Digital Services/Markets Act: Commission proposes rules on gatekeepers for a more competitive market environment

  • The European Commission has today published two pieces of legislation that will update the rules for digital companies in Europe: a Digital Services and a Digital Markets Act.

  • In a nutshell, the Digital Services Act (DSA) focuses on illegal content, while the Digital Markets Act (DMA) promises to tackle the dominance of large gatekeeper platforms like Google, Apple, Facebook, Amazon and Microsoft (GAFAM)

  • DIGITAL SME welcomes these new rules as they support a more competitive and open market environment for upcoming digital companies.

Today, the European Commission has published its long-awaited rules for digital services and digital markets. One of them, the Digital Markets Act, defines “do’s and don’ts” to address imbalances in digital markets. “Large gatekeeper platforms are dominant across different fields, e.g. search and browser, app stores and operating systems, or social media and instant messaging. Their dominance allows them to attract ever-more users and collect more data about customers, which confirms their dominance even more. We are happy that the European Commission is taking bold steps to bring back fairness to digital markets”, said DIGITAL SME President Dr Oliver Grün in a first statement.

Addressing market imbalances

Power imbalances and the practice of limiting access to newcomers is not new in digital markets. In the 2000s, the so-called “browser wars” served as a first indicator of what was to come. In 2009, DIGITAL SME backed the Commission on its antitrust investigation against Microsoft for tying Explorer to Windows. Similarly, in 2016, DIGITAL SME spoke out against the dominant position of Google’s Playstore on Android phones. “In both cases, we decided to speak up because we believe that Europe needs an open and competitive digital ecosystem that enables innovation”, said President Grün. However, the approach to tackle these issues with competition law has not been a full success. As Commissioner Breton told POLITICO Pro Morning Tech today: “We have tried in the past to address gatekeeper issues through competition cases. But these cases took years to instruct.”

With the Digital Markets Act, regulators will have the option to address certain unfair practices of large gatekeeper platforms. “We welcome that the European Commission proposes targeted legislation rather than a one-size-fits-all type of legislation. The majority of problems are caused by a handful of players, and therefore, a targeted approach is the right way to go”, remarked President Grün.

New rules for new challenges?

The second document published today is the Digital Services Act. The DSA will focus more on the “wild west” nature of the internet, i.e. illegal goods and content. Rampant disinformation, election interference on social media, and the sale of faulty goods are just a few examples of challenges the Act aims to tackle.

In an effort to harmonise the rules of how goods and services are bought and sold online in Europe, the DSA will upgrade the 20-year-old e-commerce Directive, which regulated the distribution of content online while limiting the liability of internet service providers and intermediaries like large platforms. This limited liability enabled the success of many business models like YouTube or Facebook which live off third-party content that is not moderated in real-time.

The Digital Services Act now attempts to curb some of the negative effects of limited liability while upholding the general principle. At the same time, it aims to create harmonised rules across Europe, e.g. for notice-and-action mechanisms. “We are happy that also in the DSA, the Commission refrained from taking a one-size-fits-all approach,” said President Grün after a first analysis of the document.

Stricter rules will apply to platforms with at least 45 million users: they will have to collaborate with regulators and fulfil data access requirements for researchers. Further, the DSA includes Know-Your-Customer obligations, a Good Samaritan principle and a new enforcement mechanism. And here comes the stick: Companies that don’t comply with the legislation could be fined up to six per cent of their annual revenue.

Stay abreast of everything DMA/DSA!

If you’d like to know more about the DMA and the DSA, you can read the European Commission’s official press release here. You can find our detailed position paper on the Digital Services Act here. Also, stay tuned for a debate about the impact of the DMA on SMEs, which we will organise in January 2021! To keep up with all our updates, you can subscribe to our newsletter and mailing lists here!