Details of the Digital Services Act revealed

The proposed rules will require large multinationals to work harder at containing the spread of illegal content on their platforms.

The European Commission has revealed the details of the Digital Services Act and the Digital Markets Act today (15 December). Their shared goal is to transform how digital content is ranked, advertised and removed to curb the monopoly large multinationals hold in the digital space.

To achieve this, tech companies operating in the EU will have to follow a new set of rules. They will apply to all digital services, including social media, online marketplaces and other online platforms.

Margrethe Vestager, executive vice-president of the European Commision for a Europe Fit for the Digital Age, commented: “The two proposals serve one purpose: to make sure that we, as users, have access to a wide choice of safe products and services online. And that businesses operating in Europe can freely and fairly compete online just as they do offline.

“This is one world. We should be able to do our shopping in a safe manner and trust the news we read. Because what is illegal offline is equally illegal online.”

The rules are not legally binding as the European Parliament and member countries will now weigh in on the proposed acts. Politico reports that the final rules are expected to arrive in 2023 at the earliest.

Digital Markets Act

Companies dominating large shares of the digital space have been labelled ‘gatekeepers’ in the proposed Digital Markets Act. According to the Commission, gatekeepers currently determine how smaller companies engage with online consumers.

Under the proposed rules, business users must be granted access to any data they generate while using the gatekeeper’s platform. Companies advertising on the gatekeeper’s platform will have the right to tools and information to conduct independent verification of their ads and will be allowed to manage contracts with customers outside of that platform.

Gatekeeper platforms will not be allowed to self-preference, which means ranking their own services more favourably than similar services from third parties. This could prevent Google from placing its own products at the top of user search results, for example.

They won’t be able to prevent customers from linking to other businesses outside their platforms or prevent users from removing any pre-installed software or apps.

Any company providing core services in at least three member states with European revenues of more than €6.5bn or more than 45m EU users will be treated as a gatekeeper under the new rules. These would typically hold what is considered an entrenched and durable market position.

This criteria will likely include online giants Amazon, Apple, Facebook and Google, according to Politico, all of which could face fines of up to 10pc of their global revenue if they fail to comply.

Politico also reports that gatekeepers will have to get approval from the European Commission before acquiring smaller companies and start-ups.

Digital Services Act

The Digital Services Act focuses on policing illegal material on large platforms. It will hold companies to higher accountability and oblige them to work harder at limiting the spread of illegal content and goods.

The biggest organisations – those that reach more than 10pc of 450m consumers in Europe – will be required to give regulators and external groups greater access to internal data. They will also need to appoint independent auditors to assess their compliance and conduct yearly risk assessments. They could face fines of up to 6pc of their annual revenue if the rules aren’t followed.

According to the Commission, these larger firms “pose particular risks in the dissemination of illegal content and societal harms”. They will need to be more transparent with users about who targets them with online ads, and give them more autonomy over their recommended content. They will need to provide vetting credentials for third-party suppliers, implement effective mechanisms to flag content and respect new codes of conduct and practice.

Today we are proposing a set of new rules for all digital services: the Digital Services Act and the Digital Markets Act.
We want to make sure users have access to a wide choice of safe products and services online, and that businesses compete fairly and freely.#DigitalEU pic.twitter.com/LKdf6hfmws

— European Commission 🇪🇺 (@EU_Commission) December 15, 2020

Dr Sally Broughton Micova, a member of University of East Anglia’s Centre for Competition Policy in Norwich, commented: “This will be a significant change for digital services used to the laissez-faire approach in place since the e-Commerce Directive of 2000.

“The Digital Services Act will uphold exemptions from liability enshrined in the e-Commerce Directive, but will impose new due diligence obligations, transparency requirements and establish an EU-wide board for digital regulators.

“The e-Commerce Directive exempted services from liability for content as long as they didn’t have ‘knowledge’ of it but expected them to take action once ‘notified’, for example through flagging by users. But it did not foresee the automatic detection and removal of content that the big platforms operate on a massive scale. Such services must use these in order to protect users, but there also must be oversight to check if they are being used effectively and if fundamental rights are protected.

“Platforms that represent a greater risk due to their nature and impact should be required to share more detailed information more frequently with regulators. Policy-makers need to be wary of the sensitive balance that needs be found here to not kill start-ups and scale-ups in Europe.”