The DSA and DMA proposals: ground-breaking rules for digital platforms, serving both consumers and companies

#CriticalThinking

Digital & Data Governance

Picture of Gerard de Graaf
Gerard de Graaf

Director for the Digital Transformation at the European Commission Directorate-General for Communications Networks, Content & Technology (DG CONNECT)

The combined regulatory package of the Digital Services Act (DSA) and the Digital Markets Act (DMA), proposed by the Commission on 15 December 2020, marks a historic turning point. By means of this package, Europe has for the first time put forward a single set of ground-breaking rules to regulate digital platforms.

Digital platforms are fundamental to our societies and economies, with a systemic role similar to the financial sector or utilities such as energy, transport and telecommunication. Easy access to the internet has profoundly changed the ways we exchange information, while the emergence of digital platforms has revolutionised the ways we engage with each other.

From internet infrastructure services to simple websites or digital platforms, digital services increasingly facilitate our interactions – whether at home, work or school: for news and entertainment, to shop and trade, to connect and communicate, to find jobs, transportation, accommodation and much more.

The major benefits of these developments – supported by the inherent characteristics of digital platforms like network effects and extreme economies of both scale and scope – have led to an unprecedented boom and a massive rise in the number and size of companies providing digital services.

There is a growing global consensus on the need to regulate digital platforms

However, these developments simultaneously raise myriad challenges: the online dissemination of hate speech, disinformation, attempts at manipulating electoral processes, sales of dangerous or counterfeit products, unfair market access for small players and the ever-growing power of large ‘gatekeeper’ platforms that control entire sections of the economy.

There is a growing global consensus on the need to regulate digital platforms and so the debate focuses not on whether to regulate, but how to regulate. Concrete proposals are being put forward across the globe, from the United States and the United Kingdom to Japan, China and Australia.

With the DSA and DMA proposals already under negotiation in the Council and the Parliament, it is fair to say that Europe is taking the lead. It has an opportunity to help define the global standards for digital platforms, like it did before with policies such as the General Data Protection Regulation for privacy or with the Platform-to-Business Regulation for platform transparency.

Observed risks and harms are addressed where they occur, while preserving the benefits of digital platforms and the incentives for innovation

Upgrading the rules governing digital services in the EU is central to the European Digital Strategy presented in 2020. It is to this end that the Commission proposed the DSA and DMA package with EU-level regulation being key to forestalling (legal) fragmentation of our digital single market.

The package provides a comprehensive set of new rules for all digital services, including social media, online marketplaces and other digital platforms that operate in the EU. The aim of the package is twofold: (i) to create a safer digital space for all EU users of digital services; and (ii) to establish a level playing field, fostering innovation, growth and competitiveness in the EU’s single market.

Both proposals take a proportionate, scaled approach, acknowledging that with greater power comes greater responsibility. The more impact a digital service has, the more rules apply to its provider. In the DSA and DMA package, observed risks and harms are addressed where they occur, while preserving the benefits of digital platforms and the incentives for innovation.

The proposed DSA and DMA package provides numerous benefits for consumers and businesses alike. Notably, it provides a clear legal framework across the EU, strengthening legal certainty and easing compliance for all stakeholders involved.

The DSA seeks to enhance free speech online, make online marketplaces safer and address illegal content

The DSA seeks to enhance free speech online, make online marketplaces safer and address illegal content to the benefit of both consumers and companies. It sets out enforceable obligations and increased accountability rules that apply to all digital services that connect consumers to goods, services or content.

Under the DSA, companies providing digital services are responsible for ensuring users’ safety and trust, tackling online harm and guaranteeing respect for fundamental rights in a transparent manner. For example, the DSA ensures more transparency of content moderation rules, the ability to challenge content removal decisions and access to forms of redress for incorrect content removal. Moreover, it provides for a consumer’s right to be informed as to why they are being targeted for ads and to opt out of content recommendation systems based on profiling.

Furthermore, the DSA ensures the safety of online marketplaces for both consumers and companies. For example, a trader’s identity will be subject to stricter rules of verification to use any given platform. This benefits not only customers (by minimizing the risk of buying unsafe or faulty goods) but also businesses, which can trace and better understand the origins and methods of rogue traders.

With the DMA, consumers and companies regain the freedom to make decisions and compete on fair terms

Complementarily, the core goal of the DMA is to restore fairness and contestability in digital markets where so-called ‘gatekeepers’ are present. In brief, gatekeepers are large digital platforms that play a particularly significant role in the economy because of their size and their importance as gateways for business users to reach consumers.

Currently, these uncontested digital giants can set the rules of the game to their liking. They can, for example, force companies to only conduct business on their platforms, compete unfairly on their own platform by self-preferencing their own services and products or force consumers to stay on their platforms by locking in their data.

The DMA establishes a series of clear, directly enforceable obligations that designated gatekeepers will need to implement in their daily operations to ensure fair and contestable digital markets. For example, the DMA prohibits gatekeepers from blocking users from un-installing software or apps and obliges gatekeepers to enable the software of third parties to properly function and interoperate with their own services.

With the DMA, consumers and companies regain their freedom to make decisions and compete on fair terms, becoming less dependent on a few gatekeepers. This will bring about more diversity of accessible products and services to the benefit of all.

Consumers and companies in Europe – and the world – can look forward to a balanced rulebook

In short, for the first time Europe has put forward a comprehensive rulebook tackling all major challenges posed by the emergence of digital platforms. This single set of rules is comparable to the overhauling regulatory frameworks introduced in the past for sectors such as banking or utilities.

As with all regulation, the proposed DSA and DMA package requires a delicate balancing act between ensuring the benefits whilst mitigating the risks of digital platforms. With a solid Commission proposal now under the strict scrutiny of the EU’s co-legislators in the Council and the Parliament, consumers and companies in Europe – and the world – can look forward to a balanced rulebook that will make the internet a safer, fairer, more open and competitive space to the benefit of all.

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