In 2026, Western Europe’s digital economy will be defined by the friction between innovation and regulation. The EU’s AI Act will take full effect in August 2026. While the European Commission is considering delaying elements of the regulation and potentially loosening General Data Protection Regulation (GDPR) rules, the uncertainty will likely slow AI experimentation in commerce and advertising. Yet innovation won’t stall, as TikTok is proving to be a catalyst for live commerce in the region. And retailers are transforming the customer experience with assistive AI, such as recommendation engines and conversational assistants.