Ten key points from new, global-first rulebook aimed at online platforms
5 min to read

Ten key points from new, global-first rulebook aimed at online platforms

Date
11 January 2021
Members of the European Parliament are vying to have a leadership role in shaping the EU’s new rule book for online platforms, as political discussions kick off on the proposed Digital Services Act package. Published at the end of last year, this global norm-setting package comprises: a Digital Services Act, which proposes new content moderation and transparency rules as well as risk assessment management; and a Digital Markets Act which proposes ex-ante rules for very large “gatekeeper” platforms.

The Digital Services Act package is the boldest initiative to date in an ongoing global conversation about the role and responsibilities of online platforms. Companies and other stakeholders have until 3 March to provide feedback in response to the Commission’s public consultation on the proposals.

Internet Service Providers, cloud services, messaging, marketplaces and social networks will all fall under the scope of this new, horizontal framework for online intermediaries. Specific due diligence obligations will apply to hosting services, in particular online platforms such as social networks, content-sharing platforms, app stores, online marketplaces, online travel and accommodation platforms. In addition, there will be extra obligations for very large online platforms with over 45 million users, whether established in or outside the EU.

It is also important to note that the DSA will have extra-territorial reach. It will apply to all intermediary service providers, irrespective of their place of establishment, if they provide services in the European Union.  Whether they provide services in the Union is determined by a “substantial connection” test. This is deemed to exist where the provider either has an establishment in the EU; a significant number of users in one or more Member States; or targets activities towards one or more Member States. 

Please find below 10 key points from the Digital Services Act (DSA):

1. Liability regime: according to the Commission, the proposed DSA builds on the still “valid” core principles of the e-Commerce Directive (2000/31/EC) which has been in place for two decades. It therefore retains the liability safe harbour provisions for online intermediaries and the prohibition of general monitoring obligations for illegal content. Nevertheless, there is some uncertainty over the future of the “active role” criterion, which appears only in recitals and is likely to be subject to further debate.

2. Illegal content online (goods and services): a mechanism is proposed for citizens to notify illegal content and dangerous products they encounter online and for platforms to work with “trusted flaggers”. Hosting services would be required to put in place notice-and-action mechanisms which enable individuals or entities to notify multiple specific items of alleged illegal content through one notice, thus streamlining the enforcement process for rightsholders. There will also be a U.S.-style ‘Good Samaritan” provision, whereby providers which voluntarily take down illegal content will not have negative consequences by losing their safe harbour.

3. Content moderation: measures are proposed to enable citizens to challenge online platforms when their content is removed. Platforms must provide for a mechanism to contest decisions, even if they are according to the terms and conditions of that particular service. Platforms are also obliged to notify citizens of any decisions taken to remove their content and the reasons for those decisions. Users can complain directly to the platform, choose an out-of-court settlement, or seek redress before the courts.

4. Transparency requirements:  online platforms are required to ensure that users have the individualised information needed for them to understand when and on whose behalf an advertisement is displayed, including whether or not this advertisement is based on profiling. Also, when platforms recommend content, users will be able to modify the criteria used and choose not to receive personalised recommendations. Users should also see if content is sponsored.

5. Traceability of business users:  online market places should adopt a “know-your-business-customer” (KYBC) approach, to help identify sellers of illegal goods.  There will be an obligation for certain online platforms to receive, store and partially verify and publish information on traders using their services.

6. A Single Point of Contact:  service providers established in the U.S. or elsewhere will be obliged to appoint a legal representative in the EU.

7. Access to data: it will be obligatory for key platforms to provide access to data so that independent auditors and vetted researchers can scrutinise their activities via reports and independent audits.

8. Very large online platforms: VLOPs will face additional requirements to prevent abuse of their systems by taking risk-management measures, including oversight through independent audits. These extra responsibilities will apply to online platforms with more than 10 per cent of the EU population, or 45 million users. Such platforms need to make sure they are not manipulated into spreading harmful goods or content (e.g. disinformation, hoaxes during pandemic etc.)

9. Oversight structure: each Member State will be obliged to appoint a Digital Service Coordinator, who will be supported by a new European Board for Digital Services. There will also be enhanced supervision and enforcement by the European Commission for very large online platforms.

10. Penalties: online platforms deemed to have flouted the new rules risk fines of 6 per cent of total global turnover in the preceding year, which could amount to billions of euros for the largest players.

Next Steps

The proposed Digital Services Act takes the form of a Regulation, which will be directly applicable to Member States. We can now expect at least 18 months of negotiations between the EU institutions (Commission, Parliament and Council) followed by six months for the final Regulation to take effect.  However, given the scope and complexity of these proposals, the decision-making process could stretch into 2023.

As the European Parliament prepares reports on the proposals, there will also be opportunities to intervene and propose, or oppose, certain amendments.

Bird & Bird’s Regulatory & Public Affairs team works hand in hand with our legal experts from around Europe to assist companies in reviewing the proposals and developing advocacy positions in order to convey your industry’s priorities effectively to EU decision-makers.

For further information contact Francine Cunningham
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Written by
Francine Cunningham
Francine Cunningham
As the senior public affairs manager, Francine leads our regulatory and public affairs practice in Brussels at a time of huge legislative challenges that will define the future of the digital economy. Working at the intersection of politics, bureaucracy and business reality, she advises our clients how to navigate complex EU decision-making processes to achieve specific industry goals.
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