Digital Regulatory Package of European Union

(Digital Markets Act & Digital Services Act)

Anjali Singh
Anjali Singh

Published on: Mar 28, 2023

Tina Sharma
Tina Sharma

Updated on: Dec 13, 2023

(21 Ratings)
917

Introduction

The Digital Markets Act (DMA) and Digital Services Act (DSA) are two new pieces of legislation that were approved by the European Union to regulate the digital economy. The DMA aims to address the power of dominant online platforms, such as Google and Amazon, by creating new rules for these companies to ensure fair competition and protect consumers. The DSA, on the other hand, aims to update the existing laws and create new rules for online intermediaries, such as social media platforms and online marketplaces, to ensure that they are held accountable for illegal content and activities on their platforms.

Why do we require new rules?

Over the past few decades, digital platforms have substantially improved our lives to the point where it is now difficult to imagine a world without Tech giants like Facebook, Amazon, Google, YouTube, and Instagram.

The perks of life with tech giants are enormous, and as a result of this, these tech giants have a competitive advantage over their competitors and influence in many nations, which may have an impact on a nation’s politics and economics.

The primary cause for worry is the online trading and exchange of unlawful goods, services, and content online. Online services can also be used by malicious algorithms to disseminate false information or achieve other undesirable objectives.

The rapid adoption of digital technology, which has put the dominance of the digital ecosystem in the hands of a small number of potent platforms, is another issue that raises worry on a global scale.

One such incident happened when the European Union, noticed that Google is abusing its dominance as a search engine affecting the competition in the European Union Market.

Brief of Google Abusing Dominance as Search Engine:

In the year 2017, European Commission imposed a fine of 2.42 billion euros on Google for breaching EU Anti-Trust Rules. As per the decision of the Commission, Google is dominant in each national market as a search engine throughout 31 European Economic Area countries. However, market dominance is not illegal in European Union but dominant companies have a special responsibility not to abuse their powerful market position by restricting competition.

  • Google failed to fulfil this responsibility and abused its market dominance as a search engine by giving an illegal advantage to a separate google product named Google Shopping.
  • Google used its monopoly in the search engine business to elevate its comparison-shopping service in search results while degrading those of competitors.

As per the commission, such practices are not a competition on merit base and are prohibited under the EU Anti-Trust Rules. According to the decision of the Commission, a fine of 2.42 billion euros was imposed taking into account the duration and gravity of the infringement. They were also instructed to end such conduct within 90 days or face penalty payments of up to 5% of the average daily worldwide turnover of Alphabet.

The Commission started the initial investigation of the matter in November 2010 and it was finally concluded in June 2017. The whole matter was dealt with within 7 years which is a scenario of justice delayed is justice denied. There were also growing reports of abuse and default of law by the Gatekeepers therefore as a result of these advancements, Europe was in need of a cutting-edge legal framework that guarantees user security online, provides governance with the defence of fundamental rights at its core, and upholds an environment for fair and competitive online platform use.

To address the current scenario, the Digital Services Package, which consists of the Digital Markets Act (DMA) and the Digital Services Act (DSA), has now been formally adopted. On July 5, 2022, it was approved by the European Parliament.

This new set of rules aims to create a more secure online environment where the fundamental rights of users are better protected and creates an even playing field for enterprises doing business online.

The European Commission’s strategy for the digital market focuses on encouraging an environment in the EU that is reliable, ethical, and innovation-driven.

Elements of DMA and DSA

BASIS DIGITAL MARKETS ACT DIGITAL SERVICES ACT
Objective
  • To Prevent gatekeepers from placing unfair conditions on businesses and end users
  • To promote competition by making it simpler for new platforms to enter the market
  • To safeguard consumers and their fundamental rights online
  • To create a strong foundation for accountability and transparency for internet platforms
  • Provide a single, uniform framework across the EU
Applicability
  • DMA will target “gatekeepers”— the core platforms that act as a gateway between business users and customers and meet the following thresholds:
  • A yearly turnover of at least €7.5 billion in each of the last three financial years, or its average market capitalization or equivalent fair market value amounted to at least €75 billion in the recent financial year
  • Provides core platform service in at least three Member States
  • More than 45 million monthly active end users and more than 10,000 yearly active business users in the EU in the last financial year
  • Having achieved the above thresholds in the last three years
  • To safeguard consumers and their fundamental rights online
  • To create a strong foundation for accountability and transparency for internet platforms
  • Provide a single, uniform framework across the EU
Penalties Sanctions for non-compliance:
  • Fine of up to 10% of the gatekeeper total worldwide annual turnover
  • 20% in the case of persistent infringements
  • Additionally, periodic penalty payments of up to 5% of the gatekeeper total worldwide daily turnover
  • Additional remedies are necessary to achieve compliance for systematic infringements
  • Fine of up to 6% of service provider’s global turnover
  • Immediate actions to address very serious harms
Functioning
  • The Digital Markets Act will impose a strict regulatory system on gatekeepers. Once implemented, it will create a list of obligations for the chosen Gatekeepers.
  • The DSA will govern how Intermediaries operate when it comes to moderating user content. DSA will establish specific rules and obligations for intermediaries to follow.

Some Obligations under Digital Services Act (DSA)

The Digital Services Act (DSA) governs the obligations of digital services that serve as intermediaries by connecting customers with products, services, and content online.

It will improve user and basic fundamental rights online, create a strong framework for online platform transparency and accountability and provide a single, uniform structure throughout the EU.

A primary concern of the Digital Services Act (DSA) is the presence of illegal content on the Internet. The DSA aims to minimize the harm caused by such content by implementing measures to reduce its prevalence online.

Responsibilities Outlined in the Digital Services Act

  1. Measures to combat illicit online material, including illegal goods and services
  2. Protection of Minors in the EU on any platform
  3. Prevent abuse of Gatekeepers Systems
  4. Crisis Response Mechanism
  5. Prohibition on Target Advertisement
  6. Allow access to data to scholars & researchers
  7. Right to Complain
  8. Transparency measures for online platforms

Effects and Implications of the Act

Once effective, companies offering digital services will be held accountable for maintaining customers’ safety and trust, addressing online abuse, and ensuring the transparent observance of fundamental rights.

Online platforms will now have to provide comprehensive, clear information about any adverts they run.

Customers and users will have easy access to ways of redress for inappropriate material removal, as well as the ability to contest content removal decisions and be informed of the guidelines for content moderation.

Conclusion

In conclusion, the Digital Services Act and Digital Markets Act are important pieces of legislation that address the challenges and opportunities of the digital economy. The DSA focuses on reducing the spread of illegal content online and holding intermediaries accountable for the content on their platforms while the DMA targets the market power of the dominant online platforms and creates new rules to ensure fair competition and protect the consumers. Both acts have the potential to shape the future of the digital economy in the EU and serve as a model for other countries looking to regulate their digital markets. Stakeholders must stay informed about the progress of these acts and their potential impacts on businesses, consumers, and society as a whole.

Disclaimer

The information provided in this article is intended for general informational purposes only and should not be construed as legal advice. The content of this article is not intended to create and receipt of it does not constitute any relationship. Readers should not act upon this information without seeking professional legal counsel.

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