On 15 December 2020, the European Commission published its Digital Services Act (‘DSA’), text available here, and its Digital Markets Act (‘DMA’), text available here. Together, the two Acts will shape how online platforms, content and competition are regulated in Europe. The proposals seek to better protect users of digital services and their fundamental rights online, and to facilitate competition in digital markets by ensuring they are fairer and more open.

Digital Services Act

The DSA marks the first major update to digital content moderation since the eCommerce Directive in 2000. Impetus behind the update comes largely from concern over the trade and exchange of illegal goods, services and content online, along with concern over the misuse of algorithmic systems to spread disinformation and for other harmful purposes. The rules target online intermediaries and platforms (for example, online marketplaces, social networks, content-sharing platforms, app stores) and obligations are graduated according to the role, size and impact of the service provider in the online ecosystem.

All intermediaries offering their services in the single market, regardless of whether they are established in the EU or not, will have to comply with the new rules which include the following:

1. Measures to counter illegal goods, services or content online (such as mechanisms for users to flag this type of content and due diligence obligations for platforms);

2. New obligations on the traceability of business users in online marketplaces to help identify sellers of illegal goods;

3. Safeguards for users such as the ability to challenge content moderation decisions;

4. New transparency measures around online advertising and the use of algorithms;

5. New obligations on very large platforms to prevent the misuse of their systems; and

6. Access for researchers to key data of the largest platforms to help understand how online risks evolve.

Very large platforms reaching more than 10% of the 450 million consumers in Europe will also be subject to enhanced supervision and enforcement by the Commission.

Digital Markets Act

The DMA targets a specific set of large online platforms acting as ‘gatekeepers’ in digital markets. Certain criteria must be met for a platform to qualify as a ‘gatekeeper’, namely, it must have a significant impact on the internal market, a strong intermediation position (i.e. it links a large user base to a large number of businesses), and has an entrenched position in the market. This means it will likely only apply to platforms like search engines, social networks or online intermediation services.

The measures introduced by the DMA are largely aimed at creating a more competitive online environment, and include:

- Prohibiting anti-competitive practices, such as preventing users from un-installing any pre-installed software or apps, treating services/products offered by third parties on the gatekeeper’s platform less favourably in rankings, or preventing users from linking to businesses outside of the gatekeeper’s platform.

- Requiring gatekeepers to put in place pro-competition measures, such as allowing third parties’ software to function and interoperate with their own services, allowing their business users to access data that they generate in using the gatekeeper’s platform, and allowing their business users to promote offers and conclude contracts with customers outside of the gatekeeper’s platform.

Sanctions for non-compliance could include fines of up to 10% of worldwide annual turnover and periodic penalty payments of up to 5% of average daily turnover.

Next steps

Following this proposal by the European Commission, the European Parliament and Council will start working on their own positions regarding the DSA and DMA. Once adopted, the Acts will become directly applicable across the EU.

It is interesting that the measures under the DSA and DMA align with regulatory developments in the United Kingdom. On 27 November 2020, the UK government committed to introducing a new pro-competition regulatory regime for digital markets (see our separate post on this here) with consultation on proposals scheduled for early 2021. Although it is too early to say exactly what the similarities will be, recognition by the UK government that certain online platforms with substantial and enduring market power have ‘Strategic Market Status’ seems similar to the ‘gatekeeper’ concept under the DMA.

What is certain, therefore, is that the next few years will see significant changes in European regulation of digital markets and their participants.