News & Views

A First Look at the Proposed Digital Services Act

2 March 2020

Authors: Liisa Vaaraniemi, Jesper Nevalainen and Anton Pirinen

The Digital Services Act (the “DSA”) is a new ongoing legislative project of the European Commission, stemming from its commitment to update the rules for digital services in the EU. The reform is welcomed, as the predecessor, the Electronic Commerce Directive (2000/31/EC, the “ECD”), was adopted two decades ago, prior to the age of sharing economy, social networks, and user-generated content, and is expected to mainly focus on platform liability, content moderation, and regulatory oversight. The Commission is also considering rules to ensure that markets characterised by large platforms remain fair and open.

The DSA is likely to become the next major piece of internet regulation, wherefore we want to provide some initial insights on it already at this stage, based on what is known thus far.

From Divergence to Convergence

One of the objectives of the contemplated DSA appears to be the introduction of a clear, uniform, and up-to-date innovation-friendly regulatory framework for the entire stack of digital services.

Currently, seemingly similar online platforms are subject to different regulatory regimes as the Court of Justice of the European Union has, for example, ruled that the service provided by Uber, unlike Airbnb, should be classified under the ECD as “an information society service” and not “a service in the field of transport”. Going forward, the same regulatory scope is intended to cover all digital services, including ISPs, cloud services, content delivery networks, domain name services, social media services, search engines, collaborative economy platforms, online advertising services, and digital services built on electronic contracts and distributed ledgers, thereby bringing the current grey areas into the scope of the regulatory framework. The intention is also to move away from the distinction between active and passive service providers, a concept developed by European courts in an attempt to adapt the ECD’s liability regime to developing markets, yet currently causing considerable legal uncertainty.

Notwithstanding the above, all actors within the scope of the DSA may not be subject to similar rules. Options to define a category of services on the basis of their size or market status are being explored and if realised, such a category would complement the threshold of dominance under competition law and enable the imposition of supplementary conditions on large market players. The Commission will further explore ex ante regulation to ensure that markets characterised by large platforms remain fair and open for innovators, businesses, and new market entrants.

Specific Monitoring Provisions?

The DSA’s intention appears to be to maintain the ECD’s general prohibition to monitor the information being transmitted or stored. At the same time, proactive measures for content moderation are to be encouraged and incentivised, and the introduction of specific provisions regarding the use of automated content moderation technologies is set to be considered. In order to preserve the ECD’s liability exemptions based on ignorance despite the new content monitoring obligation, an express provision enabling proactive measures without losing exemption from liability is envisaged.

As an implication, certain digital service providers may be compelled to moderate the information in their service by automated means. As one of the DSA’s potential objectives is seemingly to protect, enable, and empower users when accessing digital services, the contemplated provisions are likely to be aimed at social media platforms and other services that include user-generated content.

Binding Transparency Obligations?

It seems that the DSA may also introduce transparency obligations relating to the provision and moderation of online content. These may concern “notice-and-action” mechanisms and other activities taken in respect of content considered illegal. Options to ensure the transparency of algorithmic recommendation systems of public relevance are also being entertained.

The introduction of transparency obligations could entail that digital service providers will be compelled to publish information in respect of their content. Digital platforms that host user-generated content may need to provide information on the grounds based on which content is removed or disabled. Newsfeeds and other similar services may be required to explain why and how certain content is displayed to a particular user.

Introducing Regulatory Oversight?

A final issue that the DSA might address is the current lack of a “platform regulator” in the EU. The idea is that a dedicated regulatory structure would ensure oversight and enforcement of the new rules, in particular in complex cross-border situations, where it is often difficult to implement and enforce rules in an effective manner. Possible roles and powers of such regulators are still to be explored, including the power of the regulator to impose fines or take other corrective actions in case of non-compliance.

What Happens Next?

As set out in the European Data Strategy on 19 February 2020, the DSA will be presented by the Commission later this year. However, as some of the suggested reforms are likely to face opposition and may give rise to fundamental rights concerns, a lot of debate and some changes are also expected. We will keep you updated.