What's the issue?

In March 2020, the EC unveiled its ambitious Digital Services Package. This was followed by a consultation in June which has just closed and which focused on:

• overhauling the eCommerce Directive, in particular, the country of origin principle and the safe harbour online content liability provisions, and
• maintaining a level playing field in the European digital market, with a focus on redressing market imbalances and introducing general rules for large platforms and/or tailored requirements for specific 'gatekeepers'.

What's the development?

Negotiations about the content of draft legislation are ongoing but the EC has indicated that it will be published on 2 December. Leaked documents reveal a raft of proposals on the 'wish list' from various parts of the Commission and European Parliament, and it is far from clear whether they will all make it into the final draft. Early indications suggest there could be sweeping reforms, particularly to level playing field rules.

Changes to eCommerce Directive

The rules on country of origin do not appear to be changing, so the country in which a business is established will be the country in which it is regulated.

The draft does appear to tackle the content liability loophole in the eCommerce Directive, under which an intermediary which proactively takes down unlawful content without having been put on notice, loses its immunity safe harbour. New proposals suggest that intermediaries will maintain immunity from liability for infringing content, even if they use tools to monitor and remove content. On the other hand, the Commission is hoping to introduce rules to harmonise how providers inform users that their content has been removed, and procedures for appeals. The new rules will not tackle specific issues around what constitutes harmful and unlawful content and are unlikely to impose specific requirements for particular types of harm.

Level playing field

The EC is reportedly considering black, grey and whitelists of activity and obligations for: app stores, marketplaces and social networks (online intermediary services); online search engines; operating systems; and cloud services. The larger 'gatekeepers' would be subject to a wider range of requirements.

Blacklisted activities may include rules preventing companies favouring their own services on their platforms, exclusively pre-installing their apps on operating systems, or blocking users who want to get apps from other platforms, as well as a ban on large platforms using data they collect online unless they also make it available for use by smaller platforms.

Greylisted activities may include requiring platforms to give information to sellers about their customers, a ban on various types of self-preferencing, and a requirement to share click data at a fair and reasonable rate.

Transparency requirements are proposed for the adtech ecosystem, including on how content is targeted and requiring large platforms displaying ads to conduct an annual audit.

What does this mean for you?

The Digital Services Act proposals are clearly intended to regulate the tech giants in the EU but they will inevitably have a trickle-down effect on all players in the digital services ecosystem, including new entrants. Even though the UK will no longer be required to implement any eventual EU laws in this area, the borderless nature of the internet means the new rules are highly likely to impact UK-based digital service providers as well as international businesses. The DSA package may well get watered down between publication and eventual enactment which will be some way off. Even then, it is likely to have significant repercussions for anyone offering or using digital services.