Source: The European Commission Press Corner
In December, the European Commission proposed a comprehensive set of rules for all digital services reforming the digital space. The new rules include social media, online market places and other online platforms that operate in the EU: the Digital Services Act and the Digital Markets Act. Even though this is a development from December 2020, we wanted to update you on this regulatory development as they are vital in the digital transition of the EU. These new rules will be at the core of our Digital Age Working Group discussions and meetings as well.
The aim of the new rules are stated by the Commission as to better protect consumers and their fundamental rights online and to make the digital markets fairer and more open for everyone while keeping the European values at the core. The modern rulebook across the single market will bolster innovation, growth and competitiveness and will provide users with new, better and reliable online services. It is also underlined that these rules will also support the scaling up of smaller platforms, small and medium-sized enterprises, and start-ups, providing them with easy access to customers across the whole single market while lowering compliance costs. Furthermore, the new rules will prohibit unfair conditions imposed by online platforms that have become or are expected to become gatekeepers to the single market. The two proposals are vital in the Commission's ambition to make this Europe's Digital Decade. To prepare the EU's digital space for the next decades to come is a very challenging issue and we believe this set of rules with overarching aims greatly contribute to this goal.
Margrethe Vestager, Executive Vice-President for a Europe fit for the Digital Age, said: “The two proposals serve one purpose: to make sure that we, as users, have access to a wide choice of safe products and services online. And that businesses operating in Europe can freely and fairly compete online just as they do offline. This is one world. We should be able to do our shopping in a safe manner and trust the news we read. Because what is illegal offline is equally illegal online.”
According to the ordinary legislative procedure, the next step is the European Parliament's and the Member States' discussion of the Commission's proposals. If adopted, the final text will be directly applicable across the European Union. Therefore, there is a long way until the implementation of these rules and it is of great importance to keep up with the developments on the subject.
The two Acts encompass a single set of rules applicable across the whole EU. As stated in the Press release, the Digital Services Act and the Digital Markets act are the European answer to the deep reflection process in which the Commission, EU Member States and many other jurisdictions have engaged in recent years to understand the effects that digitalisation – and more specifically online platforms – have on fundamental rights, competition, and, more generally, on our societies and economies.
On the Digital Services Act
The Digital Services Act will have a series of new, harmonised EU-wide obligations for digital services, carefully set on the basis of those services' size and impact, such as: Rules for the removal of illegal goods, services or content online; safeguards for users whose content has been erroneously deleted by platforms; new obligations for very large platforms to take risk-based action to prevent abuse of their systems; side-ranging transparency measures, including on online advertising and on the algorithms used to recommend content to users and many more, as listed by the Commission.
We would like to underline that if there is a platform with a reach larger that 10% of the EU's population, 45 millions, it is considered systemic in nature. These platforms are subject to specific obligations to control their own risks as well as to a new oversight structure. This Act is a powerful tool in regulating the digital market preemptively and successfully preventing the unfair actions of such big platforms while protecting the SMEs and smaller platforms.
On the Digital Markets Act
The Digital Markets Act focuses on the consequences arising from the negative behaviours by platforms acting as digital "gatekeepers" to the single market. These platforms have an important effect on the functioning of the internal market due to their size. As stated by the Commission, they also act as an important gateway for for business users to reach their customers, and which enjoy, or will foreseeably enjoy, an entrenched and durable position. These new rules aim to put implications of their negative behaviours as these significant powers may grant them the power to act as private rule-makers and distort competition. We would like to note that the Digital Markets Act is built on the horizontal Platform to Business Regulation, the conclusions of the EU Observatory on the Online Platform Economy as well as the Commission's extensive experience in dealing with online markets through competition law enforcement.
Digital Markets Act, as explained by the Commission, particularly sets out harmonised rules defining and prohibiting those unfair practices by gatekeepers and providing an enforcement mechanism based on market investigations. In short, the Digital Markets Act provides rules for the major providers of the core platform services, such as search engines. The Act also defines thresholds as a basis to identify presumed gatekeepers and it is noteworthy that the Commission will also have the power to designate companies as gatekeepers after carrying out an investigation. Certain numbers of practices which are clearly harming competition are banned in this Act. The gatekeepers will also need to put in place certain measures such as targeted measures for the proper functioning of third parties' softwares. There will also be sanctions for non-compliance. These are significant issues tackled by the Digital Markets Act and we are closely following these developments to see how effective the new rules will be in tackling the unfair competition done by the giant platforms and often multinational companies.