The Commission has proposed an ambitious reform of the digital space, a comprehensive set of new rules for digital services, including social media, online shopping venues, and other online platforms operating in the European Union: the Digital Services Act and the Digital Markets Act.
European values are a vital part of both proposals. The new rules will better protect consumers and their fundamental rights online and lead to fairer and more open digital markets for all. A modern regulation within the single market will foster innovation, growth and competitiveness and provide users with new, better and more reliable online services. It will also support the growth of smaller platforms, SMEs and start-ups, giving them easy access to customers throughout the single market, while reducing compliance costs. In addition, the new rules will prohibit unfair conditions imposed by online platforms that have become or are expected to become “gateways” to the single market. Both proposals underpin the Commission’s ambition to turn this decade into Europe’s digital decade.
LEGISLATIVE ACT ON DIGITAL SERVICES
The scope of digital services differs significantly from that of 20 years ago, when the E-Commerce Directive was adopted. Online intermediaries have become vital participants in the digital transformation. In particular, online platforms have created significant benefits for consumers and innovation, facilitated cross-border trade inside and outside the EU, and also opened up new opportunities for various European businesses and traders. At the same time, they can also be used as a means of distributing illegal content or selling online illegal goods or services. Several very large players have emerged, such as quasi-public spaces for information exchange and online commerce. They have become systemic in nature and pose particular risks to consumer rights, information flows and public participation.
According to the Digital Services Act, legally binding EU-wide rules will apply to digital services that connect consumers to goods, services or content, including new procedures to speed up the elimination of illegal content, as well as comprehensive protection of users’ fundamental rights. online. The new framework will restore the balance of rights and responsibilities of users, intermediary platforms and public authorities and is based on European values - including respect for human rights, freedom, democracy, equality and the rule of law. The proposal complements the European Democracy Action Plan, which aims to make democracies more sustainable.
In particular, the Digital Services Act will introduce a number of new, harmonized EU-wide obligations for digital services, carefully graded based on the size and impact of these services, such as:
- rules for removing online illegal goods, services or content;
- safeguards for users whose content has been incorrectly deleted from platforms;
- new obligations for very large platforms to take risk-based actions to prevent abuse of their systems;
- comprehensive transparency measures, including with regard to online advertising and the algorithms used to recommend content to users;
- new powers to thoroughly review the operation of the platforms, including by facilitating researchers’ access to key platform data;
- new rules for traceability of business users in online markets, to support the tracking of sellers of illegal goods or services;
- a new procedure for cooperation between public authorities to ensure effective implementation within the single market.
Platforms that reach more than 10% of the EU population (45 million users) are considered systemic in nature and not only undertake specific obligations to control their own risks, but are also subject to a new supervisory structure. The current new reporting framework will consist of a Board of National Digital Services Coordinators with special powers for the Commission to oversee very large platforms, including the possibility to sanction them directly.
LEGISLATIVE ACT ON DIGITAL MARKETS
Legislation on digital markets combats the negative effects of certain types of behavior on platforms that act as “digital gatekeepers” within the single market. These are platforms that have a significant impact on the internal market, serve as an important portal for business users to reach their customers and that benefit or are expected to benefit from a permanently established and permanent position. This may give them the right to act as private policy makers and to act as a barrier between businesses and consumers. Sometimes such companies control entire platform ecosystems. When an “information gatekeeper” engages in unfair business practices, this may prevent or delay the access to the consumer of valuable and innovative services by its business users and competitors. Examples of these practices include unfair use of data by businesses operating on these platforms or situations where users use only one service and have limited options to switch to another service.
The Digital Markets Act is based on the horizontal Regulation on platform-enterprise relations, the findings of the EU Observatory on the Economics of Online Platforms, and the Commission’s extensive experience with online markets through the application of competition law. In particular, it lays down harmonized rules for the identification and prohibition of these unfair practices by information entry security guards and for the provision of a law enforcement mechanism based on market investigations. The same mechanism will ensure that the obligations set out in the regulation are updated in the ever-changing digital reality.
In particular, the Digital Markets Act:
- will only apply to large service providers on the main platform that are most susceptible to unfair practices, such as search engines, social networks or online intermediary services, that meet the objective legal criteria for designation as “information entry guards”;
- will set quantitative thresholds as a basis for determining the alleged security guards of the information input. The Commission will also have the power to designate information entry guard companies following market investigations.
- will prohibit a number of manifestly unfair practices, such as blocking users from uninstalling any pre-installed software or applications;
- will require information entry security guards to proactively take certain measures, such as targeted measures to allow third-party software to function properly and interact with their own services;
- will impose sanctions for non-compliance, which could include fines of up to 10% of the global turnover of the information entrance guard, in order to ensure the effectiveness of the new rules. For repeat offenders, these sanctions may include the obligation to take structural measures, possibly leading to the sale of certain establishments, where there is no other equally effective alternative measure to ensure compliance;
- will allow the Commission to carry out targeted market investigations to assess whether the practices of a new entry gatekeeper should be added to these rules to ensure that the new entry gatekeeper’s practices and services are in line with the rapid 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 throughout the European Union.