The Digital Services Act: What Does it Mean for Business?

Taso Advisory
Jun Tue, 2020
share

KEY POINTS

  • The European Commission is grappling with the thorniest questions surrounding the digital economy and has launched a series of roadmaps with policy options on 1) the role of platforms acting between business users and consumers, 2) how illegal content is moderated online, and 3) measures to prevent market dominance and anti-competitive behaviour.
  • The responses will feed into the upcoming Digital Services Act (‘DSA’) which will impact a diverse set of businesses, both within and outside of the EU, and will likely shape regulatory responses in other jurisdictions.
  • This blog provides context on the policy options available in the roadmaps, insight as to which direction the EU could take, and sets out the deadlines to provide responses.

AN INTRODUCTION TO THE DIGITAL SERVICES ACT

The European Commission, led by President Ursula von der Leyen, took up its mandate stating that it wished to tackle the biggest questions in regulating the digital economy, namely through a Digital Services Act to update existing rules, some of which have not been touched for 20 years.

As part of this work the Commission has released roadmaps with options for intervention and consultations covering three areas:

  • Regulations for intermediary platforms acting as ‘gatekeepers’ and associated rules for how they treat business users who list goods or services online;
  • New rules for digital service providers hosting illegal content, goods, or services; and
  • A ‘New Competition Tool’ for intervening early in digital markets.

The previous European Commission started working on these areas, yet interventions were either non-legislative or focused on increasing transparency and learning opportunities rather than prescriptive rules of behaviour. The DSA will take a much more interventionist approach.It will have broad implications for corporates which offer services within the EU and the consultation touches on specific sectors such as on-demand services and online advertising.

There may well be knock on effects in other jurisdictions wrestling with the same questions. The EU’s leadership (or militancy) in regulating the tech sector has been well established in recent years, and the progress of the DSA will be closely watched elsewhere.

Corporates have different ways to provide comments. Consultations on the three roadmaps above are open until 30 June, whilst longer questionnaires with broader questions on the Digital Services Act and the New Competition Tool, are open until 8 September.

REGULATIONS FOR INTERMEDIARY PLATFORMS ACTING AS ‘GATEKEEPERS’

The approach taken by the European Commission is to build on the Platform to Business Regulation (‘P2B’) which is about to enter into force in EU Member States. The P2B Regulation introduced transparency requirements for online platforms and how they provide their intermediation services between businesses and consumers. Importantly, P2B did not define rules about how platforms treat business users (such as ranking practices, data access policies, unfair contractual provisions etc) but focused on transparency instead.  

The DSA would build on these requirements and the Commission sets out a series of options which could be overseen by a dedicated regulatory body at EU level:

  •  A horizontal approach which sets prescriptive rules for all platforms on self-preferencing, data access policies, unfair contractual provisions etc.
  • A data gathering framework allowing regulators to collect further information from gatekeepers on the workings of their platforms.
  •  Specific rules for gatekeepers of a certain size, including rules against ‘blacklisted’ behaviour for all platforms or more tailored interventions on a case by case basis.

The P2B Regulation was always intended as a stopgap measure before further action and its wide scope was underappreciated by several corporates who did not see themselves as intermediaries. Measures in the DSA will follow the same themes and scope whilst allowing greater intervention.

Also important for the direction of travel is the Observatory on the Online Platform Economy,which the Commission set up in 2019 to consider these approaches and scan for areas requiring intervention. Their interim reports on data access and differentiated treatment are due to be published this year and will feed into work on the DSA.

NEW RULES FOR DIGITAL SERVICE PROVIDERS AND ILLEGAL CONTENT

The second issue at hand is how content is shared on a swathe of digital services, including social media platforms, search engines, video gaming platforms, online marketplaces and other information society services and internet service providers.

The question of online content is not new and is a recurring dilemma created by the cornerstone of the EU’s digital regulatory environment: the E-Commerce Directive (‘ECD’). The Directive includes an exemption from liability for digital services hosting illegal content unless they are aware of the content, effectively disincentivising proactive content moderation measures. 

This issue was given headline coverage recently when US President Donald Trump signed an executive order which could undermine similar liability exemptions for companies (granted by Section 230 of the 1996 Communications Decency Act) in the US in response to his feud with Twitter. 

The Commission roadmap is vague here and outlines many options which could be incorporated into the DSA:

  • Implementing a 2018 Recommendation on illegal content as a legally binding measure. This would assign responsibility for the distribution of illegal content and other illegal activities of users, albeit without impacting the liability exemption of the ECD.
  • Applying new liability and safety rules for digital services by removing the disincentive in the ECD for voluntary action against illegal activity. This could include greater obligations for larger digital service providers and auditing automated content moderation services.
  • EU-level oversight and coordination between Member States to allow more effective governance.

How content is shared online is one of the hardest issues currently facing policymakers and finding balance will be difficult. We can expect recurring debates about how illegal content is defined, free speech vs hate speech, how such measures could be used by repressive governments to muzzle their opposition, and whether private companies should be shouldered with the responsibility at all.

There are existing policy initiatives which show where the Commission may turn to for inspiration. For example, the above 2018 Recommendation on illegal content included a call for frameworks allowing public authorities to notify digital service providers about illegal content, and mechanisms to contest the decision where the service provider takes down the content in question. Going a step further, a proposed Regulation preventing the dissemination of terrorist content attempted to require service providers remove content within a specified time window and for them to take proactive measures, such as applying automated content moderation tools.

In short, the liability exemption of the ECD is the most hotly debated element here and will be where the EU potentially diverges from other jurisdictions. The EU approach could also affect how the UK deals with illegal content. The UK Government has been working on a full response to its consultation and White Paper on Online Harms, which is expected later in the year. Ministers and officials will be mindful of how the UK diverges from or aligns with the EU approach

A NEW TOOL FOR COMPETITION POLICY

Lastly, the European Commission is considering a New Competition Tool that will allow it to intervene early in markets where they feel that traditional competition policy fails to produce desired outcomes. The Commission has identified a list of behaviours it wishes to address, including: tacit collusion between companies, the effects of algorithm price monitoring and ‘tipping’, whereby dominance in one market is used to leverage entrance into another. Two broad options are outlined:

  • A tool against dominant companies which is either applied horizontally to all markets, or only specifically to some sectors. This would empower the Commission to enforce behavioural or structural remedies against transgressors before they raise barriers for competitors wishing to enter the market.
  • Interventions addressing market structures before companies become dominant where there are structural risks to competition. Again, this could either be applied horizontally or targeted to certain markets.

This would likely be a controversial move and would broaden the scope of the European Commission’s powers. The tool would not involve findings that a company has infringed competition rules per se, but instead be based on a yet to be defined test.

The key debate will be on the thresholds required to designate a company as dominant or a market as requiring early intervention, and there will be opposition from those who already feel that competition policy is becoming too interventionist.

Taso Advisory supports clients with the political, policy, and regulatory challenges they face, and helps them to design and deliver credible responses to mitigate risks and seize opportunities. We make complex challenges simple, give actionable advice, and support in delivery. You can find out more about what we do and who we work with.

For a confidential discussion about how we can support your public policy and public affairs work with the Digital Services Act, or more broadly, please get in touch by emailing [email protected] or by calling +44 (0) 20 3488 4489.

Also read

Get updates

Subscribe to hear from us

    Get updates

    Subscribe to hear from us

      Taso Advisory is a public policy consultancy. We act as guides by navigating government, and the people and politics behind it, for our clients.

      Quick Links

      Copyright © 2022 Taso Advisory - All Rights Reserved.
      Website By Saifee Creations
      envelopephone-handsetmap-markermenuarrow-right