Archive – 2021-22

December 2020

Europe Releases Massive Digital Services Act Package of Platform Regulations

Special Report from PEI

In Brief – The European Commission has unveiled the Digital Markets Act (DMA) and the Digital Services Act (DSA), an unprecedented effort to rewrite the rules governing the digital economy. The DMA is designed to address competition concerns caused by large digital platforms and is expected to have the greater economic impact. The DSA aims to compel digital platforms to better police harmful online content such as hate speech, terrorism advocacy and child exploitation. The European Parliament and EU national governments will have a chance to amend the laws in a process that could take two years before final versions are adopted.

The Digital Markets Act –

The DMA sets out a list of prohibitions and obligations imposed on digital “gatekeepers,” meaning platforms deemed to have a significant impact on the market. This key determination will be based on factors such as the number of users, revenues and market capitalization, and the concept of being “entrenched” in its status. It is not clear which platforms will be covered, nor which of the commission’s internal departments with determine or oversee them.

Gatekeeper firms will face a range of obligations. “Black-list” practices are prohibited. These include requiring users to accept the combining of data from across different platforms, preventing business users from offering better prices via other channels, or forcing a company to pay for one service as a condition of using another platform. Other requirements include providing price transparency for small business customers, allowing data portability, and informing the commission of any acquisitions. Finally, there are rules more open to interpretation, such as a ban on self-preferencing or using data collected in one business to compete in another market. In such cases, gatekeeper firms will be able approach the regulator with an implementation plan and ask for approval.

The Digital Services Act –

The DSA reinforces the core intermediary liability principle that platforms and other intermediaries are not liable for users’ unlawful behavior unless they are aware of illegal acts and fail to remove them. It harmonizes the rule across the EU. However, all digital platforms will now face uniform obligations to address harmful and illegal content appearing on their services. In addition, large digital platforms, those with 45 million or more users in Europe, will face a full set of transparency, compliance and regulatory oversight requirements.

All platforms, including those based outside the EU, will be required to take measures to counter illegal goods, services or content online. These include adopting mechanisms for users to flag objectionable content and cooperate with “trusted flaggers”, the ability to trace business users in online marketplaces to identify sellers of illegal goods, providing a range of safeguards to users, including the ability to challenge content moderation decisions, and transparency into advertising.

Large platforms face a host of compliance duties. They are required to assess systemic risks stemming from the use of their services and take steps to mitigate those risks. The three categories of systemic risk are the spread of illegal content, the use of a platform to undermine citizens’ fundamental rights, and intentional manipulation of a platform to negatively impact public health, civic discourse, electoral processes, public security or the protection of minors. Large platforms will need to name a lead compliance officer, and provide regular public reports on efforts to remove illegal content, access to data to “vetted researchers”, a user code of conduct, and transparency into recommendation algorithms. They will also face yearly external audits and, if they fail to address issues, fines of up to 6% of turnover.

Finally, the DSA proposes a new regulatory role for EU governments, including the naming a national Digital Service Coordinator (DSC) to regulate home country platforms, make requests of other DSCs and serve on a new European Board for Digital Services, an advisory group for the EU executive.


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