Tag: platforms

European Union Reins in Big Tech

Οn Tuesday, 5 July 2022, the European Parliament held the final vote on the new Digital Services Act (DSA) and Digital Markets Act (DMA), two bills that aim to address the societal and economic effects of the tech industry by setting clear standards for how they operate and provide services in the EU, in line with the EU’s fundamental rights and values.

What is illegal offline, should be illegal online

The Digital Services Act (DSA) sets clear obligations for digital service providers, such as social media or marketplaces, to tackle the spread of illegal content, online disinformation and other societal risks. These requirements are proportionate to the size and risks platforms pose to society.

The new obligations include:

    • New measures to counter illegal content online and obligations for platforms to react quickly, while respecting fundamental rights, including the freedom of expression and data protection;
    • Strengthened traceability and checks on traders in online marketplaces to ensure products and services are safe; including efforts to perform random checks on whether illegal content resurfaces;
    • Increased transparency and accountability of platforms, for example by providing clear information on content moderation or the use of algorithms for recommending content (so-called recommender systems); users will be able to challenge content moderation decisions;
    • Bans on misleading practices and certain types of targeted advertising, such as those targeting children and ads based on sensitive data. The so-called “dark patterns” and misleading practices aimed at manipulating users’ choices will also be prohibited.

Very large online platforms and search engines (with 45 million or more monthly users), which present the highest risk, will have to comply with stricter obligations, enforced by the Commission. These include preventing systemic risks (such as the dissemination of illegal content, adverse effects on fundamental rights, on electoral processes and on gender-based violence or mental health) and being subject to independent audits. These platforms will also have to provide users with the choice to not receive recommendations based on profiling. They will also have to facilitate access to their data and algorithms to authorities and vetted researchers.

A list of “do’s” and “don’ts” for Gatekeepers

The Digital Markets Act (DMA) sets obligations for large online platforms acting as “gatekeepers” (platforms whose dominant online position make them hard for consumers to avoid) on the digital market to ensure a fairer business environment and more services for consumers.

To prevent unfair business practices, those designated as gatekeepers will have to:

    • allow third parties to inter-operate with their own services, meaning that smaller platforms will be able to request that dominant messaging platforms enable their users to exchange messages, send voice messages or files across messaging apps. This will give users greater choice and avoid the so-called “lock-in” effect where they are restricted to one app or platform;
    • allow business users to access the data they generate in the gatekeeper’s platform, to promote their own offers and conclude contracts with their customers outside the gatekeeper’s platforms.

Gatekeepers can no longer:

    • Rank their own services or products more favourably (self-preferencing) than other third parties on their platforms;
    • Prevent users from easily un-installing any pre-loaded software or apps, or using third-party applications and app stores;
    • Process users’ personal data for targeted advertising, unless consent is explicitly granted.
Sanctions

To ensure that the new rules on the DMA are properly implemented and in line with the dynamic digital sector, the Commission can carry out market investigations. If a gatekeeper does not comply with the rules, the Commission can impose fines of up to 10% of its total worldwide turnover in the preceding financial year, or up to 20% in case of repeated non-compliance.

Next Steps

Once formally adopted by the Council in July (DMA) and September (DSA), both acts will be published in the EU Official Journal and enter into force twenty days after publication.

The DSA will be directly applicable across the EU and will apply fifteen months or from 1 January 2024 (whichever comes later) after the entry into force. As regards the obligations for very large online platforms and very large online search engines, the DSA will apply earlier – four months after they have been designated as such by the Commission.

The DMA will start to apply six months following its entry into force. The gatekeepers will have a maximum of six months after they have been designated to comply with the new obligations.

Source: European Parliament

The EU Digital Markets Act

The EU has recently unveiled its much-expected landmark proposal for a Digital Markets Act (DMS). Twenty years after the introduction of the eCommerce Directive, the DMA envisages a new legal basis for competition and platform management, covering everything from content moderation  to app stores, search and self-preferencing.

The DMA introduces rules for platforms that act as “gatekeepers” in the digital sector. These are platforms that have a significant impact on the internal market, serve as an important gateway for business users to reach their customers, and which enjoy, or will foreseeably enjoy, an entrenched and durable position. This can grant them the power to act as private rule-makers and to function as bottlenecks between businesses and consumers.

With an eye mainly to US big-tech, the Digital Markets Act is set to prevent gatekeepers from imposing unfair conditions on businesses and consumers and ensure the openness of important digital services. Examples of these unfair conditions that gatekeepers sometimes impose on others include prohibiting businesses from accessing their own data when operating on these platforms, or situations where users are locked into a particular service and have limited options for migrating to alternative service providers.

Gatekeeper on the historic Banco Santander, Lisbon.

The enforcement system of the DMA is of particular importance, as the proposal does not seem to leave much space to national authorities. In fact, the European Commission shall be vested with extensive investigative powers (see Articles 19-21) and shall be able to impose fines and periodic penalty payments in case of non-compliance (Articles 26-27) of the same magnitude as in antitrust cases (up to 10% of annual turnover and 5% of daily turnover for fines and periodic penalty payments respectively).

In case of systematic non-compliance that has further strengthened or extended the gatekeeper’s position, the Commission may even impose behavioral or even structural remedies on the gatekeeper, including divestiture (Article 16). Structural remedies are a last resort penalty and can be imposed only if there are no equally effective behavioral remedies. The European Commission may also issue interim measures (Article 22) and accept commitments offered by the gatekeeper (Article 23).

Together with the Digital Services Act, the DMA is oriented at providing better protection to consumers and to fundamental rights online, establishing a powerful transparency and accountability framework for online platforms and leading to fairer and more open digital markets.

Harmonised across the EU and directly applicable, the new rules will make it easier to provide digital innovations across borders, while ensuring the same level of protection to all citizens in the EU.

Further information can be retrieved from the Commission’s dedicated webpage.

New Rules to Improve Fairness within the Online Platform Economy

Over the past decade, online platforms (such as Shopify, Magento, Etsy, etc.) have established their presence as important economic players, connecting economic actors and boosting efficiency while spurring innovation and new business models.

As of today, they play an important role in many industries, since they allow buyers and sellers of goods and services to trade and communicate with each other. At the same time, they create network effects, and raise new issues related to fairness, transparency, and market distortions.

This ecosystem is now regulated by means of Regulation 2019/1150 on online platform-to-business relationships (P2B Regulation).

The regulation, which directly applies throughout the Union since 11 July 2020, has introduced a set of transparency rules to be followed by online platforms in their relations with business users, to address unfair and potentially harmful contractual clauses and trading practices, and lack of effective redress.

Its scope covers online intermediation services and online search engines provided, or offered to be provided, to business users and corporate website users, respectively, that have their place of establishment or residence in the Union and that, through those online intermediation services or online search engines, offer goods or services to consumers located in the Union, irrespective of the place of establishment or residence of the providers of those services and irrespective of the law otherwise applicable.

The key points covered by the regulation can be summarized as follows:

    • Terms and Conditions will have to be written in plain and intelligible language;
    • Business users will have to be informed of any modification of the Terms and Conditions;
    • Platforms will have to respect a reasonable notice period depending on the nature of the modification (minimum is fixed at 15 days) unless a business user gives an explicit agreement for this period to be shortened;
    • Providers of online intermediation services will have to provide business users with the reasons for restricting or suspending individual products/ services;
    • In case of definitive termination of the online intermediation service offered, the platform will provide the business user concerned with a statement of reasons at least 30 days in advance;
    • The providers of these services have to formulate and publish general policies on what data generated through their services can be accessed, by whom and under what conditions;
    • Providers of online intermediation services as well as online search engines will be required to clearly inform businesses about the main parameters determining how goods and services are ranked;
    • Online search engines should be transparent about any preferential treatment they give to their own products and services offered through their search sites;
    • Providers of online intermediation services will be required to explain the use of contract clauses demanding the most favourable range or price of products and services offered by their professional users;
    • Online platforms will have to set up or have in place internal complaint handling mechanisms (small enterprises with less than 50 staff members and generating ≤€10 million turnover will be exempted from this obligation);
    • Business users will have access to out-of-court dispute settlement through easily accessible external mediators (small enterprises with less than 50 staff members and generating <€10 million turnover will be exempted from this obligation);
    • Representative organisations or associations will be able to defend businesses in courts against possible infringements of the proposed rules by online platforms or search engines.

Furhtermore, an EU Observatory of the Online Platform Economy has been established to look into the current and emerging challenges and opportunities for the EU in the online economy. The observatory shall be monitoring online trends, the evolution of trading practices, and the development of national policies, in order to monitor, anticipate and solve issues arising in the online economy.