European Commission publishes landmark package to regulate digital platforms and services

Taking the form of a Regulation, which will be directly applicable to Member States, the proposed new rules aim to ensure uniform protection obligations and the same protection of rights for business and consumers across the internal market. The DSA would introduce a horizontal framework for all categories of content, products, services and activities on intermediary services. Under the proposals, known as the Digital Services Act and Digital Markets Act, large online platforms would have to comply with the new rules or face fines of 6 per cent (for the DSA) or 10 per cent (for the DMA) of their global revenue in the preceding year.

First, the Commission proposes new rules framing the responsibilities of digital services to address the risks faced by their users and to protect their rights. The DSA aims to define certain responsibilities and accountability measures for providers of digital services, in particular online platforms, such as social media and marketplaces. It contains due-diligence obligations for certain intermediary services, including notice-and-action procedures for illegal content and the possibility to challenge the platforms' content moderation decisions. Also included is an obligation for certain online platforms to receive, store and partially verify and publish information on traders using their services. This "know-your-business-customer" (KYBC) approach, which is designed to guard against rogue traders, is familiar from the financial services sector.

Second, the Digital Services Act package proposes ex ante rules covering large online platforms, which the Commission regards as acting as "gatekeepers", to set rules of the game for their users and their competitors. The initiative is meant to ensure that those platforms behave fairly and can be challenged by new entrants and existing competitors, so that consumers have the widest choice and the Single Market remains competitive.

The introduction to the DSA package notes that many new and innovative digital services have emerged since the adoption of the e-Commerce Directive (2000/31/EC) twenty years ago. While these services have contributed to societal and economic transformation, they have also become a source of new risks and challenges. The centrality of digital technologies to modern life has been further demonstrated during the coronavirus crisis.

According to the Commission, the proposed Digital Services Act builds on the core "valid" principles of protection from liability for hosting service providers and the prohibition of general monitoring set out in the e-Commerce Directive. The proposed new rules would set conditions for the provision of innovative digital services in the internal market, contribute to online safety and the protection of fundamental rights, and set a governance structure for the supervision of providers of intermediary services.

In addition, the proposed Regulation aims to remove disincentives towards voluntary online safety measures undertaken by digital service providers and to clarify their responsibilities in relation to consumers. It also sets out a co-regulatory backstop that would build on some of the existing voluntary initiatives undertaken by digital platforms regarding, for example, counterfeit goods or hate speech.

Very large platforms, with more than 45 million users in the EU, have been singled out for particular attention. The proposal sets a higher standard of transparency and accountability for the way in which such platforms moderate content, use targeted advertising and employ algorithms. It also sets obligations to assess the risk their systems pose and develop risk management tools to protect their services against the use of manipulative technologies.

Bird & Bird's Regulatory & Public Affairs team and legal experts are available to support clients in following these regulatory developments and understanding how they impact their business.

For further information contact Francine Cunningham