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On December 15, 2020, the European Commission (EC) presented its long-awaited proposal for a Digital Services Act (DSA), together with a proposal for a Digital Markets Act (DMA), which we discussed in a previous alert. Whereas the DMA aims to promote competition by ensuring fair and contestable markets in the digital sector, the DSA proposal intends to harmonize the liability and accountability rules for digital service providers in order to make the online world a safer and more reliable place for all users in the EU.

Most notably, the DSA would impose far-reaching due diligence obligations on online platforms, with the heaviest burdens falling on “very large” online platforms (i.e., those with more than 45 million average monthly active users in the EU), due to the “systemic” risks such platforms are deemed to pose in terms of their potential to spread illegal content or to harm society. In this day and age when the perceived power of online platforms to independently control content publication and moderation is headline news daily, with governments throughout the globe grappling with different legislative and regulatory proposals, the DSA stands out as an ambitious effort by the EC to create a consistent accountability framework for these platforms, while striking a balance between safeguarding “free speech” and preserving other values and interests in a democratic society. Like the parallel DMA proposal, the DSA proposal has been criticized for targeting mainly U.S.-based companies, which would make up most of the “very large” platforms. Given the huge commercial interests at stake, the passage of both laws will no doubt be the subject of intense debate and lobbying, including with respect to the asymmetric nature of the proposed regulation and the powerful role that the EC reserves to itself in both proposals.
Continue Reading Digital Services Act: The European Commission Proposes An Updated Accountability Framework For Online Services

On December 15, 2020, the European Commission (EC) published its proposal for a Digital Markets Act (DMA). The proposal aims to promote fair and contestable markets in the digital sector. If adopted, it could require substantial changes to the business models of large digital platform service providers by imposing new obligations and prohibiting existing market practices. These changes not only would create significant new obligations on “gatekeeper” platforms, but also opportunities for competitor digital service providers and adjacent firms. Further, the proposed requirements of the DMA have the potential to transform the way that businesses engage with “gatekeeper” providers – including, for example, companies that sell goods and services, distribute apps, and/or purchase advertising on large platforms.

Digital Markets Act Proposal: Main Takeaways

  • Proposes new rules intended to promote fair and contestable markets in the digital sector, which would apply only to providers of “core platform services” designated as “gatekeepers”.
  • Defines “core platform services” to include online search engines, online marketplaces, social networks, messaging and chat apps, video-sharing platforms, operating systems, cloud computing services, and advertising networks and exchanges.
  • Defines “Gatekeepers” as providers of core platform services which have a significant impact on the EU internal market, serve as an important gateway for business users to reach customers, and have an entrenched and durable position.
  • Provides quantitative thresholds based on turnover or market value, and user reach, as a basis to identify presumed gatekeepers. Also empowers the Commission to designate companies as gatekeepers following a market investigation.
  • Prohibits gatekeepers from engaging in a number of practices deemed unfair, such as combining personal data across platforms, ‘wide’ MFN clauses, misusing non-public data about the activities of business users and their customers to gain a competitive advantage, blocking users from uninstalling pre-installed applications, self-preferencing in ranking, etc.
  • Imposes certain affirmative obligations on gatekeepers, including measures to promote interoperability, data access, data portability, and transparency regarding advertising services.
  • Requires gatekeepers to notify below-threshold mergers and to accept independent audits of profiling practices.
  • Puts the Commission in charge of enforcement with extensive investigative powers, including the power to require access to databases and algorithms, and the ability to impose fines of up to 10% of the gatekeeper’s worldwide annual turnover.
  • Empowers the Commission to impose structural remedies, potentially including the divestiture of businesses, for recurring non-compliance.
  • Authorizes the Commission to carry out market investigations to assess whether new gatekeeper practices and services need to be regulated.

Continue Reading Digital Markets Act: The European Commission Unveils Plans to Regulate Digital ‘Gatekeepers’

In the coming weeks or months, the European Commission is expected to table an ambitious set of draft legislation that, if adopted, will have a major impact on the business practices of digital service providers in the EU, including non-EU companies serving European users: the Digital Services Act (DSA) and the Digital Markets Act (DMA). The Commission’s legislative proposals aim to strengthen the responsibilities of online platforms and to support fair competition in digital markets.

1. The Digital Services Act (DSA): increasing responsibilities for digital service providers

The DSA’s main objective is to update the e-Commerce Directive. This is long overdue, as the legal framework for digital services has remained largely unchanged since the e-Commerce Directive was adopted in 2000. The update aims to clarify the liability regime for digital intermediaries active in the EU and to reinforce oversight and enforcement.

The DSA will require digital service providers to take more responsibility for dealing with harmful or illegal content and dangerous or counterfeit products. They will have to put in place clear and simple procedures to deal with notifications about harmful or illegal content or goods on their platforms. They will also have to verify the identity of traders before letting them on their platforms (“know your business customer”). At the same time, they will have to make available simple procedures for platform users to complain if they think the removal of their material was unwarranted.
Continue Reading New EU Proposals to Regulate Digital Markets – What to Expect

At 9:30 a.m. Central European Time, privacy professionals around the world were refreshing their browsers to read the long-awaited judgment of the Court of Justice of the European Union (CJEU) principally addressing the viability of Standard Contractual Clauses (SCCs) and the EU-U.S. Privacy Shield (Privacy Shield) as means to transfer personal data from the European Union (EU) to the United States (U.S.).

When the judgment arrived, it landed with a bang: though the CJEU upheld the use of SCCs, it invalidated the Privacy Shield, the well-known mechanism to transfer personal data from the EU to the U.S.  The decision also cast doubt on the viability of other options, including SCCs, for making transatlantic transfers.

The foundation of this decision and previous decisions affirming challenges to U.S. privacy practices is that the protection of personal data is a fundamental right in the EU, akin to a constitutional right in the U.S.  The General Data Protection Regulation (GDPR) enshrined these fundamental rights and established uniform data protection standards across the EU designed to protect the personal data of EU-based individuals.Continue Reading Privacy Shield Invalidated: EU Data Transfers to the U.S. under Siege (again…)

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