Online platform giants will be forced to abide by a broad range of obligations as part of ambitious new plans laid out by the European Commission in its Digital Markets Act (DMA) and Digital Services Act (DSA) on Tuesday (15 December).
The DMA proposals will see so-called ‘gatekeeper platforms’ prohibited from engaging in practices deemed to be of detriment to “contestability and fairness” in online markets.
Fines for non-compliance with the rules have been pitched at a maximum of 10% of a company’s annual worldwide turnover.
Platforms that engage in “systematic non-compliance” of the rules could come in for other remedies, including behavioral orders but also “last resort” options of divestments or breakups. However, the latter options are unlikely since those tools are already available in the Commission’s arsenal of antitrust capacities.
Antitrust ‘hand-in-hand’ with regulation
Under the rules, platforms will be banned from using data gathered on their core service to offer other services in competition with rivals and there will be prohibitions on certain self-preferencing activities.
Moreover, gatekeeper platforms will also be banned from forcing users to register with other core services as a condition for accessing certain platform functionalities. Gatekeepers will also be prohibited from blocking users from un-installing any pre-installed software or apps.
Certain “affirmative obligations” include the fact that platforms must allow business users to offer their products up for sale on different platforms at different prices or conditions than those on the core service platform.
Unveiling the new rules on Thursday, the Commission’s executive vice-president Margrethe Vestager said that after a raft of antitrust cases, there was a need to combine efficient antitrust enforcement with regulatory efforts.
She referenced a series of Google antitrust investigations, totaling €8.2 billion in fines for alleged self-preferencing activities and for stifling competition with rivals, as well as an ongoing Amazon probe with regards to its use of non-public merchant data.
“Complaints keep coming through our doors, and we have many more investigations right now,” Vestsager said.
“So, obviously, the Digital Markets Act is to complement vigilance competition law enforcement. This is to do the same thing as we have been doing in banking, in telecoms, and in energy – to realise that antitrust will have to work hand in hand with regulation, so that we have a complete set of tools.”
Once a company, by its own assessment, falls under the gatekeeper scope, it becomes subject to the new rules up to six months after the gatekeeper designation is made.
The criteria for identifying designating such ‘gatekeeper platforms’ has been tightly defined by the EU executive. Certain firms are defined as those with at least 45 million monthly EU users and more than 10,000 annual business users.
In addition, a firm will have had to have generated at least €6.5 billion across the European Economic Area over the last three years or have a market value of at least €65 billion in the last financial year – with services available in at least three member states.
Illegal content, online ads and
Meanwhile, as part of the Digital Services Act (DSA), platforms will face the prospect of billions of euros in fines unless they abide by new rules across fields including advertising transparency, illegal content removal, and data access.
“We need to make rules that put order into chaos,” Vestager told reporters on Tuesday (15 December). And that is what the Digital Service Acts is all about: Creating new rules, making the online world a safe, reliable, secure space for users of digital roads.”
“We should be able to trust what we see online, to navigate without being confronted with terrorist propaganda and with the feeling that the toys we buy online are safe.”
In terms of illegal content broadly, platforms will be required to conduct annual risk assessments detailing how they have dealt with the dissemination of such material online. A channel will be created for “trusted flaggers” who will be able to report illegal content to which platforms will have to react with priority.
With regards to the sale of counterfeit goods online, a so-called “know your business customer” principle will be established whereby online marketplaces will be required to verify the identity of sellers.
On the subject of advertising transparency, new rules have been put forward that will give users of online platforms immediate information on the sources of the ads they see online, including granular information on why an individual has been targeted with a specific advertisement.
Platforms will also be required to make their data available for examination by researchers, “in order to scrutinise how platforms work and how online risks evolve.”
Moreover, EU nations will be required to appoint a so-called “Digital Services Coordinator” to oversee enforcement of the regulation.
The coordinator will monitor the number of users of a platform “every six months” to see whether an online service would fall within the 45 million-user scope.
Reactions poured in on Thursday, as stakeholders jockeyed to get their voices heard on the proposals.
Google, the US digital firm likely to be hit hardest by the new plans, raised concerns that the move could hamper the company’s ability to develop new products and support SMEs in Europe.
“While we will review the Commission’s proposals carefully over the coming days, we are concerned that they appear to specifically target a handful of companies and make it harder to develop new products to support small businesses in Europe,” said Karan Bhatia, vice president of government affairs and public policy at Google.
However, Google’s statement was directly contradicted by Booking.com, an Amsterdam-based online lodging reservation agency, which came out in support of the Commission’s ‘targeted’ approach to introduce new rules for a select scope of gatekeepers.
“We support a targeted gatekeeper regulation that ensures fair and effective competition in the digital economy. It should address those platforms that leave business users and consumers no choice. The Commission’s quantitative criteria are a starting point but alone are insufficient for establishing a gatekeeper designation. It cannot just be about the size or the number of users of a platform. It must be about its lock on consumers,” a spokesperson from Booking.com said.
In the European Parliament, MEPs generally welcomed the Commission’s proposals, but sent a clear message that there is still work to be done.
French centrist MEP Stéphanie Yon-Courtin (Renew Europe), the 2019 rapporteur on European competition policy, expressed disappointment at how the Commission had scaled back powers originally envisaged for the “New Competition Tool” which would have monitored markets, investigate them and directly impose appropriate remedies.
“Beyond a predefined list of prohibitions and obligations, we must ensure that digital markets are effectively monitored, with the necessary human resources and appropriate remedies. We need to embrace a comprehensive approach from competition to data power to consumer protection,” she said.
Meanwhile, Internal Market Chair, German Green Anna Cavazzini, raised concerns with the flexibility of enforcement procedures carried out by the Digital Services Coordinators.
“Unfortunately, the proposal remains too flexible on enforcement and sanctions, which are vital to ensuring a high level of consumer protection in the internal market,” she said in a statement.
Representatives from civil society meanwhile highlighted issues over heavily lobbying on behalf of the platforms, as well as the Digital Services Act’s failure to address other issues related to the platform economy.
“The result so far is a mixed bag of what seem like good intention that met corporate and government lobby realities,” said Jan Penfrat, senior policy advisor at European Digital Rights (EDRi), an advocacy group.
Nienke Palstra, from the investigative campaigning organisation Global Witness, said they were disappointed that the Digital Services Act “fails to establish any limits on the controversial practice of micro-targeting.”
Heavily lobbying from stakeholders across the digital policy field is expected to continue as the text now embarks on the co-legislative procedure, as the European Parliament and EU nations vie to adopt common positions on the text.
For proposals as impactful and far-reaching as these, the process could take several years before formal adoption.
[Edited by Frédéric Simon]