Proposed Major Reform of Digital Services in the EU
Late last year, the European Commission launched its long-awaited set of new rules concerning the digital space.

 

The European Commission has proposed a new EU Regulation on contestable and fair markets in the digital sector, the Digital Markets Act (DMA), while also recommending the adoption of a new EU Regulation on a single market for digital services, the Digital Services Act (DSA), amending the e-Commerce Directive. 

These proposals focus on addressing challenges surfacing from recent digital developments, as well as promoting growth, competitiveness and innovation. 

Key provisions of the DMA

The DMA aims to address negative consequences from certain behaviours by major online platforms, known as gatekeepers, by prohibiting them from engaging in certain practices. 

Gatekeepers are platforms that have a significant impact on the EU's single market. They serve as a strong intermediary for business users while holding a stable and durable position. Under the DMA, they will not be allowed to use unfair practices towards business users/customers that depend on them, to gain an undue advantage. Gatekeepers must follow certain "do's and don'ts", including not being able to prevent users from removing any pre-installed apps, or to rank its own services more favourably than similar services offered by third parties on its platform.

Sanctions for non-compliance include fines of up to 10% of the gatekeeper's most recent annual worldwide turnover. Structural sanctions such as the break-up of companies may be imposed for recidivists.

Key provisions of the DSA

The DSA proposes a common set of rules for digital companies. These include a range of key players, from network infrastructure service providers, hosting service providers, online marketplace-type platforms to very large online platforms. The relevant obligations will match the role, size and impact of the relevant entity in the online ecosystem and will apply to all services provided within the EU (whether the providers are EU-based or not). The DSA stipulates that providers based outside the EU will need to appoint an EU legal representative to promote effective compliance with the rules.

The DSA also includes provisions on advertising and transparency, combatting illegal content and traceability of business users and illegal goods. EU Member States will be required to appoint a digital services co-ordinator, while a new body will be created at EU level to coordinate compliance and enforcement. For substantive breaches, fines for non-compliance of up to 6% of the most recent annual global turnover of the relevant undertaking may be levied, with procedural infringements being sanctioned with a fine of up to 1% of relevant turnover.

Next Steps

The European Parliament and Member States will consider the Commission's proposals according to the ordinary legislative procedure. If and when adopted, both Regulations will be directly applicable across the EU.

Impact on Big Tech

When implemented, this new package will require tech companies to take more responsibility, notably in terms of illegal content while addressing the competition issues arising from certain activities of the largest digital platforms. 

Contact Us

We are available to discuss the above with you and to advise on any relevant issues you might have. Please contact Cormac Little SC, Claire Waterson, Sheila Tormey or your usual William Fry contact with any queries. 

 
Contributed by Karolina Rozhnova

Key Contacts

Claire Waterson Partner

Sheila Tormey Partner

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