What is the Digital Services Act?

In the Commission’s Work Programme for 2020, published in January of this year, the Commission set out its ambition, as part of its EU digital strategy, to create a new Digital Services Act (“DSA”) with the aim of reinforcing the single market for digital services and creating a level playing field for smaller EU businesses.

The new DSA will update the E-Commerce Directive, which has not been revised for 20 years. The Commission’s view is that there is now a fragmented approach across EU member states to rules for digital services on removing illegal content and online advertising. This makes it difficult to tackle those problems but also the lack of clarity on the rules applicable to particular services and activities across the EU makes it difficult for small innovators to compete with the well-established platforms.

Originally, the two key strands of the DSA were:

• new and revised rules regarding the responsibility of online platforms (social networks, search engines, online marketplaces etc.) for risks to users, such as illegal goods, illegal content and misinformation; and
• ex ante rules for large platforms to ensure the market remains fair for innovators and new market entrants.

The second strand of the DSA setting out the ex-ante rules for large platforms was later repackaged along with plans for new market investigation powers in a Digital Markets Act (“DMA”).

Timeline

The Commission intends to publish drafts of the DSA and DMA on 15 December 2020. In order to help shape the legislation the Commission ran two separate public consultations on clarifying responsibilities for digital services and on ex ante rules for large platforms, which ended on 8 September 2020. Since then, the responsible committees of the EU Parliament have considered the Commission’s plans and issued recommendations to the Commission.  These were recently debated during the plenary session of the EU Parliament and adopted as requests to the Commission for a legislative proposal on 20 October 2020.

Key committee recommendations

Key aspects of the committee recommendations include:

Transparency and information obligations: the DSA should include clear transparency and information obligations; minimum standards for contract terms and a new framework to regulate targeted advertising to consumers, including giving more control to users over how content is curated for them.

Tackling illegal content online: the DSA should include a harmonised and binding notice and take down mechanism for illegal content and certain existing aspects of the E-Commerce Directive should be maintained: the ‘safe harbour’ provisions for online intermediaries and the ban on Member States imposing general monitoring obligations on intermediaries.

Online Marketplaces: the DSA should include specific rules for online marketplaces to tackle the sales of counterfeit or dangerous goods, including obligations to remove illegal products and misleading information on a product.

Regulation of large platforms: the DSA should set up an ex ante mechanism to prevent perceived market failures caused by large systemic operators, such as requiring such platforms to share tools, data and resources with smaller players.  According to the Commission, this mechanism is now being considered under the DMA and will not form part of the DSA.

New European entity: the DSA should create a new European entity tasked with ensuring compliance with the provisions set out in the Act. Measures should include, inter alia, regular monitoring of the algorithms employed by content hosting platforms for content management, regular review of the compliance of content hosting platforms on the basis of transparency reports provided by those platforms, working on best practices as well as imposing fines for non-compliance with the DSA.  

Next steps

The Commission will publish its legislative proposals on 15 December, taking into consideration the recommendations above.

It remains to be seen how the legislative drafts will then be perceived by the EU Parliament and what the outcome of the trialogue negotiations (informal tripartite meetings on legislative proposals between representatives of the Parliament, the Council and the Commission) will be. Last year, the EU Parliament proved to be a tough negotiating partner when it came to the adoption of the DSM Directive to reform European copyright law. And already there are signs that the Commission and the EU Parliament may be at odds, for example, in relation to the creation of a new regulatory authority to enforce some of the rules.

The Commission will also have to navigate the way in which the new rules sit alongside the highly controversial liability regime for online content sharing service providers set out in the new DSM Directive on Copyright, which must be implemented by EU member states by June 2021 (click here to read our earlier blog on this) and also the new rules for video service providers in the revised Audio-Visual Media Services Directive. In all probability, we expect the negotiations to continue throughout much of 2021 before the DSA is adopted.

DSA Taskforce

The legislation is expected to draw significant interest from a wide range of players, given the scope of services potentially affected and the fact the proposed rules are intended to cover any digital services, whether or not based in the EU, where activities or services are aimed at EU consumers.

We have a dedicated multi-jurisdictional taskforce closely tracking the progress of the DSA and DMA, including experts in technology regulation and policy, intellectual property, consumer and contract laws, data protection and competition.

To contact our DSA Taskforce, click here.