How are fine amounts adjusted for SMEs and start-ups?
The AI Act caps fines for SMEs and start-ups at the lower of the two thresholds (fixed amount vs. turnover percentage), and requires authorities to consider company size and economic viability.
Under the EU AI Act, the maximum fine limits are specifically adjusted to be more lenient for small and medium-sized enterprises (SMEs) and start-ups.
While standard administrative fines for non-compliance are capped at a specific fixed monetary amount or a percentage of a company's total worldwide annual turnover - whichever is higher - SMEs and start-ups are subject to a different rule: their fines are capped at whichever of those two amounts is lower.
Practical impact
This means that for a start-up with modest revenue, the percentage-based calculation would likely be lower than the fixed cap, resulting in a significantly reduced maximum fine. Conversely, for a slightly larger SME, the fixed amount may be lower than the turnover percentage, again ensuring that the penalty remains proportionate.
Additional consideration
Additionally, when national authorities decide on the exact amount of a fine in an individual case, they are legally required to take into account the size of the provider, specifically noting if it is an SME or a start-up, and they must consider the company's economic viability.
This dual protection mechanism - capping at the lower amount and mandatory consideration of economic viability - aims to ensure that enforcement does not disproportionately burden smaller innovative companies while still maintaining meaningful deterrence.