Germany: Digital Services Act and Digital Markets Act: (Not only) the E-commerce Directive is Under Scrutiny
The EU plans to introduce a Digital Services Act and a Digital Services Act. A first proposal has been announced for 2020
The Digital Services Act announced in February 2020 is a key project of the new EU Commission. It will not only reform the e-commerce Directive dating from the year 2000, but also introduce new rules for platforms, especially those that act as gatekeepers. According to the current status, the latter will probably be spun off in a Digital Markets Act, jointly with the New Competition Tool, which is also planned. The legislative project thus touches on central rules of digital business models. Significant deviations from the status quo are currently being discussed. After the consultation, the European Commission intends to present a draft in the fourth quarter of 2020.
What’s the plan?
The EU Commission has announced a package which will contain two sets of rules. The first is a revision of the rules for digital services, i.e. a reform of the e-Commerce Directive (2000/31/EC), one of the cornerstones for cross-border provision of services in the EU.
On the other hand, a more stringent regulation of platforms, probably in the form of “ex-ante” regulation, is planned. Both parts are currently still at an early stage, in which the Commission has commenced to consider several regulatory options in an “Inception Impact Assessment”. The options range from rather small adjustments of the status quo to more substantial additions to the existing regulatory framework. It is likely from the Commission’s considerations that in both cases the Commission tends to favour the latter. So far, it is not yet clear whether the Digital Services Act will be in the form of a directive or a regulation. However, some of the options are likely to be more suitable to be implemented by way of a regulation.
What impact would the Digital Services Act have?
In particular, the more extensive changes favoured by the Commission would have far-reaching effects on digital business models and competition on the Internet. For example, it is foreseeable that the liability rules for third-party content will be adapted. Furthermore, certain platforms with a gatekeeper function could be subject to behavioural or even structural regulation.
Reform of the e-Commerce Directive
Baseline Scenario – The “small solution”
First, the Commission is considering – as a “small solution” – the regulation of the obligations of platforms to prevent the sale and distribution of illegal content and to stop other illegal activities of users. To this end, it could essentially draw on the 2018 Recommendation of measures to effectively tackle illegal content online already published and the implementation of other European legislation already adopted regarding Copyright in the Digital Single Market, on Audiovisual Media Services, and regarding the prevention of the dissemination of terrorist content . In this event, the core liability rules of the e-commerce Directive would not be affected.
Adaptation of the e-Commerce Directive
The more extensive second option would focus on revising the liability and safety rules for digital services. Apart from a possible tightening of liability rules, such draft could also make it easier for privileged companies to take voluntary action against illegal content without losing their liability privileges. It could also impose obligations on platform operators, such as those foreseen for video-sharing platforms in the updated AVMS Directive. Service providers would then be obliged to remove illegal content through a more harmonised and formalised “notice-and-action” system. In addition to increased transparency obligations, service providers could also be instructed to provide a system to prevent so-called “overblocking”. Measures to protect against disinformation are also being discussed. This option would likely constitute a substantial change to the existing liability rules and affect Art. 12-15 of the e-commerce Directive as well as Art. 7-10 of the German Telemedia Act, which are of high practical relevance.
Enforcement and oversight
In addition, as a third, complementary option in this scenario, the Commission is considering revising the system of regulatory oversight by the Member States. Building on the country-of-origin principle, the aim is to strengthen law enforcement and cross-border cooperation in regulation and control of digital services. This option could entail a substantial change to existing legislation as there is hardly and regulatory oversight regarding digital services. The provisions of the e-commerce Directive have so far been predominantly enforced by private individuals and associations.
Ex-ante regulation
In addition, the Commission is considering different options for “ex-ante” regulation. The first option could be to extend the horizontal rules of the Platform-to-Business Regulation, which has been in force since July 2020. New “problematic” practices could be added, such as unfair contract terms or self preferencing. Data access policies are also mentioned. The enforcement regime of the Platform-to-Business Regulation, which essentially follows civil law in Germany, is likely to be retained.
Under the second option, certain large online platforms classified as gatekeepers could be subject to supervision by a European authority. However, this option would primarily include rights to information, but would not entail behavioural and/or structural remedies.
However, the Commission is considering such remedies in its third option, which is discussed in two forms. Under this option, a European authority could either ensure that a ban of predetermined prohibited practices (so-called “blacklist” – similar to the unfair commercial practices prohibited under the UCT Directive) is respected, such as certain forms of self-preferencing (option 3a). Further, such an authority could also be given the power to define such prohibited conduct itself and to sanction it on a case-by-case basis. Possible options include access to platform-specific non-personal data access obligations, or interoperability requirements (option 3b).
What‘s next?
The legislative process is still at an early stage. For the fourth quarter of 2020, the Commission has announced a first draft after evaluating the results of the consultation. In view of the almost 100 comments received for each of the two elements of the legislative package, the draft is expected to be highly controversial. The Commission’s proposal must then be adopted by the European Parliament and the Council of Ministers. Here too, recent experience – for example regarding the ePrivacy Regulation – shows that the Commission’s proposal could still be subject to extensive amendments, or even be blocked. With regard to ex-ante regulation, however, the European Council seems to be leaning towards options 3a or 3b. It remains to be seen what other changes will result from the likely combination with the New Competition Tool
Outlook
The package of measures follows a tendency to impose stricter control and regulation on online platforms, as well as on intermediaries. Its implementation can lead to a substantial realignment of the rules for digital business. Although the Commission is likely to focus in particular on the large tech companies, the new rules may entail collateral effects for nearly all digital stakeholders.
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