EC unveils drafts of the Digital Services Act and the Digital Markets Act
The European Commission has announced drafts of the Digital Services Act and Digital Markets Act, introducing sweeping new rules for all digital services, including social media, online marketplaces, and other online platforms that operate in the European Union.
The Digital Services Act (DSA) aims to regulate all digital services that connect consumers to goods, services, or content, including new procedures for faster removal of illegal content, as well as comprehensive protection for users’ fundamental rights online. The draft DSA sets up obligations for intermediary service providers, hosting service providers, online platforms and very large online platforms.
The draft of the DSA, among others:
- Provides for the exemptions to liability of providers of intermediary services and sets out conditions when providers of mere conduit, caching, and hosting services are exempt from liability for the third-party information they transmit and store;
- Lays down a prohibition of general monitoring or active fact-finding obligations for providers of intermediary services and imposes an obligation on providers of intermediary services to act against illegal content (‘Know your customer’ obligations);
- Sets out the due diligence obligations for a transparent and safe online environment, such as the obligation for online platforms to provide an internal complaint-handling system in case of takedowns. It also obliges online platforms to engage with certified out-of-court dispute settlement bodies to resolve any dispute with users of their services;
- Includes transparency obligations for online platforms in respect of online advertising;
- Very large online platforms are subject to additional obligations to manage systemic risks;
- It introduces a role of ‘vetted researchers’ – expert researchers affiliated with academic institutions, independent from commercial interests for the purpose of conducting research that contributes to the identification and understanding of systemic risks stemming from the large online platforms.
- lays down provisions on Digital Services Coordinators, primary national authorities designated by the EU Member States for the consistent application of the DSA and lays down provisions regarding the European Board for Digital Services, an independent advisory group of Digital Services Coordinators.
The Digital Markets Act (DMA) is designed to regulate the power of online platforms that act as ‘gatekeepers’ in the digital market. The draft of the DMA sets out, among others:
- Specific criteria for a platform to be considered a gatekeeper, such as size, control power over market between businesses and consumers, and durability of this influence;
- Obligations of gatekeepers related to allowing third parties to inter-operate with the gatekeeper’s own services, providing companies advertising on their platform with access to the performance measuring tools of the gatekeeper and information to carry out their own independent verification of advertisements hosted by the gatekeeper; and to provide their business users with access to the data generated by their activities on the gatekeeper’s platform;
- Do not block users from uninstalling any pre-installed software or apps;
- Gatekeepers are not allowed to use data obtained from their business users to compete with these business users (creating data silos);
- Gatekeepers may not restrict their users from accessing services that they may have acquired outside of the gatekeeper platform.
The sanctions for noncompliance are 6% of global turnover in case of the DSA and 10% of global turnover in case of the DMA.
The DSA and the DMA are to be adopted as regulations with the European Economic Area relevance, meaning they will be directly applicable. According to Ms. Margrethe Vestager, Executive Vice President for a Europe fit for the Digital Age, the European Commission expects the adoption of the DSA and the DMA within a year and a half.