EU Commission Finds That X Has Violated the Digital Services Act

Report from EuroNews

In Brief – The European Commission has made a preliminary determination that X has failed to comply with several provisions of the Digital Services Act (DSA), the EU’s law to regulate content moderation and increase the transparency of digital platforms. The Commission’s findings involve DSA requirements on dark patterns, advertising, and providing necessary data access for researchers. Of note, the regulator considers X’s “Blue checkmark” for “verified accounts” to be a deceptive “dark pattern” by failing to correspond with industry practice because anyone can obtain “verified” status by paying for a subscription. The regulator also believes that the company fails to meet requirements to provide a searchable repository of advertisements and provide access to its public data to researchers. The initial Commission request for information from X regarding DSA compliance was made last October, just days after the Hamas attack on Israel. Besides the DSA transparency provisions that the Commission is citing in this preliminary determination, their formal investigation of X also challenged the platform’s compliance with DSA requirements more explicitly focused on content moderation, including countering the dissemination of illegal content and information manipulation. Those investigations continue.

Context – EU Commissioner Theirry Breton took to X last October at the start of this process and said, “we have indications of X/Twitter being used to disseminate illegal content & disinformation” related to Hamas’s attack on Israel. It’s noteworthy that the Commission’s initial findings stick to more technical sections of the law and the Commission’s questions that raise censorship concerns remain open. Nevertheless, X’s owner responded to the preliminary determination alleging that, “The European Commission offered X an illegal secret deal: if we quietly censored speech without telling anyone,” and that X would challenge the Commission findings in court. Breton responded, also on X, “Be our guest @elonmusk. There has never been — and will never be — any “secret deal”.”

German Court Applies Antitrust Law In Facebook Content Moderation Case

Report from Heise Online

In Brief – A non-profit association of film enthusiasts in Dusseldorf, Germany, has successfully circumvented jurisdictional limits on lawsuits targeting social media platforms for their content moderation decisions by challenging a Facebook decision to freeze the group’s page as an antitrust violation. The Düsseldorf Regional Court found that Meta had improperly exploited its dominant position in Germany when it blocked the film group’s page in December 2021 without prior notice or specific reason. The case stemmed from Facebook blocking the group’s page based on a determination by its content moderation algorithms that probably considered still photos from a documentary on indigenous peoples as violations of the rules against nudity. The group could not get its page unblocked and sued Meta in early 2023. Meta has their EU headquarters in Ireland and tried to force the claim to be dealt with there, but the Dusseldorf court ruled that it had “international jurisdiction” because the matter was an antitrust claim rather than a dispute over contractual terms. The film group argued that Facebook, the dominant social media platform in Germany, must protect its users’ fundamental rights, including giving prior notice and objective reasons for removing a page. Along with accepting jurisdiction based on the competition law claim, the court said that the EU’s Digital Services Act “requires a clear, specific and comprehensive justification” to block a user.

Context – Frustration with the legal and regulatory implications of so many large digital platforms setting up their EU headquarters in Ireland (and a lesser extent Luxembourg), led to the EU’s two major digital economy regulatory overhauls shifting primary enforcement authority to the European Commission for the largest digital platforms. The Digital Services Act regulates content moderation policies and the Digital Markets Act regulates the largest “gatekeepers” using competition law principles. Meta is regulated by Brussels for both. Although, if this ruling stands, content moderation could be a matter for country-by-country competition suits as well.

Microsoft Reaches Deal with EU Cloud Companies to Avert Antitrust Action

Report from Reuters

In Brief – Microsoft and the association of Cloud Infrastructure Services Providers in Europe (CISPE) have reached an agreement to resolve the concerns that many of the small and mid-size cloud services companies in Europe have with practices that the software giant uses to preference its Azure cloud services business with customers that use its highly popular business software. The deal will allow most CISPE members to offer Microsoft applications and services on Microsoft’s cloud infrastructures with the main preferential features and similar prices to Microsoft, compensates the members for losses over the last two years, and establishes an ongoing monitoring body. In exchange, CISPE has agreed to withdraw the antitrust complaint it lodged with the EU’s competition authority. The European Commission must still review the agreement and judge its impact on cloud services competition across the EU, and CISPE reserved the right to refile their complaint if the agreement is not fully implemented within nine months. Finally, the Microsoft concessions do not apply to the other largest cloud services providers, Amazon’s AWS (the largest in Europe and a CISPE member), Google, or Alibaba.

Context – Allegations that Microsoft leverages its dominant software packages, including Office 365 and Windows OS, to preference its other digital services, is a complaint that extends beyond Azure cloud services. The European Commission has recently found that Microsoft has engaged in anticompetitive conduct by bundling its Teams service into Office 365 nearly four years after Slack filed an antitrust complaint. German software company NextCloud accuses Microsoft of unfairly bundling its OneDrive cloud system into Windows. The EU’s Digital Markets Act (DMA) regulatory regime will likely impact some or all of these issues at some point. Microsoft is a DMA gatekeeper (as are Amazon and Google). Microsoft’s Windows OS and LinkedIn are currently designated as regulated core platforms. And while the DMA does apply to cloud services, none of the gatekeepers' cloud businesses have so far been designated as regulated core platforms.

South African Sellers Complain About Amazon Using Algorithms to Set Price Floors

Report from MyBroadband

In Brief – Just months after Amazon opened its South Africa-based business, third-party sellers in the country are complaining that the ecommerce giant is imposing a price parity policy on them that penalizes their Amazon listings if they sell the product for a lower price on a competing marketplace, even when the costs on the other platform are lower. The sellers report that Amazon carries out this pricing policy by not placing a product into the key “Add to Backet” slot if the seller offers the product for a lower price elsewhere. A product will be able to gain the prime selling position if the seller raises the price on the other site up to their price on Amazon. This practice discourages sellers from taking advantage of promotions and discounts on competing platforms because those gains are offset by lost sales on Amazon. The South African Competition Commission released a report in 2023 directing domestic ecommerce platform Takealot to address several anticompetitive behaviors including removal of its own price parity clause from seller contracts.

Context – Amazon’s use of its Buy Box (“Add to Basket”) algorithm to enforce a “fair pricing policy” is a feature of several lawsuits in the United States. It is particularly relevant because the harm to consumers involves driving up prices, in this case on platforms other than Amazon, which is especially important in the context of US antitrust law. In addition, Amazon is the dominant online marketplace for small business retailers in the US, and its fee level for top sellers now averages over 50 percent, which exceeds fees on most other platforms. Several antitrust lawsuits alleging harm from fair pricing have survived Amazon’s motions to dismiss, including two class action suits in federal court in Washington State, and a lawsuit by the Attorney General of California in California state court. Amazon’s practices aimed at dissuading marketplace sellers from offering lower prices on competing platforms is also incorporated into the US Federal Trade Commission’s antitrust complaint scheduled for trial in October 2026.