Businesses face major shift under EU AI Act

While these measures are designed to protect citizens’ rights, the study warns that the resulting compliance obligations could become a heavy burden for smaller companies that lack the legal and technical resources to meet them. According to the authors, the Act requires firms to conduct extensive documentation, audits, and testing before deploying certain AI systems. The research finds that this could slow innovation and raise costs, particularly for startups that rely on agility and fast product development cycles.

The European Union’s Artificial Intelligence Act (EU AI Act) will profoundly change how companies develop, deploy, and govern artificial intelligence, according to research that examines how this landmark legislation, the first of its kind globally, will affect innovation, competitiveness, and trust in AI technologies across industries. 

Published in AI Magazine, the study titled “Artificial Intelligence and the Impact of the EU AI Act in Business Organizations" offers one of the first comprehensive analyses of how the new regulatory framework will influence business operations, especially for small and medium-sized enterprises (SMEs) and startups in Europe’s e-commerce sector.

Balancing regulation and innovation in the AI economy

The EU AI Act represents a major step toward regulating artificial intelligence at scale, introducing a risk-based approach that classifies AI systems into four categories, unacceptable, high, limited, and minimal risk. The study highlights how this classification system redefines what companies can and cannot do with AI technologies, imposing strict rules on high-risk applications such as biometric identification, emotion recognition, and algorithmic decision-making that affects consumer welfare.

While these measures are designed to protect citizens’ rights, the study warns that the resulting compliance obligations could become a heavy burden for smaller companies that lack the legal and technical resources to meet them. According to the authors, the Act requires firms to conduct extensive documentation, audits, and testing before deploying certain AI systems. The research finds that this could slow innovation and raise costs, particularly for startups that rely on agility and fast product development cycles.

Despite these challenges, the researchers argue that the Act also provides an opportunity for businesses to differentiate themselves through ethical AI governance. By embedding transparency and fairness into algorithmic design, firms can strengthen consumer trust and enhance brand reputation. This emerging model of “responsible AI” could become a competitive advantage in global markets increasingly sensitive to data ethics and accountability.

Impact on businesses: Costs, compliance and competitiveness

The research explores in detail how the EU AI Act will affect AI-driven industries, with a special focus on e-commerce and digital platforms. These sectors rely heavily on artificial intelligence for logistics optimization, targeted marketing, pricing algorithms, and customer personalization. Under the new legislation, firms must disclose how algorithms process user data, manage consent mechanisms, and ensure that automated decisions do not discriminate or manipulate consumers.

The researchers point out that the compliance process entails operational restructuring. Companies will need to hire data protection officers, retrain employees, and invest in regulatory technologies to ensure adherence to EU standards. For SMEs, these additional costs could limit access to advanced AI solutions. However, the authors note that early compliance may lead to long-term gains by positioning firms as trustworthy and compliant players in the digital economy.

The study identifies three technologies under particular scrutiny:

• Synthetic media and deepfakes, which require mandatory labeling and disclosure when content is AI-generated.
• Facial recognition and biometric systems, classified as high-risk and restricted to prevent invasive data profiling.
• Emotion recognition tools, used in marketing and consumer analytics, which demand explicit consent from users and must meet privacy requirements.

These regulations, the authors explain, are designed to protect individuals from manipulation and discrimination while maintaining the integrity of digital markets. Although compliance increases short-term costs, it also reduces long-term reputational and legal risks.

To measure the business impact, the study introduces an “Impact of Regulation on Performance (IRP)” model, which evaluates how regulatory obligations affect revenue, market share, and innovation capacity. The analysis shows that while the initial implementation phase reduces profit margins, companies that integrate regulatory compliance into their strategy experience greater resilience and consumer loyalty over time.

The authors also note that the EU AI Act could inspire similar legislation worldwide, potentially establishing Europe as a standard-setter in global AI regulation, just as the GDPR did for data protection. This may create competitive advantages for European firms accustomed to strict oversight, as they will already operate under higher compliance benchmarks when expanding internationally.

Consumer trust and the future of responsible AI

The study argues that the EU AI Act will reshape the social contract between technology and consumers. By requiring transparency, traceability, and human oversight in AI systems, the law is expected to rebuild public trust in automated decision-making. In e-commerce, where personalization and data collection are pervasive, this transparency could significantly influence consumer behavior.

The researchers suggest that firms that proactively explain how AI systems use data and provide clear consent options will see a rise in customer engagement and brand loyalty. As consumers become more aware of algorithmic fairness and ethical design, trust will become a key differentiator in competitive markets.

The Act’s focus on human-centric AI could drive a shift in corporate culture. Instead of viewing compliance as an obstacle, organizations can treat it as an innovation framework, encouraging the development of transparent, accountable, and sustainable AI ecosystems. To facilitate this transformation, the authors propose a series of recommendations for policymakers and businesses:

• Financial and technical support for SMEs to offset compliance costs.
• Public-private partnerships to develop sector-specific compliance guides.
• Collaborations between universities and businesses to advance research on ethical and responsible AI.
• Investment in training programs to build regulatory literacy among employees.

These initiatives, the study concludes, would ensure that the AI Act supports both ethical governance and economic growth, allowing innovation to flourish under responsible conditions.