EC Digital Services Package passes final European Parliament vote

What's the issue?

The European Commission published its Digital Services Package in December 2020. It consisted of:

The Digital Markets Act (DMA), intended to regulate digital markets to address concerns raised about the market power of large online players, and
The Digital Services Act (DSA) intended to regulate the obligations and accountability of online intermediaries and platforms in order to tackle illegal content, products and services, while promoting transparent advertising.

As we reported, provisional political agreement was reached on the DMA in April. Provisional agreement on the DSA followed a few weeks later. However, the majority of MEPs objected to aspects of the draft text sent by the French Presidency and there were concerns about a delay to its adoption.

What's the development?

On 5 July, the European Parliament voted to adopt both the DSA and the DMA, the last hurdle before enactment (final consolidated text not available at time of writing).

The DSA will be formally adopted by the Council in September, and the DMA in July. After this both will be published in the Official Journal and will come into force twenty days later. These are both Regulations which do not require implementing legislation (although Member States may need to adopt related legislation).

What does this mean for you?

These are major pieces of EU legislation. They will not apply in the UK, but both have extra-territorial reach, and will be relevant to multi-nationals operating in the EU, including those with UK businesses. This is particularly the case because there are parallel initiatives in the UK, so may businesses will need to get to grips with two similar but different regimes (not to mention a lot of acronyms).

DSA and OSB

The UK's equivalent to the DSA is the Online Safety Bill (OSB) (find out more here). While similar in aim to the DSA, it is strikingly different in scope, most notably in that it will regulate certain types of harmful as well as illegal content, whereas the DSA is focused on illegal content.

The DSA will apply to network infrastructure intermediaries, hosting services, online platforms and marketplaces. Obligations will differ according to the size and impact of the organisation and the nature of the service, with the most stringent provisions applying to services designated as "Very Large Online Platforms" and "Very Large Online Search Engines". Obligations include increased transparency and accountability, strengthened traceability and checks on traders in online marketplaces to tackle illegal products (including counterfeit and unsafe products), and takedown obligations in relation to illegal content.

The OSB will apply to user-to-user and search services. It is intended to protect users, particularly children, from online harm, focusing mainly on user-generated content. Unlike the DSA, it does not cover unfair advertising which is likely to be dealt with in the UK under the as yet unpublished Digital Markets Bill.

DMA and DMU

The DMA Will regulate digital markets to address concerns raised about the market power of large online players. Businesses designated as "gatekeepers" will be subject to a number of requirements and restrictions. The focus is on large platform service providers (including social media, search engines and operating systems) designated as gatekeepers, although it will also impact the wider market (see more).

Again, the UK is looking to tackle similar issues with legislation which will be similar but not identical. The government published its response to the July 2021 consultation setting out proposals to tackle entrenched market positions of big tech and prevent abuse of dominance. These are centred on a legislative regime underpinned by codes targeted at companies engaged in "Digital Services" and which are designated as having "Strategic Market Status" (SMS). The regime will be overseen and enforced by the Digital Markets Unit which will be placed on statutory footing.

The government highlights the introduction of fair-play rules to make it easier for consumers to switch between digital service providers without losing their data and to give them greater control over their data. Rules will be introduced to ensure fair prices for content providers like news publishers and advertisers. SMS firms will also be required to notify smaller firms about changes to algorithms which might impact their revenues (see more).

When will the DSA and DMA apply?

The DSA will apply 15 months after coming into force or from 1 January 2024 (whichever is later), however, the obligations on very large online platforms and very large online search engines will apply to them four months after their designation as such by the Commission.

The DMA will apply six months after it enters into force. Gatekeepers will have a maximum of six months to comply with the new obligations following their designation.