European Commission proposes ambitious regulatory framework for the digital sector
On 15 December 2020, the European Commission, presented its proposals for a Digital Services Act (DSA) and a Digital Markets Act (DMA). Until now, the EU has admittedly not been a global frontrunner in the area of digital market regulation. The main legal framework regulating online markets currently in place is the e-Commerce Directive, adopted in 2000. Now, however, it is apparently the Commission’s aspiration that the EU regulatory framework for the digital sector could potentially become a global yardstick for enforcement on digital markets. Has the Commission succeeded in this ambitious aim? In our regular blog for Kluwer, we make up an initial balance.
Digital Services Act
The DSA is meant to apply to all providers of intermediary services, although certain provisions only apply to digital platforms and very large platforms, respectively. The latter are defined as platforms that provide their services to a number of average monthly active recipients of the service in the EU equal to or higher than 45 million.
The DSA intends to impose rules and obligations in inter alia the following areas:
- measures to counter illegal content online, including goods and service;
- new rules on traceability of business users in online market places, to help identify sellers of illegal goods;
- effective safeguards for users, including the possibility to challenge platforms’ content moderation decisions;
- transparency measures for online platforms, including on the algorithms used for recommendations;
- obligations for very large online platforms to prevent abuse of their systems by taking risk-based action, including oversight through independent audits of their risk management measures;
- researchers will have access to data of core platforms, in order to scrutinise how platforms work and how online risks evolve;
- an oversight structure to address the complexity of the online space.
Digital Markets Act
The DMA applies only to ‘gatekeeper’ platforms. According to the proposal, the DMA shall apply to a provider of core platform services that:
- has a significant impact on the internal market;
- operates a core platform service which serves as an important gateway for business users to reach end-users; and
- enjoys an entrenched and durable position in its operations or it is foreseeable that it will enjoy such a position in the near future.
The proposal also lays down a set of cumulative conditions that – if met a provider of core platform services – entail a rebuttable presumption of being a gatekeeper. These are:
- an annual EEA turnover equal to or above EUR 6.5 billion in the last three financial years, or an average market capitalisation or the equivalent fair market value of at least EUR 65 billion in the last financial year, as well as providing a core platform service in at least three Member States;
- more than 45 million monthly active end users established located in the EU and more than 10,000 yearly active business users established in the Union in the last financial year;
- the condition mentioned under (b) must be fulfilled for a period of at least the last three financial years.
A platform that meets these conditions is obliged to notify this to the Commission within three months after those thresholds are satisfied. The Commission may also, after a market investigation, designate other platforms that do not fulfil the turnover and user criteria as gatekeepers.
Rules and obligations
According to the proposal, gatekeepers must comply with extensive lists of do’s and don’ts explicitly laid down in the proposal. The lists include (i) a prohibition to combine personal data sourced from the core platform services of the gatekeeper with personal data from any other services offered by the gatekeeper or with personal data from third-party services, (ii) obligations on ensuring data-portability for users, and (iii) on not imposing certain types of clauses prohibiting the presentation of better offers through other platforms or their own channels in contracts, as well as (iv) a prohibition on self-preferencing.
Read much more in our latest Kluwer blog.
What can Loyens & Loeff do for you?
Digital technologies present companies with many online and offline business opportunities. However, they also bring about a whole new range of tax and legal challenges, from competition and intellectual property issues, to data protection and privacy questions. Loyens & Loeff has set up a dedicated and multidisciplinary Digital Economy Team. This firm-wide team unites top experts from our various practice groups in all of our jurisdictions. This integrated and dynamic approach guarantees high-end and efficient solutions for our clients covering all relevant legal and tax aspects of their business.
Over the past few years, the competition specialists in our Digital Economy Team have represented a broad variety of technology companies, from major online platforms to smaller but innovative start-ups. In this respect we have developed an impressive track record in providing legal advice on several technology related topics, such as digital commerce, block chain, fin-tech and big data.
It is our forward thinking and practical advice that helps our clients to stay ahead in the digital world and to find solutions to any (potential) competition problems that arise. In the context of our focus on the tech sector and our aim of thought leadership, we published our handbook Digital Competition Law in Europe: A Concise Guide (Kluwer), in September 2019. This book aims to be an indispensable guide to quickly and accessibly acquiring in-depth knowledge in competition law in the digital sector, and a must-read for any practitioner or academic who encounters competition law related to digital markets. According to Kluwer, this book is ‘one of [its] most significant publications of recent years’.