EU ministers gathered in Brussels on Thursday (25 November) to rubber-stamp the new ambitious rules for the digital space. However, significant divisions remain.
Ministers on the Competitiveness Council unanimously agreed on the mandates to start interinstitutional negotiations on the Digital Markets Act (DMA) and Digital Services Act (DSA), two sister regulations that seek to reshape the digital environment in the decades to come.
The DMA targets gatekeepers, the largest tech companies, with a set of ex-ante obligations that should prevent them from abusing their systemic role in the internet economy. The DSA is a horizontal law designed to regulate digital services based on the principle that “what is illegal offline is also illegal online.”
The first phase of the legislative process was completed in just 11 months, but despite the impressive pace not all knots have been untied. As a result, two camps have emerged: those asking to ‘defend’ the Council’s position and those seeking ‘improvements’.
Digital Markets Act
The DMA is meant to provide self-executing rules that will complement the EU’s case-by-case competition toolbox to prevent digital giants from defining their own rules, which might result in self-preferencing, lock-in effects and other anti-competitive practices.
A few days before the summit, Denmark, Italy, Portugal and Spain issued a statement asking for obligations to provide fair access conditions to be extended to social media and search engines. Since then, the proposal has gained the support of Austria, Belgium, Germany and the Netherlands.
Danish minister Simon Kollerup made clear the proposal was looking at the media sector, arguing that “it is not fair that dominant digital platforms decide where and how citizens have access to editorial offerings.”
Ironically, the government with the longest grievance list is also the one with possibly the shortest life expectancy.
Berlin, together with the Hague, questioned the current definition of active end-user, a key criterion to decide if a platform is a gatekeeper. At the moment, users are defined as visitors, even for e-commerce platforms where the business model is transaction-based.
German state secretary Claudia Dörr-Voß stressed the need for further involvement of national authorities, a recurrent theme in the negotiations.
She also made several references to the report of the European Parliament, led by German CDU lawmaker Andreas Schwab. In particular, Dörr-Voß echoed the case to extend measures against self-preferencing practices to smartphone’s settings and in-app payment systems.
Germany and Italy also voiced support for including measures against killer acquisitions, a key addition in Schwab’s report. For Dörr-Voß, the merger control regulation did not allow to consider “the acquisition of companies which have very high value, but relatively small turnover.”
Similarly, the Netherlands voiced support for new measures in the areas of self-preferencing and interoperability, while Italy called for the extension of the scope to web browsers and voice assistants, all measures included in the European Parliament’s proposal.
“Ireland cannot support extensions to the scope of the proposal that have not been subjected to rigorous impact assessment,” warned Minister Robert Troy.
Slovakia, Ireland, Czechia, and Luxembourg have stressed the need not to move significantly away from the compromise text. One of the recurring arguments has been that any addition should be made on an evidence-based approach.
“We will do our very best to defend the compromise,” said Cédric O of France, whose government will represent the Council in the upcoming trilogues.
Digital Services Act
“The text provides a balanced, fair, but delicate compromise,” said Mark Boris Andrijanič, Slovenia’s minister for digital transformation.
The chances of the final outcome being rather different to the compromise are higher for the DSA, as it tries to address a broader question of fighting illegal content and unsafe products online.
The main hurdle in the negotiations was the enforcement mechanism, as France and other heavyweights contested the country of origin principle. Smaller member states, led by Ireland, opposed plans to oblige companies to comply with 27 different jurisdictions.
A solution was found in giving the European Commission exclusive competence over very large online platforms, namely those with more than 45 million users in the EU.
Still, small countries voiced concerns small companies might be overburdened with red tape as the due diligence exemptions for SMEs are a subject of intense debate in the European Parliament.
By contrast, Denmark argued that online marketplaces should be liable for unsafe products sold by vendors based outside the EU. The position is the same as the DSA’s rapporteur Christel Schaldemose, but it has so far been resisted as disproportionate.
Again, Germany made several references to the parliamentary discussions, starting by calling for stronger protection of minors. MEPs are currently discussing a ban on targeted ads for users that are less than 18 years old.
In a similar vein, Germany and Sweden stressed the need to defend media freedom online, without explicitly mentioning a media exemption from content moderation rules that has been recently ruled out in the Parliament.
On the other hand, countries in favour of maintaining the current agreement emphasized that the DSA is meant to introduce harmonised, horizontal rules that should be complemented by sectorial legislation.
“The DSA is not in itself going to respond to all problems linked to content online,” said Luxembourg’s minister Franz Fayot.
[Edited by Benjamin Fox]