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The Digital Markets Act and Digital Services Act:
An EU member state review
“We need to make rules that put order into chaos.”
– Margrethe Vestager, Executive Vice President for Digital, European Commission.
Story of the week: 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.
Under a new set of obligations as part of the Digital Markets Act 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.
The criteria for identifying designating such ‘gatekeeper platforms’ have 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.
Fines for non-compliance with the rules have been pitched at a maximum of 10% of a company’s annual worldwide turnover.
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. Penalties for violations of the rules include fines of up to 6% of a company’s annual income.
After the landmarks proposals were published on Tuesday, EURACTIV embarked on a tour of EU member states to get a grip on what their responses were to the plans…
A message from Google:
Helping people & businesses recover with technology
Online tools are helping Europeans find new jobs and grow their businesses. We support a Digital Services and Markets Act that creates the right conditions for recovery and growth as people ask for more, not less, from technology.
We want a ‘future-proof’ DMA
The French government welcomed the two long-awaited draft regulations and the European Commission’s “strong ambition” to “put an end to the irresponsibility of online platforms”. During the upcoming negotiations, France will remain attentive to ensure that the “Digital Markets Act” is sufficiently agile and flexible to adapt to the constantly changing business models and to allow for rapid action, the government said.
As for the “Digital Services Act”, France will ensure that the text guarantees the proper involvement of all member states in the supervision mechanism.
“The European level is the right level to be effective, to defend our interests and our values, said Clément Beaune, Secretary of State for European Affairs.
“The French Presidency of the European Union in the first half of 2022 will be an opportunity to bring these much-needed rules to fruition.”
France, which has suffered several terrorist attacks in recent weeks, had also strongly advocated that the draft regulation on the removal of terrorist content, on the table since 2018, to be finalised as soon as possible. The trilogue resulted in a text that should be voted on in Parliament in January, reports EURACTIV France’s Louise Rozès Moscovenko.
We want rules for harmful content
The economy ministry told us that the DSA fits Germany’s own recent attempt at curbing market-dominating digital services, as previously reported by EURACTIV Germany. More generally, earlier this week, German Economy Minister Peter Altmaier welcomed the plans.
However, ahead of the presentation of the DSA and the DMA, Germany released a 17-page non-paper on the plans, which gave an insight into their standing on the debate over how illegal content and harmful content is moderated.
“New rules for the digital economy need to go beyond just regulating illegal goods and content. The dissemination of information and content that is not (yet) illegal can also be harmful in many ways, particularly disinformation and activities relevant to the protection of minors,” the paper states.
With regards to the scope for ex-ante regulation as part of the Digital Markets Act, the Germans suggested that also so-called ‘significant intermediaries’ may also have to come under the new rules.
“The Federal Government shares the Commission’s assessment that the current European legal framework (including competition law) does not sufficiently ensure fair competitive opportunities for all market participants in markets that are characterised by large platforms with significant network effects acting as “gatekeepers”. These platforms should therefore be subject to ‘ex-ante regulation’. It should also be examined whether such ex-ante regulation should also apply to platforms which do not yet perform a gatekeeper function but have significant intermediary power.”
Meanwhile, Germany has presented a draft bill on competition reform in the country that aims to address the dominance of digital market power through data practices, as well as amendments to other areas including merger control and cartel investigations.
However, the EU’s Digital Markets Act could limit the extent to which member states are able to pursue their own initiatives in gatekeeper regulation, being as it is an internal market tool and therefore bound by its legal basis to foster greater harmonization across the EU. Speaking as part of an online panel hosted by DOT Europe and ITI recently, Gökhan Cetintas of the German Economy Ministry conceded that while the ins and outs of Germany’s Digitalisation Act are still being drafted, issues could arise in this field in the future.
Presidency priorities and member state divisions
Portugal has made it a priority to chart progress on both files, as part of their presidency of the EU Council starting in January.
Speaking at an event held earlier this week by DOT Europe and ITI, Digital Counsellor at the Portuguese Permanent Representation to the EU, Ricardo Castanheira, revealed that the Digital Services Act will be tabled in the Council at the Internal Market Working Party, and the Digital Markets Act will appear in the Competition Working Party. Both files will fall under the COMPET Council. Discussions in both working parties begin on the first week of January.
“Between member states, so far there has been a lot of alignment on the most essential points,” Castanheira said. “The need to update the rules, to update the core principles of the eCommerce directive, to set up clear responsibilities for online platforms, and also to strengthen enforcement.”
“However, some member states, for example, would prefer tackling harmful content in the DSA, others would rather have it limited to illegal content – this could be a point of possible disagreement,” Castanheira added.
Further ‘hot topics’ that may be contentious between member states could also include the ins and outs of the know your business customer principle, and the ‘missing’ stay down mechanism, Castanheira told EURACTIV.
Scope for customisation needed
In an initial reaction, State Secretary Mona Keijzer said the proposals fit in well with the Dutch position. For example, the DMA contains clear bans and obligations for large platforms. Entrepreneurs who depend on them to offer their products will thus be better protected. It also allows innovative start-ups and scale-ups to compete better with large platforms.
“The proper functioning of the digital economy and trust in digital services are of great importance. This has been demonstrated even more during the corona pandemic,” Keijzer said.
“It is necessary to properly safeguard public interests across borders. The current regulations do not sufficiently anticipate current developments. There was therefore an urgent need for innovation. This is how we can continue to stimulate innovation. And we can tackle the lesser aspects, such as dependence on large platforms, obstructing market access, the distribution of illegal content, cyber insecurity and misleading consumers.”
The State Secretary continued: “The EU proposals improve market morale and set frameworks for players outside and inside the EU. However, scope for customisation is necessary in order to actually achieve these goals and to be able to respond to rapid change. For example, through the stricter supervision I advocated for in terms of prior intervention of gatekeepers’ platforms.”
DSA should cover disinformation and hate speech
“New rules for the internet are overdue”, EU Minister Karoline Edtstadler (ÖVP) told us. In particular, the minister hopes that Brussels will tackle disinformation and hate speech as part of the digital services act.
On hate speech, Austria passed a law last Thursday, obliging platforms to take down content marked as illegal. “This is about protecting our freedom of speech, we cannot leave this to US-companies”, said Edtstadler. “I expect concrete steps from the Portuguese presidency.”
Commission: Prove that ex-ante regulation is necessary
Dublin, the European home of some of the world’s largest tech giants, has pushed back against the idea of imposing ex-ante regulation against gatekeeper platforms.
In a position paper published earlier this year, the nation highlighted the fact that it had blocked attempts to include ‘blacklisted’ practices “without merit and evidence of economic harm during the negotiations on the Platforms to Business Regulation.”
“In order to justify the need for ex-ante intervention, the onus is now on both DG CNECT and DG Grow to demonstrate that innovation is being stifled by so-called ‘gatekeeper platforms’ and that digital markets are not contestable due to exclusionary behaviour,” the Irish said.
Strong public institutions necessary for enforcement
Two Polish NGOs have been asked by the Digital Affairs Minister, Marek Zagórski, to gather their recommendations regarding the DSA: the Panoptykon Foundation, concerned with freedom and human rights protection, and Centrum Cyfrowe — dealing with the transparency of institutions and social dimension of digital change, reports EURACTIV’s Maria Zawadzka.
The digital NGOs agree with the European Commission’s diagnosis that the regulatory model calls for an urgent revision. The recent years have seen a transformation of private entities into watchmen of cybersecurity, specialists on independent journalism, and all things digital.
Among their chief ideas on the new model, is placing strong public institutions on top of regulations, since they prioritise public interest.
The dominating players, on the other hand, should be differentiated from the smaller entities and have different structural regulation and additional responsibilities regarding its users and other companies. The criteria for such differentiation should not only focus on the place of such entities within the digital market but also their influence on social life.
The NGOs also recommend solving the issue of content moderation by transferring control over it to the public trust entities or communities. Lastly, the responsibility for illegal content should be held by the platforms. The system of notification must be transparent and users must have a clear appeal procedure available.
For Minister Zagórski, it’s also important to impose new rules on entities from countries outside the EU.
‘We support the scope’
“In general we welcome the proposals made and the scope envisaged, but we’re currently working on an assessment in a group of experts of the different stakeholders involved, given the broad scope,” a Belgian government spokesman told us.
Remember that firms with at least 45 million monthly EU users and more than 10,000 annual business users come under the scope of the proposals.
2022 Presidency responsibility
The Czech Republic has one of the highest numbers of online stores per capita and one of the most rapidly growing e-commerce markets. Therefore, digital services are one of the country’s top priorities in the digital agenda, and also given the upcoming Czech presidency in the second half of 2022, Prague will pay a great deal of attention to DSA, EURACTIV.cz reports.
Representatives from the Czech government told us that the DSA should ideally “build on our experience with the eCommerce directive” and preserve its core principles, namely the country of origin principle, no general obligation for providers to monitor information, and the exemption for intermediaries from liability for the content they store.
“In order to create a fully functioning digital single market, we should also avoid overregulation and refrain from snowballing too many topics,” EURACTIV was told by a Czech official. “This will help us to keep the DSA a compact horizontal enabler of cross-border provision of digital services.”
We support a ‘safer digital space’
Marian Murguleț, secretary of state and Chief Information Officer of the Romanian Government told EURACTIV’s Adrian Lungu: “The online platforms have, at this point, a categorical impact on citizens, the economy, and society as a whole. They are built and their operating scope, these platforms have the capacity to influence public opinion, commerce, and citizens’ safety.”
“We can all see, including in Romania, there is an obvious gap between the technological advance and the European regulations (lagging behind from the 2000s). The Digital Services Act aims to tackle the mentioned gap, by updating the transparency and responsibility standards of the content providers, and this will contribute to the development of a safer digital space.”
“In its turn, the Digital Markets Act aims to approach the dominant way in which companies from outside the EU are collecting data for the services they are offering but are using it to further and develop new services (so-called gatekeepers) in a manner affecting competition and, ultimately, the market.”
Let’s protect ‘the vulnerable’
Slovakia has welcomed the Commission´s initiative to support innovation, competition, and fairness in the online space, reports Lucia Yar. Its representatives consider it “important to maintain the existing key principles of e-commerce”, such as the country-of-origin principle, the limited liability regime for platforms, as well as the fact that general monitoring obligation has not been introduced.
“Today we see that large online platforms, including well-known social networks, are gaining dominance over smaller players, and that digital media is significantly influencing the way we perceive the everyday world.”
“EU member states must therefore work together to find ways to significantly reduce the spread and availability of illegal and harmful content, especially with regard to the more vulnerable populations, including children,” the ministry of investment, regional development, and informatisation told EURACTIV.sk.
We support automated filters for illegal content
Finland hopes the Package provides an environment for digital services and innovations without increasing any unnecessary administrative burden, EURACTIV’s Pekka Vanttinen reports.
For the Digital Services Act, cooperation between authorities of member states should be promoted. But it should be up to the national authorities and the Commission to enforce legislation on the single market. It is not necessary to establish a transnational EU authority for monitoring digital platforms only.
Opportunities of the host country to participate in the monitoring of the platforms should be improved in addition to the home country authorities. If service providers are outside the EU, it would be desirable to participate in the supervision if they significantly offer services in the EU.
The regulation should give users an opportunity to report illegal content and users’ reports must be reacted to without delay. The user must also have the right to contest the removal of content if he or she believes that it is not illegal. The procedure must not place a disproportionate burden and costs on the small service providers.
They should be allowed to develop automated processes to prevent illegal content from reappearing. The platforms should increase transparency in their filtering and removal procedures. Primary tools in preventing disinformation are the use of co-regulation and the fostering of self-regulation through codes of conduct.
Estonia, another one of the traditionally pro-innovation EU member states, told us that while they welcome the fact that the underlying principles of the e-commerce directive remain in place, yet modernised, it was important to tread carefully in terms of hard regulation.
“We also believe that it is crucial to refrain from over-regulating online service providers and carefully weigh every measure’s impact on consumer welfare, innovation, and business users’ legitimate interests. Therefore, we are looking forward to the proceedings in the Council in 2021,” a spokesperson told EURACTIV.
‘Protect our SMEs’
Riga said the government supports the fact that the “main guiding principles of E-commerce directive have been preserved in DSA.”
“To make an impact, the new rules must maintain a high level of harmonisation and concentrate on priorities. Of course, we are in favour of setting higher accountability standards for online platforms as well greater transparency requirements regarding the online ads and algorithms – elements that we have long been advocating for in discussions on disinformation and protection of democratic processes,” a government spokesperson told EURACTIV.
Regarding the Digital Markets Act, Latvia agrees with the need to ensure a level playing field and access to the markets for small players.
“99% of Latvian enterprises are SMEs, therefore fair access to the market is essential and a set of tools fit for digital age is necessary,” the spokesperson said.
“We see a potential in DMA for fostering competition and competitiveness in the Internal market and hope that DMA will help our SMEs to conquer new markets on fair conditions and enjoy the benefits of using the platforms. A proportionate and evidence-based approach is important for us as well as compatibility with the existing EU competition legislation, Digital Services act and Platforms to business regulation.”
For both proposals – DSA and DMA – practical applicability and effective enforcement is key, especially as regards the businesses from outside the EU who are reaching out to EU consumers.
Don’t disincentivise ‘proactive measures’
One particular standout point from Sweden’s position paper on the Digital Services Act and the Digital Markets Act, published ahead of the Commission’s unveiling of the two texts, was the fact that the country backs the idea of a Good Samaritan principle in the DSA.
“The process of notifying and removing illegal content on online platforms should be clarified and harmonized. EU rules should not disincentivise platforms from taking more proactive measures in order to take down illegal content, and make sure it stays down. This could be done through a principle such as ‘The Good Samaritan,’” the Swedes said.
Consumer and business rights are our ‘focus’
Greek Minister of Development and Investments, Adonis Georgiadis, speaking exclusively to Euractiv.gr’s Theodore Karaoulanis, emphasised that the ministry wants “to further secure the rights of ordinary citizens against the giants of online platforms”.
Georgiadis told EURACTIV that “we strongly support the need to revise the directive to include the developments that have taken place since 2000” up to date. The minister also pointed out that the Greek government is focused on the rights of businesses and of consumers, “as we have recently demonstrated with the bill we voted on for the rights of business associations for internet platforms”.
The minister also noted that “in this effort of the Commission, we will be helpers and pioneers”.
We call for a clampdown on ‘illicit goods’
The Hungarian Ministry of Innovation and Technology said it has started examining the “voluminous” proposals but Hungary, in general, considers the review of the 2000 e-Commerce directive “timely.”
“Up-to-date answers to the new challenges of the internet must be found, including, for example, in the fight against illegal and harmful content and the sale of illicit goods online. In order to avoid fragmentation of the internal market, it may be useful and worthwhile to establish harmonized rules at the EU level in these areas,” the ministry told EURACTIV.com.
We praise the ‘level-playing field’ goal
On the DMA & DSA, Malta believes that they represent a step in the right direction as they aim at providing a “level-playing field for all the businesses involved in the sector,” a government spokesperson told EURACTIV. However, Malta is still analysing the proposal and a final position will be reached as the file evolves within the Council of the EU.
This is a necessary ‘modernisation’
Luxembourg welcomes the Commission’s presentation on the Digital Services Act and the Digital Markets Act and looks forward to working on both files within the Council. “We welcome that the Commission intends to modernise the rules where they need modernising most,” a spokesperson told us.
In other news
Ireland’s data regulator has fined Twitter €450,000 for a bug that made some private tweets public, the first sanction against a major US tech firm under a new EU dispute mechanism, but much less than some EU states demanded.
Facebook, Twitter and Chinese-owned TikTok face fines of up to 10% of turnover if they fail to remove and limit the spread of illegal content such as child sexual abuse and terrorist material under laws proposed by Britain on Tuesday.
Alphabet’s Google won EU antitrust approval on Thursday (17 December) for its $2.1 billion bid for Fitbit after agreeing restrictions on how it will use customers’ health related data.
Behind the corporate battle for French media company Lagardère, there’s a political tug-of-war involving the country’s richest man, a media magnate and President Emmanuel Macron.
The Spanish government will draft a list of “safe” mobile technology suppliers for the future local 5G mobile network to assess their level of risk, allowing the government to avoid issuing an explicit veto against Chinese giant Huawei or any other mobile operator, EFE reported.
Facebook Inc will shift all its users in the United Kingdom into user agreements with the corporate headquarters in California, moving them out of their current relationship with Facebook’s Irish unit and out of reach of Europe’s privacy laws.
Notary services from across the bloc have said that the EU should pay attention to which global actors have ‘control and access’ to key technologies used in judicial processes in the ongoing digitalisation of the sector.
The European Union’s rights watchdog has warned of the risks of using artificial intelligence in predictive policing, medical diagnoses and targeted advertising as the bloc mulls rules next year to address the challenges posed by the technology.
It’s the Christmas break! This will be my last Digital Brief before the new year. We’ll return with our weekly breakdown of all things digital in the EU policy and politics bubble on 15 January. Thank you for your continued loyalty and readership throughout 2020.
What else I’m reading this week: