On December 2020, the proposal for the new Digital Services Act package (DSA) was published by the European Commission. DSA aims to revise the regulation of the E-Commerce Directive adopted in 2000 by increasing the rules governing the internal market for digital services.
In particular, the purpose of the new DSA is to improve the safety of users from illegal goods, content and services and the protection of their rights online by reinforcing higher regulatory oversight.
DSA is expected to affect a great number of digital services and businesses, such as transport and tourism platforms, e-commerce marketplaces, social media platforms, online sellers, data services, online search engine search engines, Internet service providers etc. Subsequently, various implications for numerous businesses in the EU might occur, depending on the sector concerned.
The main provisions of the DSA include:
* Revised rules concerning digital service providers and illegal content.
Under the E-Commerce Directive, digital service providers in the EU are exempted from intermediary liability, as long as they are unaware of illegal content on their services, or, if once they become aware of the illegal nature, they remove it or disable access to it. This is commonly known as “safe harbor” principle.
The proposal of the Commission is to apply new liability rules for digital services, by removing the disincentive set in the E-Commerce Directive for voluntary action against any illegal activities. Faced with this fact, digital service providers and operators will have to adopt procedural obligations such as notice-and-action mechanisms. This could subsequently lead to an increase in the rate of content takedown, to the detriment of such businesses.
Moreover, since platforms will be liable for any illegal material posted in their sites, they might take measures to reduce their risk by limiting the type of products and services that can be sold, increasing verification requirements for sellers or even limit users’ ability to upload content.
* ‘Know your customer’ (KYC) obligations.
‘Know your customer’ responsibilities will be implemented either to specific users or to a wider range of users of digital services. For instance, online marketplaces would identify business users through recognized databases, before accepting them onto their platforms.
The impact of these proposals on platforms will depend on the existence and extent of KYC protocols currently applied by different platforms. For example, platforms with limited direct interaction with their users, might have minimal KYC processes in place, whereas platforms that process payments for their users, have already adopted some form of KYC protocol.
However, any obligation for additional identification will lead to platforms demanding more information from users when they register for the first time and may even require that they demand more details of the goods, services or content that users upload to the platform. This will dramatically affect the ‘open’ platforms regime, for which there is no need for users to register in order to post, causing a possible slowdown in the process of attracting new users.
* Changes to the ‘country-of-origin’ policy.
Under the scope of ECD, digital services are subject to the law of the Member State in which they are established (‘country-of-origin’ principle) and not the law of the Member States where the service is accessible (country of destination). However, this principle has been the subject of many contradictory interpretations by the Member States Courts. In order to create a consistent regulatory framework, Commission proposed policies which will include the introduction of an EU regulatory authority with the responsibility to directly enforce the DSA rules.
In such case, platforms are expected to be affected depending on the means used to deliver their services. For instance, platforms that operate only as online intermediary, would branch out around the EU market more easily, whereas those providing services that require local infrastructure, might face obstacles to their expansion. For the online-only platforms that a local base is not required, a consistent regulatory framework could contribute to their growth to additional member states, fostering their competition with global competitors.
The editorial team