The EU’s Digital Services Act: Difficult choices ahead

At the start of June, the EU Commission launched a public consultation on the Digital Services Act. It may replace or amend the e-Commerce Directive which laid the foundations for the regulation of the internet over twenty years ago.

While the e-Commerce Directive has been largely successful in enabling electronic commerce and shielding hosting providers from liability, the world has moved on. The Digital Services Act will have to answer more difficult questions. For example, how can you ensure rights to freedom of information but prevent disinformation? How can electronic commerce be conducted fairly given the power of some tech companies?

The consultation seeks views from interested stakeholders on how best to regulate the internet for the next twenty years.

Background

The regulation of digital services (aka “information society services”) has been broadly the same in the EU since the adoption of the e-Commerce Directive in 2000. This harmonised the cross-border provision of online services in the EU, enabled electronic commerce and shielded internet companies from liability when transferring, caching or hosting content.

However, the position is starting to change. In 2017 and 2018, the EU Commission issued non-binding guidelines requiring online platforms to take more responsibility for the content they process, including putting measures in place to automatically detect and delete illegal content.

More recently, as part of its Digital Single Market strategy, the EU adopted the Platform-to-Business (P2B) Regulation, which will enter into force on 12 July 2020. The P2B Regulation is intended to increase transparency for users of online intermediation services, ban unfair practices (such as sudden or unexplained account suspensions) and provide new means to resolve disputes and complaints.

Enter the Digital Services Act

However, the EU Commission acknowledges the need for broader reform. This should modernise the law, reduce regulatory fragmentation across Member States and strengthen users’ safety and fundamental rights, in particular their freedom of expression.

These changes will come through the Digital Services Act – announced as part of the EU Commission’s “Shaping Europe's Digital Future” proposals in February 2020. The current consultation was announced at the start of June and covers the following workstreams.

Issue 1 - Liability for user content

The e-Commerce Directive shields internet companies from liability when they merely transfer, cache or host information. The hosting exemption is most important and protects them from liability if they: (i) only have a neutral, merely technical and passive role towards the hosted content; and (ii) remove any illegal content or disable access to it as fast as possible once they become aware of its illegal nature.

Added to this, intermediaries have no general obligation to monitor content, albeit that the Courts have steadily chipped away at this principle in recent years (see most recently Eva Glawischnig-Piesczek v Facebook, Case C-18/18).

Building on these principles, the EU Commission proposes new and revised rules aiming at increasing and harmonising the responsibilities of online platforms and information service providers, including non-EU platforms operating in the EU. Such rules will tackle controversial issues such as the liability of online platforms for content created by users and online disinformation.

Given the potential impact on fundamental rights to freedom of expression, this may be easier said than done. However, the consultation document asks about a wide range of solutions including dedicated reporting channels, processes for sanctioning infringing users, multilingual moderation teams, automated systems for detecting illegal content, labelling of political adverts and tools to tackle fake-accounts. This gives some idea of the EU’s Commission’s thinking on these issues.

The EU Commission is also looking to overhaul the so-called “country of origin” principle in the e-Commerce Directive, which means providers of online services are subject to the law of the Member State in which they are established, and not the law of the Member States where the service is accessible.

The EU Commission is proposing a more effective system of regulatory oversight, enforcement and cooperation across Member States supported at EU level. This would still be based on the “country of origin” principle, but Member States’ authorities would be allowed to deal with illegal content, goods or services online, including effective cooperation procedures for cross-border issues in the regulation and oversight over digital services.

Issue 2 - Ex ante regulation of gatekeepers

The EU Commission also wants to consider ex ante rules to ensure that markets with large platforms and significant network effects remain fair and contestable for smaller innovators, businesses and new market entrants.

This measure is intended to ensure a “level playing field” in European digital markets and address potential market imbalances. This should ensure that consumers have an increased choice and that the EU single market for digital services remains competitive and open to innovation.

The EU Commission is proposing additional general rules for all online platforms, such as rules on self-preferencing, and/or tailored regulatory obligations for specific large platforms, such as non-personal data access obligations, specific requirements regarding personal data portability or interoperability requirements.

The consultation also covers other issues related to online platforms, such as the opportunities and challenges that self-employed people may face in providing services through online platforms.

What next?

The general public, digital service providers, businesses who offer their services to consumers online, authorities, academics and other concerned parties have until 8 September 2020 to submit a response.

Once the consultation is finalised, the EU Commission's proposal for the Digital Services Act, including an expected review of the e-Commerce Directive, is expected to be released at the end of the year.

By Ceyhun N. Pehlivan