September 2020 Issue
The European Commission (EC) is undertaking a significant, much-needed overhaul of the digital market in the European Union (EU). On 2 June, it launched public consultation on its forthcoming, long-awaited Digital Services Act (DSA), which will propose new rules for companies operating online services. The DSA is expected to impact social media platforms, search engines, video gaming platforms, online marketplaces and other information society services, as well as internet service providers.
The current legal framework for digital services has been unchanged since the adoption of the e-Commerce Directive in 2000. Since its inception, the Directive has been the foundation for regulating digital services in the EU. But in light of the many advancements in delivering digital services over the last 20 years, be it communications, e-commerce or simply accessing information, it is no longer viable or desirable for the bloc to rely on what is considered outdated legislation.
A number of other important developments have also helped bring about the DSA. These include scandals involving data harvesting and selling, the rise to notoriety of firms such as Cambridge Analytica, the spread of fake news and the increasing dissemination of manipulative political advertising. Given these and other developments, the EC has chosen to act now and modernise its legislation.
The COVID-19 crisis has further influenced the EC’s decision-making process. Recently, the Committee on the Internal Market and Consumer Protection (IMCP) highlighted the importance of the DSA in light of recent abusive practices by traders selling fake or illegal products or imposing unjustified and abusive price increases or other unfair conditions on consumers during the pandemic.
In April, the IMCP published a draft report with recommendations to the EC on the objectives and contents of the Digital Services Act. It recommended that the DSA should: (i) place greater transparency and compliance obligations on information society and internet service providers and their business customers; (ii) introduce concrete measures (including a ‘notice-and-action mechanism’) to empower users to notify online intermediaries of the existence of potentially illegal content or behaviour; (iii) close the existing legal loophole allowing suppliers based outside of the EU to sell products online to European customers which do not comply with Union rules on safety and consumer protection; (iv) introduce ex-ante regulation of the ‘online gatekeepers’ of the digital economy, including large platforms such as Google, Amazon and Facebook, to open up the market to new entrants; and (v) strengthen and modernise existing provisions on out-of-court settlement and court actions to allow for effective enforcement and consumer redress.
“The concept of internet ‘gatekeepers’ is central to the proposal. The EC is exploring measures that will allow for better control over these gatekeepers going forward.”
The concept of internet ‘gatekeepers’ is central to the proposal. The consultation asks respondents to define what attributes make certain actors impossible to bypass when doing business online. The EC is exploring measures that will allow for better control over these gatekeepers going forward.
The proposals have varying degrees of regulatory ‘teeth’ and enforcement consequences, including enhanced transparency on current and emerging platform practices, to allowing certain practices to be blacklisted. Accordingly, the EC would be able to introduce more bespoke, case-by-case measures, such as platform-specific non-personal data access obligations, specific requirements regarding personal data portability or interoperability requirements.
“Online platforms have taken a central role in our life, our economy and our democracy,” said Thierry Breton, EU commissioner for the internal market. “With such a role comes greater responsibility, but this can happen only against the backdrop of a modern rulebook for digital services. Today we launch our public consultation: we will listen to all views and reflect together to find the right balance between a safe Internet for all, protecting freedom of expression and ensuring space to innovate in the EU single market.”
Other jurisdictions are also independently considering the future of digital regulation. In the UK, for example, there are similarities between the proposed DSA and measures under review. The UK plans to establish a cross-regulator ‘digital markets taskforce’ and designate certain businesses as having a ‘strategic market status’ which would require them to follow a code of conduct. The Competition and Markets Authority in the UK (CMA) completed a market study into online platforms and digital advertising, building on the recommendations of the Furman review and published its final report on 1 July 2020. Within the report, the CMA made four high-level recommendations to the government – (i) establish a code of conduct for online platforms with strategic market status; (ii) require the Digital Markets Unit (DMU) to undertake SMS designation and maintain the Code of Conduct; (iii) give the DMU the necessary powers to enforce the principles of the code; and (iv) give the DMU the necessary powers to introduce a range of pro-competitive inventions.
As a part of its robust and active consultation process on the DSA, the EC has initiated public consultation to support the work of analysing and collecting evidence for scoping the specific issues that may require EU-level intervention. All European and non-European citizens and organisations are welcome to contribute to this consultation, which will be open until 8 September 2020.
Technology companies and other businesses involved in the digital services industry have been encouraged to consult with the EC and help shape the future of digital legislation across the EU.
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Richard Summerfield