The European Commission has proposed two legislative packages governing the digital economy. How will they affect innovation, research and education sectors?
As the EU’s digitalisation objectives take shape with the newly published Digital Compass (see SwissCore article), the broader digital strategy is also moving ahead. The Digital Services Act (DSA) and the Digital Markets Act (DMA) are the legislative initiatives that the European Commission (EC) proposed in order to invigorate the regulation of the digital economy in the EU. They were unveiled on the 15th of December 2020 and are part of the European Digital Strategy. This Digital Strategy, which is part of the EC’s priorities for the 2019-2024 period, rests on three pillars: (i) technology that works for people, (ii) a fair and competitive digital economy and (iii) an open, democratic and sustainable society. Based on these three pillars, the EC hopes to boost Europe as a global digital leader.
The first pillar of the strategy aims to promote and eventually regulate the development of new technologies. As such, it includes considerations on key technologies, i.e. the upcoming Strategy for Artificial Intelligence. In parallel, this first pillar also focuses on providing citizens with the skills to understand and use digital technologies, as stated in the European Skills Agenda. The second pillar aims to ensure the respect of EU values in the digital economy, in particular to guarantee fairness, and manage data collection and use. To this end, the EC developed a European Strategy for Data, with the goal of balancing the dangers of data collection against the potential benefits of data-driven applications. The DSA and the DMA lie at the heart of this second pillar: the former seeks to create a safe digital space where rights of users are protected, while the latter aims to foster innovation, growth and competitiveness in the European Single Market and beyond. Finally, the third pillar aims to create a trustworthy digital environment, based on democratic values and promoting sustainability. This includes actions combatting disinformation, building a safer internet and developing trustworthy e-Services. With these three pillars, the EC seeks to cover the wide range of challenges that need to be tackled in the digital space.
Within the framework of this strategy, the DSA aims to ensure the second goal while bolstering the growth of smaller platforms, SMEs, and start-ups. The DSA intends to implement rules that better protect users’ rights online and to make online platforms more transparent and accountable in their actions. For citizens, this means making available a broader spectrum of secure and affordable digital platforms. For providers of digital services, the DSA seeks to harmonise the rules throughout the EU in order to make Europe more competitive in the start-up field. Indeed, the EC is conscious of the risk of legal fragmentation caused by disparate national initiatives, creating barriers in the internal market for SMEs and start-ups likewise. Member States such as Austria and Germany have already established national rules on content moderation and transparency obligations for online platforms. Until now, it is unclear how the DSA and national rules will relate to each other. As a result, one of the objectives is to make EU-wide markets more accessible through digital platforms. The DSA also wants to mitigate manipulation and disinformation on a large scale in Europe, by enabling greater democratic control in the digital field.
In parallel, the DSA’s sister initiative, the Digital Markets Act, aims to guarantee fairness and openness in digital markets. Indeed, digital markets have tended towards a structure where successful online platforms dominate the digital scene, a self-reinforcing trend preventing smaller platforms from scaling up or even entering markets. The EC aims to tackle the resulting unfair market competition through legislation that would force `gatekeepers´ in digital markets to respect a number of obligations, ensuring market fairness. `Gatekeepers´ are defined as companies that control a core platform service (i.e. search engines, messaging services, etc.) and fulfil three cumulative quantitative criteria linked to their size and omnipresence on the market. The obligations set by the EC focus on transparency, limiting non-legitimate restrictions on customers (e.g. having to use a given software with a given platform) and activities and advertisement data sharing. The EC could fine infringements by `gatekeepers´ up to 10% of their total worldwide annual turnover, with possible additional periodic penalties.
Regarding innovation, both the DSA and DMA are efforts to level the playing field by introducing new measures to eliminate disincentives and enable innovations to scale up faster. The main differences between the two legislative packages are that the DSA focuses on user and consumer protection, whereas the DMA seeks to prevent unfair practices regarding market competition.
The DSA thus aims to improve consumer protection and fundamental rights online by establishing a transparency and accountability framework for online platforms. For instance, online platforms are forced to be more open about their internal processes. In this way, the act wants to enforce human-centric and European values in the digital sphere.
The DMA, however, seeks to protect and improve businesses operating on online platforms by enabling them to have access to their own data from the platform and levelling the playing field. Certain gatekeepers currently create unfair conditions for businesses on their platform, for instance ranking their own products above the ones from other businesses. With the DMA, the EC addresses such issues regarding competition on online platforms: high entry barriers and unfair competition practices. By limiting platforms from excessively exploiting their market position, it enables new market entrance to compete with incumbents, thereby stimulating innovation.
On the research scene, the DSA and the DMA should have less direct impact. The DSA does include obligations on data sharing with authorities and researchers for online platforms. Researchers, therefore, will have access to key data and will be able to analyse algorithms. The objective is to allow researchers to better asses the evolution of online risks, societal impact of online platforms, advertisement displays and recommendation systems. Improved data access should allow for more in-depth analysis of online services, thus benefiting civil society and regulatory organs.
With regard to education, the DSA will play a prominent role in the EC’s commitment to close the gap in digital illiteracy of Europeans, by ensuring that 70% of adults have basic digital skills by 2025. This objective falls within the scope of the Digital Education Action Plan, where the EC plans to create common guidelines for teachers and educational staff to foster digital literacy and tackle disinformation. One of the DSA’s principal aims is to create a safer digital world and to allow greater democratic control. Thus, in order to fully implement the DSA and DMA packages, users need to have a sufficient level of media and digital literacy, to help distinguish the truth when navigating. This is why augmenting digital skills, by means of education and training throughout the EU, is a top priority in the Commission’s vision of Europe’s digital transformation by 2030 (see SwissCore article).