As part of a package of measures to make Europe fit for the digital age, the European Commission proposed a new Regulation on a Single Market for Digital Services (“DSA”) in December 2020.

The DSA is intended to significantly overhaul the regulatory framework applicable to e-commerce and digital intermediaries which dates back from the year 2000. In particular, it would impose new obligations on providers of digital platforms to increase transparency, accountability and risk management requirements.

The DSA is following the EU’s ordinary legislative procedure, giving the European Parliament and the European Council the opportunity to propose amendments, with the goal of all three institutions coming to a joint position. The Council adopted its position (the General Approach) in November 2021, proposing several changes to the draft Regulation, and the Parliament has now also adopted a position. This opens the way for negotiations between the European Commission, the Parliament and the Council to adopt a joint position, known as the “trilogues”.

The Parliament proposes moderate but extensive amendments

The Parliament position report was published on 20 January 2022, following an intensive process during which it worked through a plethora of amendments. While the Parliament was generally supportive of the proposal, it has added additional obligations and requirements and sought to enhance user rights (read more on this in our previous blog post).

However, it appears it has abandoned some of the more extreme amendments. In particular, the proposal to ban targeted advertising has been toned down so as to only prohibit advertising targeted at minors or using sensitive personal data for targeting purposes (such as biometric and health data or personal data on racial or ethnic origin, political opinions, or religious or philosophical beliefs).

That said, even if the more extreme proposal for an advertising ban has been abandoned, if advertising using sensitive or children’s data is banned or if any other restrictions are agreed during the trilogues, this may require significant changes to existing advertising processes which are core to the funding of the free internet. It will also be interesting to see how (and if) the provisions on advertisting in the final text of the DSA can be reconciled with those in the Digital Markets Act (DMA) (the other major piece of legislation alongside the DSA to regulate digital services), or whether there is any potential for conflicting or overlapping provisions.

The Parliament has also rejected amendments to turn recommender systems off by default (these are systems which use personalised content offered to users on the basis of user preferences). Instead, digital platform providers must offer greater transparency on the parameters used to recommend content and allow users to modify those parameters.

The Parliament’s amendments are still extensive and modify almost all provisions of the DSA. While not as extreme as feared by some, it is still likely extended negotiations between Parliament and Council representatives will be needed.

Re-examination of the hosting defence

This re-examination extends to the hosting defence – a principle that is core to the current eCommerce Directive and the new DSA. In order to get the appropriate balance between fundamental rights, including freedom of information, the Parliament has suggested additional safeguards for both digital platform providers and users:

• Member State authorities wanting to issue orders to remove content or provide information on service recipients will be subject to additional formalities and the Parliament proposes those orders to be issued to the most appropriate provider where multiple providers are involved.
• Providers of intermediary services should have a right to an effective remedy once they have received an order to remove content or provide information on service recipients, for example a right to challenge that order. In addition, national regulators (known as Digital Services Coordinators) will have the right to: (i) intervene on behalf of the provider in any proceedings relating to an order, (ii) request the withdrawal or amendment of an order, and (iii) bring their own annulment proceedings against the order.
• Recipients of an intermediary service should also have an effective remedy against content removal before the courts of the relevant Member State, as well as access to a point of contact at the provider of the intermediary service.
• Finally, users who flag content as illegal should have the option to remain anonymous toward the recipient of the service who provided the content. In a similar vein, the Parliament wants to beef up the reporting obligations on digital platform providers in the DSA so they must inform authorities as well as purchasers of illegal products or services as soon as they become aware of the illegality.

New safeguards for users

Finally, the European Parliament has proposed a range of rules and principles to protect users, including:

• New requirements for user interfaces and controls, including a prohibition on making it significantly more cumbersome to terminate a service than to sign up for it or to repeatedly ask for consent where the user has already made a choice.
• An obligation for providers of online platforms to satisfy certain accessibility criteria, including both a general obligation to make required information easy to find and understand and a duty to ensure access for persons with a disability.
• Giving users the ability to appeal against the decision of online platforms to reduce their ability to generate revenue from the content they have provided and requiring very large online platforms to label deep fakes as such when they are aware of their nature.
• Further empowering users, including a right to damages if users suffer losses, and requiring the involvement of user representatives in risk assessment and risk mitigation measures.

What’s next?

The next step is the so-called “trilogues”. They are currently scheduled to run through April, with the French presidency having voiced the ambition to come to a final agreement between the institutions by the end of June.

However, with the European Parliament’s proposed amendments touching upon nearly every aspect of the draft DSA and at times diverging substantially from the original Commission draft, the road to adoption is likely to be strenuous.