After a short break from our previous reflections on the EU’s new set of regulations concerning digital markets (more details available here), we are back with an even more vivid and thorough breakdown of the proposed regulation. To pick up where we left off, we will be taking a closer look at the Digital Services Act (“DSA“ or „Act“). As we have already familiarized ourselves with the EU’s goals and ambitions regarding new digital market regulation, we can now fully indulge ourselves by taking a closer look at the Act. We hope that you managed to catch your breath because navigating through this Act will be a unique experience. So, let us begin anew.
The Commission’s Executive Vice-President Vestager said: „The two proposals serve one purpose: to make sure that we, as users, as customers, as businesses, have access to a wide choice of safe products and services online, just as well as we do in the physical world”. This statement further underlines the argument that both the DSA and Digital Markets Act are intended to bring order to the chaos of the digital world through new tech laws.
In a nutshell, the DSA itself can be broken down into three parts. The first one concerns users of digital services, the second, concerns businesses, and the third relates to platforms. In order to achieve its goals, the DSA puts forward a new set of mechanisms, which we will analyze in greater detail.
Users
Concerns around user data have been hitting the headlines recently. Instances of misuse raised serious questions about the way third-party content platforms handle data that their users provide so freely and readily. Thus, when it comes to users of online services, the DSA’s main goal is to provide a safer online environment, empower online users, and pave the way for digital consumer protection. As a matter of fact, one of the main concerns when talking about online users is their protection in the digital world. In hindsight, the 2000 eCommerce Directive established that online service providers should not be held liable for illegal content in a relatively broad range of scenarios. Online service providers did not have an obligation to monitor the information which they transmit or store nor a general obligation to actively seek facts or circumstances indicating illegal activity. In this area, the DSA’s main goal is to combat illegal content: The Commission has introduced a “good Samaritan” principle, under which providers of intermediary services will not be deemed liable if they voluntarily take part in detecting and removing illegal content. However, the devil is, as ever, in the detail… Besides the removal of illegal content, mechanisms are put forward as a shield to protect users’ fundamental rights on the internet, for example, their freedom of speech. Another important feature is that digital platforms which can reach more than 10% of the EU’s population will be subject to stronger public oversight.
Businesses
The DSA applies to online intermediaries which are as diverse as their underlying business models. In a nutshell, online intermediaries range from cloud services, messaging services, marketplaces, internet providers, to social networks. Additionally, specific due diligence obligations apply to hosting services, and to online platforms, which are a subcategory of hosting services.
Current online intermediaries must comply with all the national laws of the Member States. As a result, only large tech companies have the capacity to fully comply with the regulatory framework of each national jurisdiction. The new rules will cut the costs of complying with 27 different regulatory frameworks and will thus provide a leg up to innovative SMEs and start-ups for competing with very large players.
When it comes to companies competing in the digital markets, the DSA sets out to accomplish several ambitious goals: tackling illegal online activities and products, empowering SME`s and start-ups, creating a fair and balanced internal market, increasing legal certainty for businesses, and creating more contestable markets. All these goals are meant to be achieved through new and effective mechanisms and rules that are supposed to support the EU`s digital economy. Moreover, all intermediaries established outside the EU but offering services within the Union will have to designate a legal representative in one of the Member States where the provider offers its services.
Platforms
Platforms are probably poster children for the digital economy, but they also have their fair share of challenges. They either face a lack of regulation or outdated rules and these problems are present throughout the EU. In their case, the DSA strives to overcome these challenges and create new sets of rules which bring the EU up to date and introduces new mechanisms to create a better digital environment.
Focusing solely on platforms, the new set of regulations introduces new rules regarding the liability of online platforms and obliges platforms to disclose to regulators how their algorithms work, how decisions to remove content are taken and how advertisers target users. These changes will also bring legal certainty to a rather tempestuous digital economy.
Will the DSA Work Wonders?
There is no doubt that unfair practices are already targeted by various types of legislation, such as Antitrust rules, EU consumer law, and the General Data Protection Regulation (GDPR). Nevertheless, the DSA proposal is very significant considering the major impact internet had on the way companies do their business. Its comprehensiveness and contribution to achieving the fundamental goals are yet to be seen. Certainly, there are numerous challenges in shaping a data-driven system like this — from reviewing the standards regarding the liability of online platforms and the way they moderate content to ensuring it isn’t dominated by major IT industry players and their monopolistic practices. In any case, the new legislation would be an important piece of the puzzle of the extensive framework which tackles digital services.
To sum up, the fundamental goal of the proposed Act is to create a safer digital space in which the fundamental rights of all users of digital services are protected. Essentially, the desired outcome of such revision is to establish a level playing field for all the market participants, while fostering innovation, growth, and competitiveness, both in the European Digital Single Market and on a global scale.
Authors: David Spaić and Jovana Trivunović
