policy. Additionally, European leaders such as German Chancellor Friedrich Merz have grown discontent with the negative consequences of Europe’s regulatory architecture.
While a step in the right direction, the EU’s Omnibus package leaves numerous prohibitive barriers to innovation and growth unaddressed. Strong leadership and continued pressure from the U.S. is necessary to keep European lawmakers accountable and on a path towards renewed innovation.
