Digital Services Act & Digital Markets Act

Last Updated on Tuesday, 16 February, 2021 at 10:11 am by Andre Camilleri

Emma-Marie Sammut joined GTG Advocates as a trainee in 2019. She is currently reading for a Bachelors of Laws Degree at the University of Malta. Apart from this, Emma is an executive board member of Għaqda Studenti tal-Liġi (GħSL).

The European Commission has recently published two much anticipated legislative proposals. The Digital Services Act (‘DSA’) and the Digital Markets Act (‘DMA’) are poised to considerably increase the European Commission’s regulatory competence over online platform companies.

Digital Services Act

The DSA enhances the provision of innovative services in the internal market, and further updates the EU’s online trade laws. The Act shall apply to digital services that link consumers to goods, services or content.

Providers of intermediary services, and particularly online platforms, shall be subject to stricter rules on responsibility towards their users, as well as rules on accountability for their activities. While the DSA maintains the liability rules for providers of intermediary services set out in the e-Commerce Directive, the proposal launches innovative and comprehensive due-diligence obligations. Notable innovations include notice-and-action procedures for illegal content online and the option to challenge a platform’s content moderation decisions.

The DSA imposes higher standards for transparency and accountability by fashioning new obligations on how providers of such platforms moderate content on advertising and algorithmic processes. Online platforms are to create an internal complaint-handling system regarding decisions relating to illegal content, or information which is incompatible with their terms and conditions. Platforms will have to publish reports on activities relating to the removal and the disabling of information with regards to such content. 

Providers of hosting services will be obliged to implement mechanisms which allow third parties to notify the presence of alleged illegal content. If a provider decides to remove or disable access to specific information provided by a recipient of service, the recipient is entitled to receive a statement of reasons.

The DSA shall moreover benefit SMEs, as there will be  substantial cost-savings for those who deal with illegal content.  Only ‘very large online platforms’ are to incur significant costs, as they must adopt a risk-based approach to prevent abuse to their systems and protect the integrity of their services. Where risks are identified, these platforms must employ reasonable and effective mechanisms to mitigate them. The DSA also imposes transparency standards on those ‘very large online platforms’ using recommender systems and displaying advertisements on their site.

The DSA will also benefit public authorities, as the costs brought on by the inefficiencies and repetitions in the existing set-up for the cooperation of authorities will decrease. While Member State authorities are also to set up a Digital Services Coordinator to oversee the compliance of services established on their territory, as per the DSA, additional co-operation costs are to be borne at an EU level.

Digital Markets Act

The DMA establishes rules for platforms that act as ‘gatekeepers’ in the digital sector. ‘Gatekeepers’ are platforms that have a large impact on the internal market and grant better access to businesses to reach their customers. The DMA aims to prevent potential abuses of power  by such ‘gatekeepers’ and thus, complements the enforcement of competition law at EU and national level, without prejudicing Articles 101 and 102 of the TFEU.

Summarily, there are three principle cumulative criteria that determine whether a company falls under the DMA’s scope:

  1. A size that impacts the market;
  2. The control of an important gateway for business users towards consumers; and
  3. An (expected) entrenched and durable position.

The title of ‘gatekeeper’, as per the DMA, triggers a set of regulations, and non-adherence poses hefty fines. They shall be obliged to conduct themselves in a manner which ensures an open online environment that is fair to businesses and consumers. ‘Gatekeepers’ must now grant smaller rivals access to, and ensure interoperability with, hardware and software needed to offer their service.

‘Gatekeepers’ shall also be inhibited from practicing certain business conduct that was or is the subject of Commission or Member State investigations. While such investigations remain a point of contention, ‘gatekeeper’ online platforms will nonetheless be prohibited from;

  1. Merging personal data across services without end users’ prior consent;
  2. Favouring the gatekeepers’ own products or services over the products or services of competing businesses that also use the platform;
  3. Inserting most-favored-nation (‘MFN’) clauses that impede business users from offering the same products at different prices or conditions through third-party online intermediation services;
  4. Making use of non-public data collected from the platform’s business users to compete against those business users; and
  5. Requiring business users to use the gatekeeper’s identification service.

In practice, the Commission will determine whether a company is to be considered as a ‘gatekeeper’. The DMA also confers discretion to the Commission to determine which companies may be classified as gatekeepers, to investigate and sanction violations, as well as to create rules which clarify the manner of compliance with certain DMA obligations. 

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