The Digital Services Act (DSA) and the Digital Markets Act (DMA) of the European Union were introduced jointly on the 15 December 2020. Moving away from paper forms to digital services offers numerous benefits, including reduced costs, higher levels of customer service, improved efficiency, and greater transparency. However, this movement into the digital space also created massive concerns about our digital data and internet safety. The desired outcome of the new revisions is to establish a playing field for all the market players, while fostering innovation, growth, and competitiveness, both in the European Digital Single Market and on a global scale. These proposals will create massive changes, by eliminating gaps and updating the E-Commerce Directive, as numerous platforms will have to meet and be subject to a new threshold of legal obligations and regulations regarding our data.
What are Digital Services?
With the rise of digital services, striking a balance between transparency and intrusion into an individual's private data has never been more vital. Digital services are the financial services, products and features available to the Customer through online, mobile or other digital channels. These services refer to the electronic delivery of information, including data and content, across multiple platforms and devices. Many of these platforms lack regulations, which leaves customers with uncertainty and concern about who is using their data and how it is being used. As a result, these new measures aim to create a unified legal framework as well as a safer, fairer, and more transparent digital environment.
What is the Digital Services Act?
The DSA will provide better protection to consumers with a secure and transparent environment in the online world. This will be achieved by introducing stricter regulations for internet intermediaries and digital platforms. These regulations include the implementation of a virtual complaint system, setting yearly reporting requirements, and threatening fines. The aim is to achieve a harmonised framework across the EU, which will be directly applicable, making it easier to ensure the same level of protection to all citizens in the EU.
The DSA's impact is to usher in a new era for digital services, as it strives to harmonize the digital framework. The Act aims to achieve this by introducing a new threshold of accountability, risk analysis, annual audits and transparency requirements. This new threshold includes content regarding counterfeit or illegal goods and services, as well as hate speech. A mechanism will be in place for users to flag such content and for platforms to cooperate with “trusted flaggers”. The DSA will also be introducing a Digital Service Coordinator. This coordinator will be monitoring the implementation of the regulations by having powers in terms of investigation, enforcement (including fines) and the imposition of access restrictions. In addition, Member States, supported by a new European Board for Digital Services, will also carry out a key role. Their role is to enhance supervision and oversight the enforcement for large online platforms. By bringing these new legal obligations which will be imposed on platforms will create a coherent and trustworthy legal framework within the EU and later globally.
What is the Digital Markets Act?
Businesses are becoming increasingly reliant on digital gatekeepers, which often results in gross negotiating power imbalances. As a result, unfair practices are being forced on business users and small and medium-sized enterprises (SMEs) who rely on the platforms to reach their customers. Therefore, the Digital Markets Act aims to increase and open competition in the European Digital Markets by preventing dominant corporations from abusing their market position and allowing new players to enter the market. This will be done by the imposition of anti-steering provisions, lock-in strategies, imposition of the platform's identification services, self-preferencing practices, mechanisms to limit or refuse access to data collected by gatekeepers and the imposition of unfair terms of access upon business users. Those in breach of the rules face penalties of up to 10% of their yearly turnover and repeat offenders face being broken-up.
From the face of things, this all sounds fantastic, however, there are concerns about this Act. The DMA provides for stringent obligations and prohibitions that require significant compliance steps by companies and these steps deeply intervene in business models. This may therefore become very expensive, as businesses will have to comply with this set of rules not to face penalties. Furthermore, the transition and implementation periods throughout the DMA raise major concerns given they appear too short for the major steps expected, such as significant changes to business models, in-depth legal assessment and even technical implementation work.
Although the DMA and DSA have obtained overwhelming support from EU member states, the plans contain numerous imprecise and ambiguous passages that allow companies to scale down these provisions. These measures raise concerns about the business models and compliance measures that businesses will need to implement in order to stay up with these rapid and drastic changes. As a result, the proposed DSA and DMA package must strike a cautious balance between assuring benefits for consumers and reducing the risks connected with digital platforms while not making it impossible for businesses to comply with these requirements.
