Digital Companies & Markets Regulation Printed

Tuesday 22nd December 2020

On December 15, 2020, the European Commission (the Commission) published its long-awaited proposals on digital regulation, the Digital Services Act (DSA) and the Digital Markets Act (DMA). The new draft regulations represent a major overhaul of the European digital space and form the core of the Commission’s ambitions for digital transformation. These new rules affect the legal framework for all digital services, including social media, online marketplaces and other online platforms.

DSA

The DSA updates the obligations of digital service providers, which are currently based on the 20-year-old E-Commerce Directive of the European Union (EU). In general, the DSA clarifies the liability regime for digital intermediaries and increases the monitoring and enforcement of the regulations.

With regard to the liability regime, the DSA wants to ensure that platforms, especially those that qualify as “very large platforms”, are more accountable and responsible for their actions and the systemic risks they pose. Chapter II of the DSA contains provisions on the exemption from liability of online intermediaries, e.g. B. Conditions under which providers of mere conduits (i.e., providing network access or transmission services), caching (i.e., storing data to make transmission more efficient), and hosting services (i.e., storing data provided by users ) are exempt from liability for third-party information transferred and stored by them.

The DSA defines due diligence obligations for a transparent and secure online environment, for example new rules for the traceability of business users on online marketplaces. Other obligations include the obligation to set up a single point of contact to facilitate direct communication with the authorities, as well as reporting requirements for the removal of information that is considered illegal or violates the provider’s terms and conditions.

In addition, the DSA lays down additional obligations for very large online platforms (which reach 45 million users in the EU, which is around 10 percent of the EU population) to manage systemic risks. For example, very large online platforms are required to carry out risk assessments on the systemic risks that arise from or related to the functioning and use of their services and they have special obligations when they use recommendation systems or display online advertisements on their platforms online. Interface.

Member States will play the main role in enforcing the new rules, supported by a newly proposed European Digital Services Committee (ie an independent advisory group of national authorities designated by Member States for the consistent application of the DSA). Very large online platforms are subject to increased monitoring and potential enforcement by the Commission. In the event of a breach, the Commission can take decisions on breaches as well as fines (up to 6 percent of the company’s total sales in the previous financial year) and regular penalties for breaches of the DSA.

DMA

As the second part of the Commission’s digital platforms package, the DMA builds on Regulation 2019/1150 (P2B Regulation) and aims to limit the performance of large digital platforms that serve as an important gateway for business users to reach their customers (Gatekeeper ) to reach. The DMA contains rules to define and prohibit unfair practices by gatekeepers and gives the Commission market investigation powers to solve structural problems.

In contrast to the DSA, the DMA only applies to gatekeepers. In order to qualify as a gatekeeper, an online platform must meet three criteria: (a) size (based on turnover or average market capitalization and activity in at least three member states), (b) gatekeeping role (the platform must) a gateway role play and it must be necessary for companies to reach their consumers) and (c) a firmly anchored and permanent position of market power (this condition is considered to be met if the company meets the other two criteria in each of the two criteria) the last three Fiscal years). Apart from these criteria, the Commission will also have the power to designate companies as gatekeepers following a market investigation.

The proposal includes a “Do’s and Don’ts” list for gatekeepers. In particular, the DMA prohibits a number of practices that are considered unfair, such as: B. Blocking users from uninstalling preinstalled software or apps, and prompting gatekeepers to proactively take certain actions, such as: B. Targeted Measures That Allow Third Party Software To Function Properly And To Work With Their Own Services.

In the event of violations, the sanctions include fines of up to 10 percent of the gatekeeper’s worldwide annual turnover. In the case of systematic violations (i.e. when a gatekeeper systematically violates its obligations and has further strengthened or expanded its gatekeeper position), sanctions may include structural measures (remedial measures) that may extend to the sale of a company (or parts of it), provided No other equally effective alternative measures are available to ensure compliance.

Finally, the DMA will allow the Commission to conduct targeted market research to assess whether new gatekeeper practices and services need to be added to the list of prohibitions and prohibitions.

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On December 16, the Commission invited all interested parties to provide their feedback on both the Digital Services Law and the Digital Markets Law before February 15, 2021. The Commission will summarize all feedback received and forward it to the European Parliament and the European Council with the aim of feeding it into the legislative debate.

In the coming months the European Parliament and the EU Member States will discuss both of the Commission’s proposals under the ordinary legislative procedure. Once passed, the new rules will apply directly across the EU.

Giulia Marino & Petr Bartoš co-wrote this piece

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