The European Commission has proposed a reform of the digital space, a comprehensive set of new rules for all digital services, including social media, online market places, and other online platforms that operate in the European Union: the Digital Services Act and the Digital Markets Act.
The new rules will better protect consumers of online services, and will lead to fairer and more open digital markets for everyone. It will also support the scaling up of smaller platforms, small and medium-sized enterprises, and start-ups, providing them with easy access to customers across the whole single market while lowering compliance costs. Furthermore, the new rules will prohibit unfair conditions imposed by online platforms that have become or are expected to become gatekeepers to the single market.
The Digital Services Act
The new rules:
- Better protect consumers and their fundamental rights online
- Establish a powerful transparency and a clear accountability framework for online platforms;
- Foster innovation, growth and competitiveness within the single market
Which providers are covered?
Under the Digital Services Act, binding EU-wide obligations will apply to all digital services that connect consumers to goods, services, or content, including new procedures for faster removal of illegal content as well as comprehensive protection for users’ fundamental rights online.
All online intermediaries offering their services in the single market, whether they are established in the EU or outside, will have to comply with the new rules.
What is the impact of new obligations?
Concretely, the Digital Services Act will introduce a series of new, harmonised EU-wide obligations for digital services, carefully graduated on the basis of those services’ size and impact, such as:
- Rules for the removal of illegal goods, services or content online;
- Safeguards for users whose content has been erroneously deleted by platforms;
- New obligations for very large platforms to take risk-based action to prevent abuse of their systems;
- Wide-ranging transparency measures, including on online advertising and on the algorithms used to recommend content to users;
- New powers to scrutinize how platforms work, including by facilitating access by researchers to key platform data;
- New rules on traceability of business users in online market places, to help track down sellers of illegal goods or services;
- An innovative cooperation process among public authorities to ensure effective enforcement across the single market.
Digital Markets Act
The Digital Markets Act (DMA) establishes a set of narrowly defined objective criteria for qualifying a large online platform as a so-called “gatekeeper”. This allows the DMA to remain well targeted to the problem that it aims to tackle as regards large, systemic online platforms
These criteria will be met if a company:
- has a strong economic position, significant impact on the internal market and is active in multiple EU countries
- has a strong intermediation position, meaning that it links a large user base to a large number of businesses
- has (or is about to have) an entrenched and durable position in the market, meaning that it is stable over time
Concretely, the Digital Markets Act will:
- Apply only to major providers of the core platform services most prone to unfair practices, such as search engines, social networks or online intermediation services, which meet the objective legislative criteria to be designated as gatekeepers;
- Define quantitative thresholds as a basis to identify presumed gatekeepers. The Commission will also have powers to designate companies as gatekeepers following a market investigation;
- Prohibit a number of practices which are clearly unfair, such as blocking users from un-installing any pre-installed software or apps;
- Require gatekeepers to proactively put in place certain measures, such as targeted measures allowing the software of third parties to properly function and interoperate with their own services;
- Impose sanctions for non-compliance, which could include fines of up to 10% of the gatekeeper’s worldwide turnover, to ensure the effectiveness of the new rules. For recurrent infringers, these sanctions may also involve the obligation to take structural measures, potentially extending to divestiture of certain businesses, where no other equally effective alternative measure is available to ensure compliance;
- Allow the Commission to carry out targeted market investigations to assess whether new gatekeeper practices and services need to be added to these rules, in order to ensure that the new gatekeeper rules keep up with the fast pace of digital markets.
The European Parliament and the Member States will discuss the Commission’s proposals in the ordinary legislative procedure. If adopted, the final text will be directly applicable across the European Union.