The European Digital Strategy – New rules for digital companies
- Digital Law
As part of the European digital strategy, the EU Commission in December 2020 released two new draft regulations, i.e. for the Digital Markets Act (DMA) and for the Digital Services Act (DSA). Both legislative proposals focus on fair competition and the handling of user data. Together, they list a comprehensive set of new rules for all digital services, including social media, online marketplaces, and other online platforms that operate in the European Union. The establishment of new monopolies in the digital markets shall be prevented; those that already exist (Google, Amazon, Facebook, etc) must follow strict rules. The proposals shall be adopted as regulations. Therefore, when enacted, the regulations will be directly applicable and binding in all EU Member States. Both proposals (DMA and DSA) are amongst the most significant projects of Ursula von der Leyen's EU Commission. Based on these, further legislation has already been announced.
The proposal for the "Digital Markets Act“
The centrepiece of the DMA proposal are specific obligations for so-called gatekeepers. The term gatekeeper covers companies that dominate certain (digital) markets to such an extent that their market position is effectively unchallenged by competitors or new market participants. The proposal defines the legislative criteria for the qualification as a gatekeeper. Under the Digital Markets Act, companies identified as gatekeepers will need to proactively implement certain behaviour and will have to refrain from engaging in unfair behaviour as defined in current legislation. Also, gatekeepers will have to inform the EU Commission prior to an envisaged acquisition of another company in a digital market. In addition, gatekeepers will be prohibited from using data of their commercial platform users for the purpose of preferring their own services or competing with the respective business user (so-called self-preferencing). According to the proposal, commercial platform users are to be granted mandatory access to their data generated by their activities on the gatekeeper platform. As an additional obligation, gatekeepers will also be required to proactively ensure the interoperability of third-party software with their own services.
The proposal for the "Digital Services Act“
Unlike the DMA, which is limited to gatekeepers, the DSA proposal would apply to all digital (intermediary) services. It will therefore update the already 20-year-old provisions of the Directive on electronic commerce (so-called E-Commerce Directive). To prevent the spread of illegal online content as well as illegal services or goods, users will have the option of flagging such content. Algorithms and online advertising for rankings shall apply certain transparency requirements. To examine the functioning of platforms and potential online risks, specialised research companies will be given access to key data under certain conditions.
Companies violating the rules of the DSA shall face penalty payments of up to six percent of the company’s total worldwide annual turnover, and in case of a violation of the DMA even up to ten percent. As an ultimate sanction the draft also provides for structural remedies, e.g. in case of systematic infringements of the DMA obligations the divestiture (unbundling) of gatekeeper’s business. National "coordinators" (appointed by the respective member states) shall be responsible for ensuring compliance with the DSA. Due to the cross-border nature of gatekeeper platforms the EU Commission was designated as the most competent entity to enforce the DMA.
The EU Competition Commissioner Margrethe Vestager expects both regulations will enter into force in around one and a half years. The proposals have been widely received with approval. However, leading American trade associations have criticised the regulations for what they see as the threat of discrimination against innovative American companies. Whether the EU Commission will be able to implement the regulations in the form currently intended remains to be seen - in any case, they still have to be approved by the European Parliament and the Council of the European Union. The Austrian Minister for Economic Affairs and Digitalisation, Margarete Schramböck, welcomes the initiatives and assured that Austria will play an active role in this process.
Please note: This blog merely provides general information and does not constitute legal advice of any kind from Binder Grösswang Rechtsanwälte GmbH. The blog cannot replace individual legal consultation. Binder Grösswang Rechtsanwälte GmbH assumes no liability whatsoever for the content and correctness of the blog.