The European Parliament and European Union (EU) Member States have reached a political agreement on the Digital Services Act (DSA).
What is the Digital Services Act?
- The Act, which is yet to become law, was proposed by the EU Commission (anti-trust) in December 2020.
- The DSA will tightly regulate the way intermediaries, especially large platforms such as Google, Facebook, and YouTube, function when it comes to moderating user content.
- The DSA is “a set of common rules on intermediaries’ obligations and accountability across the single market”, and ensures higher protection to all EU users, irrespective of their country.
- It will be a landmark legislation to force big Internet companies to act against disinformation and illegal and harmful content, and to “provide better protection for Internet users and their fundamental rights”.
- The proposed Act will work in conjunction with the EU’s Digital Markets Act (DMA), which was approved recently.
About EU’s Digital Markets Act –
- The DMA’s focus is on companies termed as ‘gatekeepers’, which include Apple, Facebook, Google, etc. These companies will have to comply with the new rules.
- Violators can be fined up to 10 per cent of the company’s global annual sales for an initial breach of the law, rising to 20 per cent for repeated infringements. In worst case scenarios, they could even be banned from any further acquisitions.
- The reason the law refers to these companies as gatekeepers is that they often control distribution, whether it is for apps or ads on the platform, or even communication. Also, gatekeepers may have a dual role as developers of operating systems and device manufacturers. Examples here would be Apple, Google, even Amazon.
- According to the proposal, the provisions of the act will be “limited to a number of ‘core platform services’ where the identified problems are most evident and prominent”.
- A company will be termed as a gatekeeper if it has an annual turnover of at least €7.5 billion within the EU in the past three years, or a market valuation of at least €75 billion. Any player with over 45 million monthly end-users, and at least 10,000 business users established in the EU, also qualifies as a gatekeeper. Small and medium enterprises are exempt from being identified as gatekeepers.
What are the DMA’s proposals?
- The rules state that users will have the right to choose and install their apps. They also crack down on pre-installed apps, common in Apple, Google and others.
- The EU wants “interoperability” between the basic functionalities of messaging services.
- The rules also call for fair access conditions to app stores owned by the gatekeepers. They note that gatekeepers must “allow the installation and effective use of third party software applications or software application stores”, even while they can take “proportionate measures” for security.
- Also, gatekeepers cannot establish unfair conditions for business users or require app developers to use certain services (e.g. payment systems or identity providers) in order to be listed in app stores.
- The EU wants app developers to get fair access to supplementary functionalities of smartphones, for example the Near Field Communications chip. Also, gatekeepers will have to give sellers access to their marketing or ad performance data on the platform.
- The gatekeepers will have to inform the European Commission of their acquisitions and mergers. This is significant because big players tend to buy out some of their upcoming competition. Meta (formerly Facebook) has done this with Instagram and WhatsApp.
- The new rules also forbid the gatekeepers from ranking their own products or services higher than others, and from reusing private data collected during a service for the purposes of another service.