Report from the Courthouse News Service
In Brief – The arguments of Germany-based Zalando, Europe’s biggest online fashion retailer, that the platform should not be designated a Very Large Online Platform (VLOP) under the Digital Services Act (DSA), were rejected by the European General Court in Luxembourg, delivering a major win to the European Commission. The DSA, which regulates how digital platforms hosting third-party content address a wide range of objectionable material, designates a platform as a VLOP when they have at least 45 million active users per month, and imposes the most stringent regime. Nineteen large digital platforms, including two search engines, were initially designated as VLOPs, including three online marketplaces – Amazon, AliExpress, and Zalando. Amazon and Zalando both challenged the Commission in court. Zalando argued that with its hybrid business model, with its own retail business operating side-by-side a third-party marketplace, its user count should be pro-rated based on the share of sales made by third-party sellers, dropping it to 30 million. The court ruled that the DSA fully applies to hybrid models and that the Commission was justified in counting all Zalando users because they all see third-party offers.
Context – Although the DSA was most often described as a response to online hate speech, disinformation, and threats to children, the European Commission always argued that it covered online marketplaces for physical or digital goods. Chinese marketplace platforms Shein and Temu have since been added to the VLOP roster as well. EU officials have also been defending against attacks by US officials that the EU’s big tech laws discriminate against US digital companies, arguing that the DSA and the DMA are in fact completely neutral to the country of origin of companies. If anything, Zalando being European likely worked against it, and a Commission spokesperson responded to the decision saying, “Today’s judgment confirms once again that the DSA is a non-discriminatory tool. It applies to all online platforms in the EU, including European ones like Zalando.” You will hear that again when Amazon likewise loses its DSA court challenge.