On 15 December 2020, the Digital Services Act package was published by the European Commission (EC). The packages included two new proposed regulations: the Digital Services Act (DSA) and the Digital Markets Act. The objective of the package is to ensure that digital platforms are more accountable for the content that they host and address the market dominance of large technology companies.
The changes heralded in the package represent the most significant changes in this area since the E-commerce Directive (EcD) which was implemented in 2000. The EcD set the main rules for the provision of digital services in the EU. As regulations, these new rules (if approved) will be directly applicable across all EU Member States and will not require implementation into national law of Member States. As regulations, they will have direct effect across the member states once they have been approved and come into force.
While the EC has now published its proposals, they are yet to be debated by the Commission, the European Parliament and Council of the EU, who will all need to agree on the final versions of the Acts before they are formally adopted. Clearly, this will take some time and it is likely that it may well take two to three years before the proposals are formally adopted and legally enforceable.
The Digital Services Act (DSA)
In part one of this two-part briefing, we look at the DSA and the changes that the Act proposes.
The DSA is an EU law and so will not come into force in the UK as it is no longer a member of the EU. The UK has gone so far as to state that it has “no current plans to change the UK’s intermediary liability regime”. However, it is important to note that the DSA will apply to UK based intermediaries that, whilst not based in the EU, provide services to individuals or businesses that are based in the EU. Therefore, UK businesses should carefully consider the new obligations imposed by the DSA and the new legislative requirements contained within it.
With regards to liability, not much has changed from the EcD. Online intermediaries can still be exempt from liability for the content that they host provided they fulfil certain conditions. However, whilst the DSA maintains much of the EcD regime for liability, it has added additional requirements for host providers and platforms. Notably, in this regard is the requirement to provide notice and takedown mechanisms whereby users are easily able to notify the host provider of content that they believe to be illegal. Online platforms will have to ensure that they:
- deal with complaints in line with the requirements of the DSA
- establish complaint handling procedures
- engage in out-of-court dispute settlement mechanisms to resolve disputes with their users
- implement systems that ensure they cooperate with ‘trusted flaggers’. Trusted flaggers are defined in the DSA as ‘entities which have demonstrated particular expertise and competence to report illegal content to which platforms will have to react with priority.’
Increased due diligence obligations
Online platforms that enable consumers to enter into contractual agreements with traders hosted on their platform will be required to undertake checks on the trader. The checks must verify the trader’s identity and make sure that they are traceable before that trader can operate on the platform. This information must be stored in “a secure manner for a reasonable period of time that does not exceed what is necessary.”
Greater transparency requirements
Online platforms will be required to provide their users with real-time information as to why they are seeing a particular advertisement and who paid for it. Platforms will also be required to ensure that content which is sponsored is clearly indicated as such.
All providers of intermediary services will be required to include information on restrictions that they may impose on data provided by the user in their terms and conditions. This must include information on ‘any policies, procedures, measures and tools used for the purpose of content moderation, including algorithmic decision-making and human review.’ This information must be easily accessible and clearly set out.
If platforms remove content that is illegal or contrary to their terms and conditions, they will be required to provide an explanation to the user who uploaded the content explaining why it has been removed. There are also requirements for online platforms to publish reports detailing their activities in removing such content.
Requirement to appoint an EU representative
Online intermediaries that are based outside the EU (for example in the UK) but operate in the EU will be required to appoint an EU legal representative. The representative will be required to cooperate and liaise with the supervisory authorities, the EC commission and the European Board for Digital Services (a new entry created under the DSA) in relation to their obligations under the DSA.
Additional obligations for “very large platforms”
Those platforms that are considered “very large” (over 45million active users a month) will face additional obligations under the DSA. These include greater responsibilities to identify, analyse and manage systematic risks that arise out of use of their platforms. Risks that must be analysed include the dissemination of illegal content and the intentional manipulation of their service by means of inauthentic use. These very large platforms will also be required to commission independent annual audits to ensure compliance. If requested by a “competent authority”, the platform will be required to make data available to regulators and independent researchers for the purposes of assessing their compliance with the DSA. They will also be required to appoint a compliance officer with specific responsibilities for their obligations under the DSA.
What happens in the event of a breach?
The DSA makes provisions for fines of up to 6% of annual global turnover of the service provider as well as periodic payments for continuous infringement of up to 5% of the average daily global turnover of the intermediary based on figures from the previous financial year.