At the end of April, representatives of the European Parliament, the EU member states, and the European Commission have reached an agreement on the groundbreaking new regulations of the Digital Services Act (DSA). Now, the Parliament and the member states in the European Council have to rubber stamp the agreement. The groundbreaking law on digital services is intended, among other things, to better protect online buyers from counterfeiting and to curb illegal online trade. For this, the European Union wants to make online platforms more accountable for taking faster and better action against counterfeiting traders. “With today’s agreement we ensure that platforms are held accountable for the risks their services can pose to society and citizens,” says Margrethe Vestager, Executive Vice President of the European Commission.
The planned framework concerns digital services which provide consumers access to goods or content. In particular, the EU wants to more closely regulate the very large online firms with more than 45 million users. This affects around 20 companies, such as Alphabet, the parent company of Google with its subsidiary YouTube, Meta with the social media platforms Facebook, Instagram, and WhatsApp, as well as Amazon and Apple. Some exemptions from the new rules are provided for smaller companies. Also, there is a 15-month transition period expected once the DSA comes into effect; however, for very large platforms, the rules are to apply after just 4 months, once they are in force.
// Everything that is prohibited offline must be prohibited online!
Thierry Breton, European Commissioner for Internal Market
The new rules of the DSA are designed to ensure that something which is illegal offline also is considered illegal online. For this, online platforms are to take on more responsibility for activities performed via their services. Focusing on counterfeiting, for example, online marketplaces are to be obliged to check third-party traders on their platforms in order to take action against counterfeiting on the Internet. In addition, reporting and removing illegal goods and content, for instance, is to be significantly improved.
To enforce the new rules, it is planned that the EU Commission will get access to the data of very large digital companies. In case of violations, corporations can face heavy fines of up to 6% of their annual global turnover; repeated infringements could even lead to a ban on continuing to do business in the EU.
Industry representatives and associations are largely satisfied with the new measures. At the same time, some of them are also calling for further action: For example, the European Brands Association (AIM) criticizes loopholes, as the new regulations have not been extended to cover some online players such as social media platforms. “Rogue traders increasingly sell illegal products on social media and live streaming apps, which are subject to lighter obligations,” explains Michelle Gibbons, Director-General of AIM. This request calls to mind some headlines of the recent past, highlighting the rapid trade in counterfeits via social networks and messenger services, such as Facebook and WhatsApp.
In addition, the German Brands Association (Markenverband) is calling to swiftly create national regulations to effectively enforce DSA measures, e.g. with due diligence obligations for platforms. The Federation of the European Sporting Goods Industry (FESI) criticizes the fact that smaller companies are excluded from regulations. From the point of view of consumer protection, the European Consumer Organization (BEUC) notes the fact that online marketplaces still do not have to assume any liability, for example to compensate consumers who bought dangerous counterfeits from them.
The Digital Services Act was initiated in 2020 and is designed to replace the EU’s e-commerce directive (Directive 2000/31/EC), which is more than 20 years old. EU Commissioner Thierry Breton praised the rapid adoption of the DSA in just 16 months and emphasized the responsibility that platforms must now assume: „The web isn‘t a Wild West where anything goes. From now on, the more users a platform has, the more audience it has, the greater its responsibilities.”
In parallel to the Digital Services Act, the EU is also working on the Digital Markets Act (DMA), which deals with the market position of large online platforms as gatekeepers. Key points of the two legislative projects are explained online by the EU Commission, on the EU page on the DMA and the EU page on the DSA.