On 15 December 2020, the Commission unveiled the Digital Services Act and the Digital Markets Act, two legislative proposals aimed at ensuring a safe, fair, open and accountable online environment. The proposals form part of the European Digital Strategy, whereby the Commission is aiming to develop and promote European digital standards in order to strengthen the EU’s digital sovereignty.
The Digital Services Act (DSA) modernises the rules laid down by the previous eCommerce Directive 2000/31. Through this proposal, the Commission is seeking to rebalance the rights and responsibilities of providers of online intermediary services (including hosting services and online platforms such as online marketplaces, app stores and social media platforms) and their users. The DSA will apply to all online intermediaries offering their services in the European single market, whether or not they are based in the EU.
The obligations applicable depend on the type and size of the online player concerned and may include:
(i) measures to counter illegal goods, services or content online, such as a mechanism for users to flag such content and an obligation on providers to notify suspicions of serious criminal offences or to suspend services for recipients that frequently provide manifestly illegal content;
(ii) greater transparency and reporting obligations, for instance regarding content moderation;
(iii) new obligations on traceability of business users in online marketplaces, to help identify sellers of illegal goods;
(iv) effective safeguards for users, including access to an effective internal complaint-handling system.
Additional obligations apply to so-called “very large online platforms”, i.e. online platforms with more than 45 million users. For example, these platforms will have to assess and manage on a regular basis the so-called “systemic risks” arising from the functioning and use of their services, i.e. the dissemination of illegal content through their services, negative effects for the exercise of fundamental rights and intentional manipulation of their service. In order to mitigate such risks, very large platforms will have to put in place measures which may include:
(i) adapting content moderation or recommender systems, their decision-making processes, the features or functioning of their services, or their terms and conditions;
(ii) targeted measures aimed at limiting the display of advertisements in association with the service they provide;
(iii) reinforcing the internal processes or supervision of any of their activities;
(iv) initiating or adjusting cooperation with trusted flaggers;
(v) initiating or adjusting cooperation with other online platforms.
With the Digital Markets Act (DMA), the Commission is seeking to complement existing competition rules in order to address specific challenges occurring in the digital sector. While competition law prohibits restrictive or abusive practices ex post, the DMA’s approach is to minimise the detrimental structural effects of unfair practices ex ante.
In view of the considerable economic power of a small number of digital players, the Commission is introducing new obligations and prohibitions for large online platforms that act as “gatekeepers” in the digital sector (online intermediaries, online search engines, online social networking, video sharing platform services, etc.). Providers will be qualified as gatekeepers if they (i) have a significant impact on the internal market, (ii) operate one or more important gateways for customers and (iii) enjoy or are expected to enjoy an entrenched and durable position in their operations.
Being qualified as a “gatekeeper” by the Commission will trigger a series of obligations and prohibitions:
• Obligations: allow business users to access the data that they generate in their use of the gatekeeper’s platform; allow business users to promote their offer and conclude contracts with their customers outside the gatekeeper’s platform; allow third parties to interoperate with the gatekeeper’s own services in certain specific situations, etc.
• Prohibitions: treat the gatekeeper’s products and services more favourably in ranking than similar services or products offered by third parties on the gatekeeper’s platform; prevent consumers from linking up to businesses outside its platform; prevent users from un-installing any pre-installed software or app if they wish to, etc.
Following a monitoring period, the Commission can add new obligations to this list. In order to qualify companies as gatekeepers, design additional remedies for systematic infringements of the DMA and ensure the effectiveness of the DMA, the Commission will also be able to carry out market investigations.
If adopted by the European Parliament and Member States, the final version of the DSA and the DMA will be directly applicable across the EU. To be continued…
Please contact Karel Janssens, Pierre de Bandt, Jeroen Dewispelaere or Raluca Gherghinaru for further information regarding the above or for general legal advice relating to the digital economy and/or competition law.