Web Giants under attack by EU Digital Service Act

 

The new initiative of the EU commissioner for the internal market, the French Thierry Breton, does not concern trade in goods but web services. Very high fines for those who do not respect the new future rules. Some fear that the new EU rules could move investments and jobs out of Europe.

Original: EN

After long and continuous criticism from EU politicians and governments about how the web works and the services it offers, the European Commission has decided to act with determination.

On December 15, EU Commissioner Thierry Breton presented the proposed Regulation that goes by the name of Digital Service Act. The legislative package is a series of regulatory measures to write new rules for the digital services market in Europe.

Before finalizing the new legislative proposal, the European Commission had launched a public consultation, to gather ideas and concerns from those who operate in the market, but perhaps also a way to mitigate the expected artillery fire of the Giants of the web.

And reading statements and press releases, now the giants of the web are shaking for real.

The EU has not intervened on this issue since 2000. The European rules currently in force are twenty years old. 20 years later, the digital world has completely changed. E-commerce has become an indispensable part of the global retail framework. Tens of thousands of digital platforms sell products and services, have created many social media, powerful search engines, blogs, news aggregators, online games and millions of apps.

Let’s see the latest data.

Following the data collected by Statista, as internet access and adoption are rapidly increasing around the globe, the number of digital buyers worldwide keeps climbing every year. In 2019, more than 1.92 billion people bought goods or services online. Overall, e-commerce sales will approach $ 3.914 trillion in 2021.

 

And following the outbreak of the Coronavirus pandemic, e-commerce growth has been even more dizzying, with Western and Eastern Europe leading the world statistics. See the graph below.

 

A lot of business, a lot of problems.

In this tumultuous market, who has taken the lion’s share? Of course Amazon and Alibaba, which in a short time have doubled their turnover. And they are not alone.

With the rapid growth of the market, the planetary integration of the web and the undisputed benefits for all, there are also a number of problems that governments are looking at with growing concern.

This is the reason why the  main objective of the new EU Regulation is to identify responsibilities in relation to the digital services and assess the need to create ex ante regulatory tools to better control the large online platforms that act as gatekeepers.

A first consequence will be the opening of the digital services market to new players who would increase the offer to consumers, business user and end user, but also to limit the possibilities that the digital world may violate fundamental rights. In addition, the Commission is also preparing a new regulatory tool to address structural competition problems in digital and non-digital markets.

 

New rules, new obligations and a European Board for Digital Services

For the first time, the EU would be ready to introduce a set of rules on the obligations and liability of online service providers to protect all users in Europe.  It could be a very hard blow to the large platforms. They will either fit in or pay billion-dollar fines. Penalties of up to 6% of a company’s annual income and penalties equal to 1% of their annual turnover are announced for the dissemination of incorrect, false and misleading information. In short, the problem exists and is causing an earthquake.

The Commission wants to introduce:

• measures to counter illegal goods, services or content online, such as a mechanism for users to flag such content and for platforms to cooperate with “trusted flaggers”
• new obligations on traceability of business users in online market places, to help identify sellers of illegal goods.
• effective safeguards for users, including the possibility to challenge platforms’ content moderation decisions
• transparency measures for online platforms on a variety of issues, including on the algorithms used for recommendations
• obligations for very large platforms to prevent the misuse of their systems by taking risk-based action and by independent audits of their risk management systems
• access for researchers to key data of the largest platforms, in order to understand how online risks evolve
• oversight structure to address the complexity of the online space: EU countries will have the primary role, supported by a new European Board for Digital Services; for very large platforms, enhanced supervision and enforcement by the Commission

The aim is also to ban commercial and editorial practices that are contrary to a set of rules that alter and distort the market or threaten fundamental rights: illegal content, including illegal hate speech, terrorist content, illegal discriminatory content, child pornography, illegal and non-consensual sharing private images, online stalking, selling counterfeit products and unauthorized use of copyrighted material.

 

Who will the new European rules be aimed at?

• Intermediary services offering network infrastructure: Internet access providers, domain name registrars,
• Hosting services such as cloud and web hosting services,
• Online platforms bringing together sellers and consumers such as online marketplaces, app stores, collaborative economy platforms and social media platforms.
• Very large online platforms pose particular risks in the dissemination of illegal content and societal harms. Specific rules are foreseen for platforms reaching more than 10% of 450 million consumers in Europe.

Next steps

The EU Parliament, in defense of the interests of European countries, should support the Commission’s determination: with the vote of three resolutions it already asked for the complete revision of the current directive on e-commerce. It also called for rules on content management, content curation and online advertising. It called for the updating of the current legal framework for digital services to address the challenges posed by new technologies and ensure legal clarity and respect for fundamental rights. What else?

However, if we look at the advantages of a mostly unregulated market that has also helped new political forces, or political forces that at times had taken advantage of social raids, fishing for disinformation and the naivety of part of the population, the analysts of eEurope EEurope analysts do not take for granted a downhill path for Thierry Breton.

If we combine the natural tendencies of some political forces with national interests, discussions could go on for a long time and the legislative process could face numerous obstacles, even if the three legislative Institutions added this Proposal for Resolution to the legislative priorities for 2021.

 

 

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Official Timeline

12 December 2020

The European Commission released its Proposal for Regulation COM(2020) 825 final on a Single Market For Digital Services (Digital Services Act)

On 28 January 2021

The EP responsible parliamentary committee IMCO will appoint its Rapporteur.

15 December 2020

ITRE committee appointed MEP Henna Virkkunen (EPP Group) as Rapporteur for opinion.

20 January 2021

CULT committee appointed MEP Sabine VERHEYEN (EPP Group) as Rapporteur for opinion.

February 2021

ECON, TRAN, JURI and LIBE will appoint their Rapporteurs for opinion.

February 2021 – May 2021

IMCO committee and the six committees for opinion will start discussions on the Proposal for Regulation.