The latest legislative efforts as part of the Commission’s European Digital Strategy regulate the influence of algorithms on citizens and ensure transparency.
Moving one step closer to implementing one out of six of the European Commission (EC) priorities ‘A Europe Fit for the Digital Age’, the Digital Markets Act (DMA) and the Digital Services Act (DSA) have been agreed upon in record time and entered into force in November 2022 (see SwissCore article). The Commissioner for Internal Market, Thierry Breton, accentuates the adoption of the DMA and the DSA as a milestone by pointing out that a new page is being turned on the ‘too big to care’ platforms. There are some early indications on how the Acts will be implemented in practice.
On one hand, the DMA’s objective is to guarantee more openness and to create a level playing field in the European Union’s digital market. Today, only a few yet very successful online platforms dominate the digital market by controlling a core platform (i.e. search engines, messaging services, etc.), thus creating unfair market competition. They are preventing smaller platforms from scaling up or entering the market in the first place. Because of their monopoly position, these online platforms are referred to as gatekeepers.
The DMA further establishes a set of clearly defined objective criteria to identify large digital platforms as gatekeepers. On 6 September 2023, the European Commission designated six gatekeepers for the first time – Alphabet, Amazon, Apple, ByteDance (Tiktok), Meta and Microsoft. 22 core platform services provided by those gatekeepers have been determined in total. For some of their provided services, Apple (iMessage) and Microsoft (Bing, Edge, and Microsoft Advertising) have submitted arguments to contradict their significant impact on the internal market and, thus, their presumed gatekeeper-status, despite meeting the quantitative thresholds. For those cases, the European Commission has now opened four market investigations. The designated gatekeepers now have a total of six months – until March 2024 – to comply with the full set of obligations under the DMA. Some exemplary obligations include allowing end users to easily uninstall pre-installed apps and unsubscribe from core platform services. Furthermore, third parties need to be able to inter-operate with the gatekeeper’s own services, for instance, by enabling users to receive notifications from other messenger services while using one controlled by a gatekeeper. Business users then need to be able to conclude contracts outside the platform. A prohibition under the DMA consists of ranking the gatekeeper’s own products or services more favourably compared to those of third parties.
On the other hand, the Digital Services Act focuses more on consumer protection, following the rationale that what is illegal offline should also be illegal online. While rebalancing the responsibilities between users, platforms, and public authorities, European citizens and their fundamental rights online are placed at the centre. The DSA includes rules for online intermediary services offering network infrastructure such as internet access, cloud services and online marketplaces. Certain obligations – namely obligations related to risk assessment and mitigation – only apply to the 19 very large online platforms and search engines that the European Commission designated on 25 April 2023. These platforms reach the threshold of at least 45 million monthly active users. The designated very large online platforms and search engines had until 25 August 2023 to comply with all the obligations that arise from the DSA.
Within the aim to protect online users, the DSA obligations put special attention to minors, for instance through creating a new framework for online advertising to limit the use of personal data and protect the most vulnerable users. Consequently, profiling-based advertising aimed at children will be prohibited. End users then need to be able to easily report illegal content, followed by an immediate reaction to such reports by the platforms. The designated large online platforms and search engines need to assess and mitigate their systemic risk and provide tools for effective content moderation. The mandatory risk assessment includes the impact of illegal content and disinformation on the freedom of expression and media freedom. Several major designated platforms have announced changes to their services in the wake of the DSA compliance due date.
Concerning the enforcement of the DSA and the DMA, the European Commission obtains the exclusive power to supervise the designated gatekeepers as well as the very large online platforms and search engines. This direct enforcement of internal market rules combined with the ability to impose supervisory fees to cover the respective costs directly on private companies constitutes new powers for the European Commission. Quite remarkable is the possible extent of the fines in the case of non-compliance. For the DMA, they can amount to up to 10% of the company’s worldwide annual turnover or up to 20% in case of repeated infringements. Sanctions for violations of the DSA will amount to up to 6% of the global annual turnover of the respective company.
Following the new transparency regime in the DSA, the legislation aims to resolve the issue around the ‘black box’ that contains the design and management of algorithms – the heart of most online platforms. Thus far, the influence of algorithmic systems on what we see and how we interact has been an unchecked power due to the lack of data access. To enable public interest researchers to identify societal risks imposed by very large online platforms and search engines, the DSA contains obligations to ensure access to essential information. This is furthermore essential for the implementation and monitoring of the DSA. For the data access and scrutiny obligation to fully unfold its purpose and act as a bridge for researchers to conduct necessary social science research, a public consultation has highlighted some key issues concerning its implementation. These include some clarifications on how Article 40 of the DSA can fit into a typical research cycle as well as the overall facilitation of gaining data access.
As the DMA and the DSA both follow the objective of levelling the playing field in the EU’s digital market, the legislations are all about fostering innovation. As for Switzerland, it remains to be seen whether the gatekeepers respectively the very large online platforms and search engines would implement a different practice than in the EU. Thus, Swiss online businesses can possibly profit from scaled-up innovation through the prevention of unfair practices that distort market competition, at least in the EU.