Raising the bar - the European Parliament moves to toughen the Digital Services Act, Clare Murray, Guillaume Couneson

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A first set of amendments to the proposed Digital Services Act (DSA) were published by the European Parliament (EP) at the beginning of June and if adopted as is, would create a more onerous regime for all digital service providers and not only for the so-called Big Tech.

These amendments are part of a draft report published by the Rapporteur for the European Parliament’s Committee on the Internal Market and Consumer Protection - which will be presented to that Committee today. This will begin what is likely to be a highly contentious negotiation of the proposed Act between the EU’s co-legislators (i.e. the EP and the Council) over the coming years.

Background

Across the globe lawmakers and regulators are taking steps to regulate the digital economy and the EU’s proposals set a high benchmark. The EU’s landmark Digital Services Package was published in December 2020, comprising the Digital Services Act (DSA) and the Digital Markets Act (DMA).

The proposed DSA would impose obligations on digital service providers including intermediary services offering connectivity and network infrastructure as well as hosting services which include online platforms and very large online platforms. The obligations are centred around four principles: (1) transparency, (2) empowering users, (3) risk management and (4) industry cooperation (read more in our Insight: European Commission proposes impactful reform of rules for digital platforms).

Amendments to the Digital Services Act

When the EU put forward its Digital Services Package, we predicted fierce debates and negotiations throughout the legislative process, and early indications are that there is much to debate.

The draft report on the DSA highlights a high level of consumer protection as a key policy objective. The proposed amendments would require a greater level of transparency and accountability, enhance user rights and place additional obligations on digital service providers for goods and services, and online content.

The proposals challenge some of the fundamentals of the tech platforms’ existing business models. DOT Europe, an association which represents 19 of the leading internet companies, referred to the EP’s proposals as “unclear, unfair and unworkable”.

Key themes

There are six key themes evident in the 182 amendments proposed:

Expanded scope - Search engines have been explicitly added the recital addressing the concept of “online platforms”. The threshold for very large platforms in the initial proposal of 45 million active monthly users in the EU, is expanded to include online platforms with an annual turnover exceeding EUR 50m within the EU. This is intended to ensure that the DSA covers all key digital services as well as marketplaces which would otherwise not have been caught by a definition based solely on the number of active monthly users.
Increased risk of liability for products and services – Stricter conditions for the exemptions of liability for online marketplaces to apply are being proposed as well as greater obligations on the traceability of traders for online marketplaces (with certain provisions applying to all intermediary services) and a right of redress for consumers against the online platform for any damages the products or services have caused.
Increased requirements for removing illegal content – Broader obligations for managing illegal content and more prescriptive requirements for notice and takedown procedures for illegal content are being considered, including: deadlines of 7 days and, for high impact content, 24 hours (inspired by the German NetzDG law) and, a requirement to suspend a user frequently providing illegal content. The amendments also seek to tackle the issues presented by social media platforms suspending politicians. A requirement that platforms must receive the approval of the relevant judicial authority before suspending accounts covering matters of public interest has indeed been tabled in this respect.
Enhanced user rights – Empowering users is a key principle of the proposed legislation and the amendments are more prescriptive for complaints handling and dispute settlement. A proposed new article would allow recipients of services to choose between means of communication with the intermediary services including some that do not involve automated tools. Certain provisions are extended to micro and small enterprises to ensure full user right protection.
Additional requirements for online advertising, recommender systems and platform algorithms – A series of amendments are proposed that seek to allow consumers to navigate through online platforms without being subject to targeted advertising and “to ensure user protection by design and default”. For example: targeted advertising should be set off by default and recommender systems should not be based on profiling by default. The proposals also include a requirement to comply with new transparency and accountability provisions (such as it is proposed that access for the Commission to the algorithms used by very large online platforms). Again, certain provisions are extended to all intermediary services.

The proposed changes in relation to online advertising, recommender systems and algorithms would be a significant intervention in how the industry operates. Platform algorithms are considered highly confidential and are protected as the crown jewels.
Increased enforcement powers, obligations on Commission – It is proposed that the Digital Service Coordinator and the Commission have the possibility to restrict access to the interface of an intermediary service, if the provider repeatedly infringes obligations. Another amendment proposes that the Commission should be obliged to act if it has reasons to believe that a very large online platform infringes the DSA, thereby removing the Commission’s discretion to decide whether or not to act.

What next?

In parallel to the draft report on the DSA, the Rapporteur (Andreas Schwab) of the Internal Market and Consumer Protection Committee published a draft report on the Digital Markets Act on 1 June. The Rapporteurs will present the reports on the DSA and the DMA to the Internal Market and Consumer Protection Committee on 21 June 2021, where MEPs will have the opportunity to table and discuss amendments. Other Committees will play a supporting role and according to the current calendar, the final report is then due for adoption by the European Parliament in December 2021.

In parallel, the Council, which must come to an agreement on the text with the Parliament, published progress reports on the DSA and DMA in May 2021 and will outline its full position by the end of the year. From 2022, the European Parliament and the Council will then negotiate a common position and are expected to reach an agreement on the final text of the DSA and DMA in mid-2022.

We expect the DSA and DMA to come into force in 2023 at the earliest.

Read more on the DMA in our LinkingCompetition post: Five themes from the European Parliament’s first effort to reshape the EU’s Digital Markets Act

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While the DSA may not come into force until 2023, the unusually short implementation period of three months means that digital service providers will need to act early to ensure they have compliant arrangements in place in time.