Council of the European Union agrees proposals for digital markets and services legislation

The Council of the European Union has agreed its positions for the Digital Markets Act and the Digital Services Act., which were proposed by the European Commission in December 2020.

Digital Markets Act

The proposal aims to ensure a competitive and fair digital sector with a view to promoting innovation, high-quality digital products and services, fair prices, and choice in the digital sector.

Online platforms offering core platform services – such as search engines, social networking services and intermediation services – are playing an increasingly important role in social and economic life. However, a few large online platforms are seen as ‘gatekeepers’ between businesses and consumers, creating bottlenecks in the economy through their market power and control over digital ecosystems. This has a negative effect on fair competition.

The Digital Markets Act aims to create a level playing field in the digital sector, with clear rights and obligations for large online platforms. It is targeted at gatekeepers who control ‘core platform services’, which are platforms where the identified problems are most prominent. Core platform services include: online intermediation services (ie marketplaces, app stores), online search engines, social networking, cloud services, advertising services, and more.

The main changes to the Commission’s proposal are the following:

  • the Council’s text shortens the deadlines and improves the criteria for the designation of gatekeepers;
  • the text includes an annex that defines ‘active end users’ and ‘active business users’;
  • improvements have been made to make the structure and the scope of obligations clearer and more future-proof;
  • the text proposes a new obligation that enhances the right of end users to unsubscribe from core platform services;
  • provisions on regulatory dialogue were improved to ensure that the discretionary power of the European Commission to engage in this dialogue is used appropriately; and
  • to prevent fragmentation of the internal market, the text confirms that the European Commission is the sole enforcer of the regulation. Member states can empower national competition authorities to start investigations into possible infringements and transmit their findings to the European Commission.

Digital Services Act

The main aim of the proposed DSA is to keep users safe from illegal goods, content or services, and to protect their fundamental rights online. It also modernises part of the E-commerce Directive 2000/31/EC.

The rules set out under the DSA are designed to expand and clarify a common set of responsibilities for online businesses providing services in the EU from anywhere in the world. The proposal follows the principle that what is illegal offline should also be illegal online. It defines clear responsibilities and accountability for providers of intermediary services, such as social media and online marketplaces.

The rules proposed by the DSA are designed asymmetrically, which means that larger intermediary services with significant societal impact would be subject to stricter rules. Once adopted, the DSA will provide a modern, future-proof governance framework and set out clear due-diligence obligations for online intermediary services.

The main changes to the Commission proposal are the following:

  • The text clarifies and enhances provisions on the scope of the DSA;
  • The Council’s text explicitly includes online search engines;
  • The Council’s text provides for enhanced protection of minors online;
  • The Council’s text adds obligations for online marketplaces and search engines, as well as stricter rules for very large online platforms (VLOPs);
  • The Council’s text extends the obligation to notify the suspicion of serious criminal offences to all hosting services, not only to online platforms;
  • To monitor compliance with the obligations of the DSA, the text includes more detailed provisions on the ‘compliance function’ that VLOPs or very large online search engines (VLOSEs) must establish;
  • The text allows national authorities to issue orders regarding illegal content online directly to service providers and imposes an obligation on service providers to keep national authorities informed of their actions (the feedback obligation); and
  • Regarding effective enforcement, the Council’s text preserves the country-of-origin principle and at the same time confers exclusive enforcement powers on the European Commission, allowing it to deal with systemic infringements committed by VLOPs or VLOSEs.

Next steps

The general approaches provide the Council Presidency with a mandate for further discussions with the European Parliament, which are scheduled for 2022.

Published: 2021-11-30T16:00:00

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