09-May-2022
Written by Karen Abi Younes, Junior Associate
On the 15th of December 2020, the Commission of the European Union (the “Commission”) have adopted two proposed regulations aimed at controlling the digital single market: the DSA and the Digital Market Act (the “DMA”). This first aims to propose a harmonized framework of rules for online services, mainly in terms of moderation of illegal content and transparency of the service.
On March 2022, the DMA was approved and enforced by the Commission and the European Parliament (the “Parliament”) which propose a harmonized framework of rules weighing on certain giants of the digital sector with a view to a fair and reasonable market.
In this context, on the 24th of April 2022, and after a long period of negotiations between the Commission and the Parliament aiming to enforce the DSA which will oblige large companies to take greater responsibility for illegal content that appears on their platforms, the President of the Commission Ursula von der Leyen stated that “What is illegal offline must also be illegal online”.
After such historical step taken by the Commission and the Parliament, we will be tackling the relevant and main points that are highlighted in the proposal of the DSA, since the official text of the DSA has yet to be released.
First, we will be presenting (I) the scope and the subject matter of the DSA, then we will be enumerating (II) the due diligence obligations for a transparent and safe online environment, and we will be exposing (III) the provisions concerning the implementation and enforcement of this regulation. Finally, (IV) we will be sharing some practical effects that will change the entire online world with the implementation of the DSA.
- The scope and subject matter of the DSA
As part of the Commission’s strategy for a digital single market alongside with the DMA, the Commission have proposed a regulation on digital services which will be subject to the ordinary legislative procedure of the European Union and will be applicable to intermediary services provided to recipients of the service that have their place of establishment or residence in the Union, irrespective of the place of establishment of the providers of those services.
The rules provided for in this regulation aim to (i) better protect consumers and their fundamental rights online; (ii) put in place a solid framework for the transparency of online platforms and clear regarding their responsibility; and (iii) fostering innovation, growth and competitiveness within the single market.
The DSA consists of imposing obligations on providers of online intermediary services, whose diversity of players and regulatory frameworks present the risk of market alteration to the detriment of the consumer. It focuses mainly on the fight against illegal content online and the transparency of platforms. According to the provisions of the DSA, illegal content means any information, which, in itself or by its reference to an activity, including the sale of products or provision of services is not in compliance with Union law or the law of a Member State, irrespective of the precise subject matter or nature of that law. This implies, that the DSA itself does not define what content is illegal, though, and leaves this up to individual countries.
Therefore, the Commission is making the commendable choice to intensify the obligations of online intermediary service providers in proportion to the importance of the effects they produce on society.
Three categories of services have thus been created in order to correspond current uses, it being specified that these qualifications can be combined: intermediary services (combining information transport, caching, and hosting), online platforms and very large platforms.
- The due diligence obligations for a transparent and safe online environment
The various obligations weighing on digital service providers will be successively addressed, depending on their activity: provider, host, platform or very large platform.
- Obligations applicable to all providers of intermediary services
Such providers of intermediary services shall (i) establish a single point of contact to facilitate direct communication with Member States’ authorities, the Commission and the Board; (ii) designate a legal representative in the Union for providers not established in any Member State, but offering their services in the Union; (iii) set out in their terms and conditions any restrictions that they may impose on the use of their services and to act responsibly in applying and enforcing those restrictions ;(iv) and transparency reporting obligations in relation to the removal and the disabling of information considered to be illegal content or contrary to the providers’ terms and conditions.
- Obligations applicable to providers of hosting services
In addition to the obligations set out in paragraph A, those providers are required to put in place mechanisms to allow third parties to notify the presence of alleged illegal content.
Furthermore, if such provider decides to remove or disable access to specific information provided by a recipient of the service, it imposes the obligation to provide that recipient with a statement of reasons.
- Obligations applicable to all online platforms
Besides the obligations required in paragraph A and B, online platforms shall provide an internal complaint-handling system in respect of decisions taken in relation to alleged illegal content or information incompatible with their terms and conditions.
In addition, online platforms are obliged to engage with certified out-of-court dispute settlement bodies to resolve any dispute with users of their services. It further obliges online platforms to ensure that notices submitted by entities granted the status of trusted flaggers are treated with priority and sets out the measures for online platforms to adopt against misuse.
Furthermore, a requirement for online platforms to inform competent enforcement authorities in the event they become aware of any information giving rise to a suspicion of serious criminal offences involving a threat to the life or safety of persons.
Also, online platforms shall receive, store, make reasonable efforts to assess the reliability of and publish specific information on the traders using their services where those online platforms allow consumers to conclude distance contracts with those traders.
Those online platforms are obliged to organize their interface in a way that enables traders to respect Union consumer and product safety law.
Nonetheless, online platforms are required to publish reports on their activities relating to the removal and the disabling of information considered to be illegal content or contrary to their terms and conditions. The Section also includes transparency obligations for online platforms in respect of online advertising.
- Obligations applicable to very large online platforms
In addition to the above enumerated obligations, very large online platforms are obliged to conduct risk assessments on the systemic risks brought about by or relating to the functioning and use of their services and to take reasonable and effective measures aimed at mitigating those risks. It is also mandatory to submit themselves to external and independent audits. The section includes also a specific obligation in case very large online platforms use recommender systems or display online advertising on their online interface.
Furthermore, the DSA sets out the conditions under which very large online platforms provide access to data to the Digital Services Coordinator of establishment or the Commission and vetted researchers, the obligation to appoint one or more compliance officers to ensure compliance with the obligations laid down in the regulation and specific, additional transparency reporting obligations.
- The implementation and enforcement of the DSA
The effective implementation of the DSA is ensured by a detailed institutional framework. Each member State of the European Union will designate one or more competent authorities to ensure the application of the DSA, and among them will be designated a coordinator of digital services. On a Union scale, the European Committee for Digital Services will be created whose mission will be to advise the coordinators and the Commission. A system for sharing information between the coordinators, the Commission and the Committee will also be created. This institutional framework is supplemented by soft law norms: promotion of standards, and codes of conduct specifically designed for online advertising.
In the event such platforms infringe the provisions of the DSA, the Commission has the right to intervene vis à vis very large online platforms in case the infringement persists. In this case, the Commission can carry out investigations, including through requests for information, interviews and on-site inspections, and can adopt interim measures and make binding commitments by very large online platforms. As well as monitor their compliance with the regulation. In case of non-compliance, the Commission
can adopt non-compliance decisions, as well as fines not exceeding 6% of its total turnover in the preceding financial year (annual revenue) and periodic penalty payments not exceeding 5 % of the average daily turnover in the preceding financial year per day, calculated from the date appointed by the decision for breaching of the DSA. However, the DSA also sets a limitation period for the imposition of penalties and for their enforcement.
- Practical effects on the online world by implementing the DSA
The DSA aims to address the social damage of social media by forcing companies to examine their platforms more aggressively for illegal content or will risk them billions of dollars in fines.
In this context, the DSA will enforce tech companies (i.e., Google, Meta, Amazon) to put in place new policies and procedures to remove flagged hate speech, terrorist propaganda and other material defined as illegal by European Union countries. Google, owner of YouTube, and Meta, owner of Facebook and Instagram, will face annual audits for 'systemic risks' linked to their businesses, while Amazon would face new rules to stop selling illegal products.
In this framework, the Commission and Parliament stated some of the practical obligations which are the following:
- Banning targeted advertising based on an individual’s religion, sexual orientation, or ethnicity, where minors will not be subject to such advertising.
- Prohibit confusing or deceptive user interfaces designed to steer users into making certain choices.
- Large online platforms like Facebook will have to make the working of their recommender algorithms transparent to users, where the latter should also be offered a recommender system “not based on profiling.”
- Explanation to be made by hosting services and online platforms noting why they have removed illegal content as well as give users the ability to appeal such takedowns.
- Providing key data to researchers to “make available more insight into how online risks evolve.”
- Keeping basic information about traders on their platform to track down individuals selling illegal goods or services.
- Introduce new strategies for dealing with misinformation during crises like the war between Russia and Ukraine.
However, since the DSA aims to end an era of self-regulation in which tech companies set their own policies on what content can stay in place or be removed, it stands out from other attempts at regulation by addressing online speech, an area largely banned in the United States due to First Amendment protections. Such action will lead to a critical and sensitive situation as most of the tech companies and providers are American based.
While the sole objective of the DSA is adapting rules for commercial entities operating online’ calling for more fairness, transparency and accountability for digital services’ content moderation processes, ensuring that fundamental rights are respected, and guaranteeing independent recourse to judicial redress, we might ask ourselves to what extent such regulation will be adopted by other countries of the globe noting the mismatch of beliefs and liberties between different societies?