The European Commission is currently working intensively to create a Europe fit for the digital age. For this purpose, a considerable amount of legislation is being created in Brussels that deals with specific categories of the digital world. One of these new legislation initiatives is the Digital Services Act (DSA), which is due to take effect in early 2024.
Among other things, the DSA introduces new, stricter obligations for providers of online platforms, defined as:
With this definition, the DSA is clearly focused on 'big tech'.
One of the aspects of the DSA that stands out is the provision applying to online platforms that allow traders to use their services to conclude distance contracts with consumers (online marketplaces). In particular, Article 24c of the DSA, imposes relatively far-reaching obligations on providers of such online marketplaces with regard to Know Your Business Customer (KYBC).
In short, these KYBC obligations require the provider to obtain and make reasonable efforts to verify certain information regarding trader traceability, before allowing such traders to make use of the marketplace and target consumers. Platform providers must ensure that consumers can buy safe products or services online, by strengthening controls to prove that the information provided by traders is reliable and make efforts to prevent illegal content from appearing on their platforms, including through random checks.
In practice, the new KYBC obligations mean that providers have to obtain, where applicable, the following information about traders:
For traders it is important to keep in mind that the trader itself is responsible for the accuracy of the information to be provided. On the other hand, providers of online marketplaces should keep in mind that this obligation does not only apply to new traders on the platform, but also applies to traders which are already active. Regarding these active traders, providers must use reasonable efforts to verify the KYBC within 12 months following the date on which the DSA becomes applicable. If the trader does not correct or complete this information, the provider must promptly suspend the provision of its services to the trader with respect to the offering of products or services to consumers in the EU until the KYBC obligations are met.
The provider of an online marketplace must also actively inform consumers if the provider becomes aware of illegal products or services offered by a trader through the use of its services. The provider must, to the extent that it has the consumers’ contact information, inform them of the unlawful issue using the online platform’s service.
Details provided must include the identity of the trader and all available remedies and must be given within six months from the time the online platform becomes aware of the illegality. If the provider does not have contact information for all affected consumers, the provider must make the information about the removed illegal products or services, the identity of the trader, and all relevant redress options publicly available in an easily accessible manner on its online interface.
As the text of the DSA is set to be adopted by the European Parliament and Council in October 2022, it is quickly becoming a new reality for online marketplaces in the EU. As such, companies will need to examine whether they are subject to the obligations it imposes, including the KYBC obligations under Article 24c.
Gregor Schmid and Philipp Koehler highlight the key elements of the incoming EU Digital Services Act.
1 of 9 Insights
Adam Rendle looks at the differences and similarities in the approach of the EU and UK to online safety under incoming legislation.
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Alexander Schmalenberger looks at the scope of the Digital Services Act, what it covers and who is caught.
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Johanna Götz looks at the DSA's approach to online intermediary responsibility for illegal content.
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Alexander Schmalenberger looks at the main obligations on intermediaries (other than those relating to illegal content).
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Maarten Rijks and Annemijn Schipper look at the impact of the DSA on targeted advertising and the use of dark patterns and recommender systems.
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Elisa-Marlen Eschborn looks at the Member State enforcement provisions of the DSA.
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9 of 9 Insights