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After 20 years, the EU Commission believes that the time has come for new rules on the Internet. With the Digital Services Act (DSA) and the Digital Markets Act (DMA), Competition Commissioner Margrethe Vestager presented two corresponding bills on Tuesday, as a complement to and in some cases also as a replacement for the electronic commerce directive. It dates back to the year 2000, when business models and business practices on the Internet looked different than they are today.
The two new laws are meant to prevent the dominant US tech companies Google, Apple, Facebook and Amazon (GAFA for short) from becoming so big and powerful “that they can create their own rules,” as Vestager once put it.
The first known working paper on this was published in July 2019; After a consultation phase last summer, the finished drafts are now available to the EU Commission, 85 and 81 pages long. The DSA can be found here and the DMA here.
Some of the most important (partial) questions and answers at a glance:
What are the Law of Digital Services and the Law of Digital Markets?
The rules proposed by the EU Commission refer, as their titles suggest, to digital services and digital markets. The DSA not only, but above all, targets “very large online platforms.” observer I’ve already created the catchy abbreviation Vlops. These include platforms with at least 45 million monthly active users in the EU.
The DMA is about so-called gatekeepers. These can include search engine providers, social media, video platforms, operating systems, cloud services, and ad networks, as long as they have a certain size and market power or are predictably reaching them. Exact explanations allow the conclusion that at least all GAFA companies are destined, but there are likely a few more, Microsoft, Airbnb and Booking.com are conceivable. “One or two handfuls” of companies, an EU official said on Tuesday.
DSA and DMA are not intended to form a new “super internet law”, but rather to complement existing EU laws such as the General Data Protection Regulation (GDPR).
Both drafts are designed as a regulation and therefore would apply directly in all EU states, so they do not have to be implemented in national legislation first.
What good is all this for consumers?
The DSA is supposed to make the internet a bit more secure. Among other things, it should help people to report illegal content to Internet service operators in a simple way. This includes material depicting child abuse, private images illegally distributed against the will of the person depicted, illegal hate speech, copyrighted and unlicensed material, but also counterfeit products. In any case, there should also be the right to object if the content is subsequently removed or if an account is blocked. An anti-troll paragraph is even included: Anyone who “regularly” reports content as illegal, even if it is not, must first be warned and then temporarily banned from the reporting system.
Nothing should initially change from the old e-commerce directive: platforms are only responsible for illegal content they are informed of; they do not have their own inspection obligation.
The DMA, in turn, aims to ensure that consumers have more choice and fairer competition in e-commerce. The EU Commission would also like to prohibit certain practices with which GAFA defends its dominance of the market. If the rules came out like this, operating systems, trading platforms, social media, and search engines, for example, would change.
The ex ante principle is new: the Commission wants to be able to prevent companies from abusing their market power beforehand. Until now, the Commission’s EU competition authorities can only intervene retrospectively.
What actions would Google affect?
Note: The list is not complete and many of the formulations in the drafts leave room for interpretation.
A short DSA article calls for ad transparency: Anyone displaying ads on their website must make it clear that it is advertising, who placed it, and what factors were decisive for a user to see exactly that ad. A core Google business line would be affected by the regulation.
In the DMA, the first obligation of gatekeepers is directed to Google: anyone who wants to combine user data from several of its own services or third-party providers must obtain the consent of the users.
Android is also likely to be affected. The DMA states that users must be able to “uninstall any pre-installed software applications.” Many Google apps, however, have so far had the status of “system apps” and can be disabled, but not easily removed.
What actions would Apple take?
Note: The list is not complete and many of the formulations in the drafts leave room for interpretation.
Article 6 (c) seems like a clear requirement for Apple to finally allow alternative app stores on iOS. This would mean that the EU would force an alternative to Apple’s own app store, through which the iPhone maker controls the iOS app market and makes money on every app sold.
What measures would Facebook affect?
Note: The list is not complete; many of the formulations in the drafts leave room for interpretation.
The DSA requires a platform like Facebook to assess the “significant systemic risks” that could arise from its use once a year. These include the consequences of the dissemination of illegal content and the effects on freedom of information and expression, as well as on people’s private lives. But the use of fake accounts can also pose such a risk if it has real or foreseeable negative consequences for health, minors, civil discourse or elections. Vlops like Facebook should also check whether their moderation and recommendation systems, as well as their ad handling, could promote systemic risk.
What measures would Amazon affect?
Note: The list is not complete and many of the formulations in the drafts leave room for interpretation.
The DSA stipulates that a platform like Amazon requires the address and contact details of third-party distributors and, if possible, verifies them. This could help prevent fraud cases in which merchants do not ship the requested products.
Additionally, Amazon cannot use any customer data that retailers collect on the platform in competition with these retailers. In short, that’s what the DMA says. In this way, the commission wants to make sure that the platform operator does not favor itself by observing the transaction or other details of its business customers and directing its own offers as competition.
What are the penalties if you ignore the rules?
In the case of serious violations of the DSA’s “relevant” specifications, up to six percent of the previous year’s global sales are owed, in the case of the DMA up to ten percent. In the case of Silicon Valley corporations, this could be in the billions.
In extreme cases, the DMA even allows the EU to force tech companies to split, for example to separate Facebook and Instagram. But that was the “ultima ratio”, as one EU official put it.
Who should control all this?
Each member state should designate a “Digital Services Coordinator”. They are supposed to coordinate across borders in a committee. But the commission itself wants to ensure more power over tech companies, that is, when it comes to the aforementioned sanctions.
What are the first reactions like?
Facebook sees the Commission’s proposals “on the right track to protect the good things about the Internet.” It recognizes that Facebook will be governed by the contemplated competition rules and, if not, it expects the DMA to “also set limits on Apple” because Apple controls “an entire ecosystem of devices, app stores and applications, and uses this power to develop and Harming consumers and platforms like Facebook.
Jan Oetjen, CEO of GMX and WEB.DE, writes: »The Digital Markets Law is an important first step in the right direction. … Even if Google has had to pay billions in fines to the EU in recent years, compared to the market profit, it looks more like a ticket for driving too fast – it costs money, but you’re still the first to get there to your destination. So it’s welcome that the new regulation comes into effect early, so you can intervene before it’s too late and the markets split. “
Patrick Breyer, MEP for the Pirate Party, considers the DSA to be “industry oriented.” The Commission’s proposal not only lacks a ban on censorship machines with error-prone upload filters, it could even be mandatory for large platforms. Cross-border suppression orders without a court order with which authoritarian governments could enforce their illegal censorship laws across the EU are also a threat to freedom of expression online.
When do the rules apply?
It can take years for the European Parliament and the Member States to reach an agreement with the Commission. This is unlikely before 2022 or 2023.
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