The European Parliament adopts two legislative initiatives setting out its stance on the Digital Service Act

On 20 October 2020, the European Parliament set out its stance in relation to the upcoming Digital Service Act  (“DSA”), with Members of the European Parliament (“MEPs”) overwhelmingly approving two legislative initiative reports: one relating to improving the functioning of the single market and the other on adapting commercial and civil laws for commercial entities operating online.

The DSA is an ambitious legislative package announced by European Commission President Ursula von der Leyen in her political guidelines in July 2019, and which was subsequently formally adopted by the Commission in its communication 'Shaping Europe's digital future' in February 2020. The DSA is intended to modernise the legal framework for the regulation of  digital services, which have until now been largely governed by the e-Commerce Directive adopted in the year 2000. The Commission also intends to introduce an additional legislative package which will include new ex ante regulatory rules for those platforms which are seen as ‘gatekeepers’ to the internet (such as Google and Facebook).

On 2 June 2020, the Commission initiated a public consultation in relation to the DSA and the new ex ante regulatory rules. The deadline for submissions from interested parties was the 8 September 2020; publication of the findings is still awaited.

See our previous blog post on the DSA here.

The European Parliament’s recommendations

The European Parliament’s recommendations in relation to the DSA (as set out in the new legislative initiative reports) include:

• Tougher regulation for targeted advertising

One of the more controversial proposals by the MEPs is centred around targeted advertising. MEPs have backed the inclusion into the DSA of more stringent restrictions on targeted advertising (as compared to contextual advertising, which is based on the content of the website the advertisement appears on and is therefore less dependent on personal data). MEPs have advocated legislation that gives users more control over the advertisements they see online, with an option to opt-out of targeted advertising on content hosting platforms. Going further still, the text adopted by the MEPs invites the Commission to consider a phase-out of targeted advertisements, eventually leading to a general prohibition against targeted advertising within the EU.

Although targeted advertisements have drawn criticism from regional law-makers, they remain an integral part of the business model for many content hosting platforms. During an EU policy debate in September 2020 Nick Clegg, Facebook’s Vice-President for Global Affairs and Communications, claimed that ‘personalised advertising’ benefits SMEs, allowing them to compete on an equal basis with larger and better-resourced businesses to reach customers.

The Commission can be expected to carefully consider the opposing views on targeted advertising as the MEPs’ proposals, if introduced, would drastically impact the business models of Facebook, Google and other major stakeholders in the digital economy.

• Tougher rules to tackle illegal content

The European Parliament has stressed the importance of the upcoming DSA making a clear distinction between illegal and harmful content, and proposes that the content management measures in the DSA should only be applicable to illegal content aimed at consumers within the EU.

To tackle illegal content the MEPs propose that the DSA should put in place a harmonised and legally enforceable “notice and action” mechanism for online services which would facilitate the notification and reporting of illegal content by users to content hosting platforms. The hosting platform would then be required to verify the notified content and reply in a timely manner to the notice provider and the content uploader with a reasoned decision. It has been stressed that the notice and action mechanism must be “human-centric” to reduce the incidences of false positives regarding content taken down.

The MEPs’ proposals also provide for an independent dispute mechanism for disputes regarding content management, with the dispute bodies to be provided for by Member States. The MEPs have highlighted the importance or quick and efficient extra-judicial recourse for deciding the legality of user-uploaded content in light of the immediate nature of content hosting.

The recommendations acknowledge that this process could be open to abuse and therefore place onerous compliance obligations on content hosting platforms. To mitigate this, MEPs have stated that safeguards should be set up to prevent abusive behaviour, however, the substantive detail of these safeguards is not provided.

• Specific ex-ante rules for “gatekeepers” of market access

As well as amending the e-Commerce Directive, the MEPs call for the Commission’s legislative package to introduce ex-ante rules on ‘systemic operators’ (a phrase MEPs recommend is clearly defined on the basis of objective indicators) which take up a de facto gatekeeper role within the digital economy. The ex-ante regulation mechanism would aim to prevent rather than merely remedy market failures with the aim of opening markets to new entrants and SMEs.

• European entity tasked with ensuring compliance

To ensure compliance with the provisions of the DSA, the MEPs recommend that a European entity (either an existing or new European body or the Commission coordinating a network of national authorities) be set up to monitor content hosting platforms. To strengthen the position of the European entity, it would have the ability to impose fines on content hosting platforms for non-compliance with the new rules.

Further obligations would be put on content hosting platforms with significant market power, which under the proposals would be required to produce a biannual report to the European entity setting out the fundamental rights impact and risk management of their content management policies.

Looking ahead

The European Parliament’s legislative initiative reports will now be sent to the Commission to feed into the Digital Services Act, which is due to be published in December.

Although the recommendations put forward by the MEPs are non-binding on the Commission, they are likely to be taken by Commission lawmakers as a strong steer in respect of the content of the DSA, particularly since the DSA will ultimately need to be backed by the EU Parliament (and the Council) in order to be adopted into EU law. If the Commission intends to reject any of the proposals it will also need to communicate the grounds for such rejection to the European Parliament.