European Parliament and Council are currently discussing two key pieces of legislation regarding our digital future. The Confederation of Swedish Enterprise is positive to both the Digital Services Act and the Digital Markets Act, which the European Commission presented in December 2020, but several of the many amendments currently being discussed are worrying, writes Carola Ekblad, digital policy expert.
Digital Service Act (DSA)
Retain exemptions for smaller service providers
Swedish Enterprise opposes such amendments that suggest that several of the transparency requirements in the European Commission’s DSA proposal should also apply to smaller actors.
The DSA contains obligations for digital service providers with the introduction of gradually stricter requirements, including transparency towards authorities and end users. Transparency requirements may involve complex issues and demarcations for companies in terms of customer integrity, compliance with data protection rules, commercial considerations and interoperability issues. To ensure that the regulatory costs of such rules are proportionate, the DSA must rebalance responsibilities according to the size of the service providers. Thus, the DSA could prevent the potential widespread dissemination of illegal content while avoiding the imposition of an administrative burden and costly rules for especially micro and small-sized enterprises.
Effective notice and take down process without deadlines
Platforms that have actual knowledge or awareness of crimes committed on their services must stop such offences, usually by removing illegal content from their services. To detect illegal content on platforms more effectively, the DSA proposes that each platform must have a reporting function, where anyone can report illegal content. Once such a report has been received, the platform is considered to have knowledge or awareness of the offence.
A few amendments under discussion include specific deadlines for when service providers are required to remove illegal content. Swedish Enterprise rejects such proposals because unnecessarily tight deadlines can result in the unnecessary removal of content. Platforms that do not have time to investigate the accuracy of reports generally prefer to remove content to avoid liability. Excessively long deadlines, however, could hamper efforts to effectively counteract illegal online content. Swedish Enterprise believes, in line with the European Commission’s DSA proposal, that it is better to avoid specific deadlines and maintain the requirement for platforms to act expeditiously to remove or to disable access to illegal content.
Strengthened consumer protection through specific due diligence requirements for online marketplaces
Illegal and dangerous products entering the EU through e-commerce is a major problem. The issue of liability is particularly problematic when sellers are not represented in the EU. However, Swedish Enterprise does not agree with amendments that in these circumstances suggest a new legal regime for online marketplaces. Swedish Enterprises supports the European Commission’s DSA proposal of maintaining the existing exemptions from liability of the e-Commerce Directive.
It is important though that online marketplaces, in accordance with the Commission’s DSA proposal, have mandatory procedures in place for removing illegal goods. Online marketplaces must also trace its sellers (“know your business customer”) and they must also organise their online interfaces in a way that allows sellers to comply with their information obligations towards consumers. In addition to this, Swedish Enterprises suggests additional due diligence requirement for online marketplaces that facilitate the sale of dangerous products directly to consumers and where there is no other responsible person in the EU. In these cases, marketplaces should be required to ensure that products comply with European safety requirements. Since many platforms never receive products physically, it is reasonable that relevant documentation requirements are therefore uploaded by the sellers and checked digitally by marketplaces.
While the online marketplace cannot be held responsible for the legality of the product itself, they should be responsible to carry out this due diligence to ensure that sellers have the possession of the relevant documents required for any potential enforcement activities by European market surveillance author.
Products that do not meet European safety requirements should not be allowed to be offered on the marketplace and online marketplaces must co-operate with relevant authorities to enable them to take steps to avoid or minimize risks for consumers.
Proposed changes to the Commission’s DSA proposal include a new system for online advertising, which would mean that targeted advertising is only allowed after individual consent has been granted, so-called opt-in. Digital marketing is an overarching term for a large number of activities and advertising is absolutely critical to much of the content available online and a key driving force for economic growth and competition. Targeted online advertising is often a cost-effective and efficient method of reaching new customers and markets, especially for SMEs.
There are already digital marketing legislation and additional rules are introduced with the Digital Markets Act. The proposed amendments may result in consumers being blocked from large amounts of online content if they have to respond to additional consent requests. This may also result in reduced access to free content supported by advertising. For these reasons, Swedish Enterprise opposes amendments to only allow targeted advertising on an opt-in basis.
Digital Markets Act (DMA)
Discussions on the DMA centre on who should be subject to these regulations and what role member states’ competition authorities should have in their implementation.
Do not expand the role of member states in the implementation of the DMA
Swedish Enterprise argues that it is most appropriate for the European Commission alone to implement the DMA. Paving the way for a greater role for member states’ competition authorities is potentially problematic if it leads to a more fragmented and less clear application of the DMA and additional actors for gatekeepers to deal with. The European Commission is best suited for this task due to the cross-border nature of gatekeepers.
Retain main criteria for gatekeepers
Swedish Enterprise has previously questioned proposals to limit the DMA to actors with at least two core platform services (compared with the Commission’s DMA proposal for at least one such service). To our understanding such limitation could be justified with a reference to Article 3(6). According to this Article the Commission may attribute gatekeeping status to companies even if they do not fully meet the main criteria. Although Article 3(6) adds flexibility, it is done on the cost of legal uncertainty. Swedish Enterprises have concluded that Article 3(6) could be useful, but only in relation to margin cases. Predictability is important for companies and the main criteria that defines the scope of the DMA must not be amended, especially if this would lead to gatekeeper status instead being attributed based on Article 3 (6) to a greater extent.
Reject proposals for the European Commission to add further restrictions
It has been proposed that the Commission, where necessary and in addition to the restrictions in Articles 5 and 6, should be able to impose additional targeted restrictions on certain services. Criticism of Articles 5 and 6 have centred on how the restrictions seek to address current problems, that gatekeepers and other actors’ business models are constantly updated or changed, and that the regulations risk being outdated before they have even been introduced. However, Swedish Enterprise believes that this criticism is excessive. The various requirements set out in Articles 5 and 6 have in our opinion been adapted to address different business models for different services covered by the DMA. Important though is that the opportunity for regulatory dialogue is also maintained.
Predictability for companies is vital. Swedish Enterprises opposes proposals that would allow the Commission to impose further targeted restrictions outside the legislative process on certain services. This would result in an imbalance between the need for flexibility and legal certainty.
The DMA will be evaluated regularly, and this includes necessary amendments to the DMA. In addition, we have the competition rules that can be used to combat the behaviour of dominant gatekeepers, even if this is not the simplest and fastest approach available.Digital Markets ActDigital Service ActDigitaliseringEU