DSA: New Poster Child for Online Regulation Adopted
But also — Germany, USB-C, Minimum Wage, Prague
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DSA Is Out. Now What?
On 4 October 2022, the Council of the EU adopted the Digital Services Act (DSA), thereby updating the 20-year old e-Commerce Directive.
After the Council gave its final approval to its twin sister, the Digital Markets Act (DMA) on 18 July, the EU is now ready to lead the discussions on how to regulate online contents but also how the competition should work in the digital age. By doing so, the EU aims to set itself apart as the standard bearer of digital regulation worldwide, thus showing it indeed is a regulatory superpower.
DIGITAL WILD WEST • “What is illegal offline must be illegal online” has been the EU’s motto since the first stages of negotiations on this package. The ageing rules provided for in the e-Commerce Directive have failed to address issues such as fake news, hate speech, and users’ privacy rights that have arisen in two decades of rapid and fundamental changes in online communication.
“The Digital Services Act is one of the EU’s most ground-breaking horizontal regulations and I am convinced it has the potential to become the ‘gold standard’ for other regulators in the world.”, said Jozef Síkela, Czech Minister for Industry and Trade, whose country holds the rotating presidency of the Council of the EU.
WHAT DOES IT SAY • The 312-pages long regulation contains new requirements for ‘online intermediaries’ such as social media platforms, online marketplaces, so called very-large online platforms and very large online search engines — VLOPs and VLOSEs — that have more than 45 million active users in the EU.
All these ‘online intermediaries’ will become “accountable for their role in disseminating illegal and harmful content”. In broad terms, the DSA includes provisions to combat the sale of illegal products and services, the obligation for platforms to react quickly when illegal content is posted online, the prohibition of targeted advertising for minors, restrictions on the use of certain personal data (i.e. gender, race, religion) for the purpose of targeted advertising, and a ban on misleading interfaces (‘dark patterns’).
“The DSA is not simply about making some changes online terms and conditions [sic]. It requires more fundamental structural amendments to the service infrastructure. Notably, the ways in which information is offered to safeguard adequate transparency will require an overhaul. Equally, redress mechanisms need to be developed and/or refined.”, said Wouter Seinen, a partner at law firm Pinsent Masons, based in Amsterdam.
BIG TECH • If all the above looks stringent, it becomes even more for the behemoths of the digital world, which you may have gotten used to call GAFAMs or FAANGs but may now start calling VLOPs and VLOSEs.
These important online platforms and search engines will have additional obligations. They will have to offer users a system for recommending content that is not based on profiling. VLOPs and VLOSEs will also have to conduct a risk assessment of the systemic issues they create, whether it be the influence on elections, mental health, or gender-based stereotypes.
The DSA also introduces a ‘crisis response mechanism’, that makes it possible to analyse “the impact of the activities of VLOPs and VLOSEs on the crisis in question and rapidly decide” on measures to ensure the respect of fundamental rights.
ONLINE ADS • One hugely controversial issue during the DSA negotiations was online advertising. Targeted ads are the bread and butter of the likes of Twitter, Meta, TikTok, or Google. The more data is harvested on users the better ads can be tailored to users’ preferences, thereby increasing the value — and price tag — of the advertising services provided by those platforms.
While some MEPs went as far as to suggest an outright ban on targeted advertising, the negotiations mainly centred on banning targeted ads for minors, the processing of sensitive personal data, and ensuring that refusing consent to data processing is not more burdensome than giving consent. In these negotiations, the European Parliament favoured a stricter set of rules, while the Council, under the French presidency, advocated for more lenient provisions.
ENFORCEMENT • Fines can reach up to 6% of the annual worldwide turnover of a company that fails to comply with the obligations laid out by the DMA. Private claims for compensation can also be levied on top of the fines.
While the European Commission will be the main enforcer of the DSA, each Member State will appoint a Digital Services Coordinator (DSC), an independent authority tasked with the supervision of the intermediary services within each Member States.
WHAT NEXT • The DSA should enter into force in November. Most of the rules of the DSA will take effect 15 months after the DSA has come into force, while some will apply immediately.
In Case You Missed It — Germany, USB-C, Minimum Wage, EPC
GO-IT-ALONE • Dissent is growing among EU Member States, one week after Germany unveiled its 200€ billion plan to shield businesses and households from rhigh energy prices.
The plan is deemed excessive by many Member States that do not have the same fiscal space as Germany. “We need to reflect urgently on how to offer member states — which do not have this fiscal room for manoeuvre — the possibility of supporting their industries and businesses,” wrote Thierry Breton, Internal Market Commissioner. Germany’s scepticism towards an EU-wide price cap for gas feeds into the idea that the country is playing solo.
This situation recalls the beginning of the COVID crisis, when Angela Merkel wanted to pursue her own plans to support the country’s economy. Back then, she was accused of undermining the single market through distorted competition.
The announcement of this plan also comes a few weeks before the Commission is set to put forward a reform of the Stability and Growth pact which defines EU rules on public debt and deficit.
LEX • In addition to the DSA, two important pieces of EU legislation were adopted last week.
The first one is the new law on common chargers, which was approved by the EU Parliament: by the end of 2024, all mobile phones, tablets and cameras sold in the EU will have to feature a USB-C charging port. The EU’s regulatory clout — dubbed ‘Brussels Effect’ by Anu Bradford — had already pushed the number of commonly used chargers down from 30 to 3. The move is expected to be costly for Apple’s lightning chargers, whereas Android and Google devices are already USB-C compatible.
The second piece is the directive on minimum wages which is aimed at promoting statutory minimum wages and collective bargaining. This legislation is not an attempt to create an EU-wide minimum wage: Member States will merely have to put in a framework for wage-setting and take action plans so that 80% of the workforce is covered by collective bargaining. Back in June, we had a chat on what this directive means with MEP Dragoș Pîslaru from Romania, chair of the Employment and Social Affairs Committee at the European Parliament. Check it out here.
PRAGUE • The European Political Community held its first meeting in Prague.
As Europe navigates through turbulent times, the first meeting of the European Political Community was held in Prague on 6 October, gathering 43 leaders from all European countries, except Russia and Belarus which were not invited, in a spirit of renewed unity and solidarity around security, stability, and prosperity issues. This French-spearheaded initiative was launched as a response to the Russian illegal invasion of Ukraine, but also as an inclusive forum aimed at strengthening cooperation with EU neighboring countries and strategic partners, notably those eagerly awaiting EU membership.
Peace, security, and energy were discussed on October 6, with a priority focus on the war in Ukraine. President Zelensky joined the meeting virtually urging additional financial and military assistance to the country and talking about NATO membership. European leaders additionally exchanged on economics, energy, climate, migration and mobility, while the launch of a two-months EU civilian mission on the border between Armenia and Azerbaijan was decided in a side meeting between EU leaders and the presidents of both countries. The meeting was also attended by UK Prime Minister Liz Truss, following a declared lack of interest in joining this project. The British participation was lastly motivated by domestic concerns over migration and energy and could signal the beginning of a renewed spirit of cooperation with the EU.
The spirit of unity was however overshadowed by internal divisions on energy, such as regarding the establishment of a cap on gas prices, opposed by Denmark, the Netherlands and Germany, and by the latter’s 200 billion EUR shield package to subsidize companies sparkling resentment among EU member states. In the overall, internal competition and rivalries between participating states remains the main hurdle to the proper functioning of a so-called “European Political Community”, a significant test of unity at times of historical challenges.
What we’ve been reading this week
For the Institut Montaigne, Happymon Jacob writes on India’s conception of the present world order. If New Delhi will not formally ally with the West, a shared interest in containing China’s rise will ensure their sustained cooperation.
Marcel Muraille of the Egmont Institute makes the case for the EU to play a more important role in European efforts to attract skilled workers.
The Atlantic Council’s Kenneth Propp, Frances Burwell and Cameron Kerry have a handy explainer on the significance of the US administration’s recent executive order on transatlantic data sharing for establishing a new EU-US Data Privacy Framework (DPF).
For the Centre for European Policy Studies, Michael Emerson explores the potential and limitations of the European Political Community.
This week’s newsletter is brought to you by Matteo Gorgoni, Maxence de La Rochère, Brían Ó’Donnaile, and Augustin Bourleaud. See you next Tuesday!