by William Thomas Field-Papuga

Does the European Commission’s proposal for a Digital Services Act represent a revolution, or is it more of the same approach to online platform regulation? This was the question posed to 22 speakers at the Department of Innovation and Digitalization in Law’s second conference on the Digital Services Act (DSA) and Digital Markets Act (DMA), held on the 1st and 2nd of March 2021. 

Although their reception of the DSA and DMA was overwhelmingly positive, they identified four key issues, among others, that that might compromise the Commission’s attempts to revolutionize governance of the online platform economy.

1. Will measures designed to increase competitiveness in the online services industry benefit consumers?

This question was central to the intervention of Bertin Martens (European Commission) to the panel discussion concerning the DMA. 

The DMA prohibits certain practices presumed to strengthen a platform’s monopoly on the online platform services market (Articles 5 and 6 of the DMA). These might include the tying and bundling of services, such as where the use of an online platform by the user necessarily locks that user into using another service provided by that same online platform. For example, limiting online payment methods to Apple Pay when using iPhones.

However, prohibiting these monopolistic practices may come at the cost of efficiency for the consumer. Martens gave the example of Amazon’s practice in South America of bundling Amazon Prime, which combines its free package delivery service with its video streaming service. Prohibiting this practice would benefit Amazon’s South American competitors, but it would come at the loss of an efficiency for the consumer.

Martens uses this example to suggest that the obligations in the DMA ought to represent “grey-listed” practices, not subject to an absolute prohibition. Online platform services could then defend these practices using an “efficiency defense”.

Alexandre de Streel (Namur University), by contrast, stated that the true aim of the DMA is to create competition within each online platform among its various services; it is not intended to merely multiply the number of providers of identical services. Furthermore, the tradeoff could be better characterized as creating short-term inefficiencies in order to enable long-term benefits for both consumers, through more autonomy and the diversification of user choice, as well as competitors.

Multiple speakers raised the possibility of a liability deficit in the DSA concerning consumer protection. Christoph Busch (University of Osnabrück) stated that the DSA focuses on administrative sanctions in the field of consumer protection, which is to the exclusion of private enforcement remedies. For instance, while a platform may be sanctioned by the Commission for its failure to verify its business customers (Article 22 of the DSA), the individual consumer is given no recourse to make a claim against that platform for the same failure. This would be problematic in a scenario where a consumer has suffered damage after buying a product from an online marketplace and brings a claim against the platform, on account of not being able to identify the seller. Consequently, he proposed that a platform’s failure to verify its business customer should result in the loss of its exemption from liability (see Articles 3 to 5 of the DSA). Vanessa Mak (Leiden University) similarly suggested that the DSA favors creating due diligence obligations over liability. This approach is important for changing behaviors of social media platforms, but creates few options for redress for consumers on online marketplaces. 

Hans Schulte-Nölke (University of Osnabrück) also pointed to the absence of substantive law claims or rights, at a European level, for individual consumers. Furthermore, the DSA might even make online platforms exempt from liability regarding individual consumer claims for failure to comply with the “know your business customer” rule (Article 22 of the DSA). While the modification of other EU legislation, such as the Product Liability Directive, could allow consumers to bring actions, this would exclusively cover personal injuries and not pure economic loss. A potential move in the right direction could be to enable public enforcement officials to accept binding commitments from online platform services that they will compensate injured consumers.

3. Will increased regulation in the space of online platforms come at the cost of freedom of expression?

Jan Penfrat (European Digital Rights) in particular noted that raising the standards on platforms for policing their content would inevitably result in the over-removal of legitimate content. Some articles of the DSA significantly raise the risk for platforms in leaving potentially harmful or illegal content on their services. For example, the DSA rules on the notice-and-action mechanism, whereby notice of a complaint gives immediate knowledge of harmful/illegal content to the platform (see Article 14(3) DSA), which in turn could remove that platform’s exemption from liability (see Articles 3 to 5 of the DSA). This presents platforms with a choice between conducting an immediate and detailed liability risk assessment on each item of flagged content, or simply removing the content without significant contemplation. In this situation, there is no commercial reason for platforms to choose conducting liability risk assessments.

From a statistical perspective, over-blocking legal content creates far less risk for platforms. Rania Wazir (Vienna Data Science Group) stated that the results from research suggest that disadvantaged minorities were the most likely to be affected by algorithmic over-blocking on online platforms. These groups were also statistically less likely to take legal recourse in response to this action. This tends to suggest that over-blocking is least likely to create liability risks for online platforms, thereby making it the more attractive option for platforms. 

The DSA therefore could be misused to limit freedom of expression online, given the high likelihood that giving notice regarding content will result in automatic removal of that content, regardless of whether it is justified or not. Penfrat proposed that the preferred solution should be structural changes to the social media landscape, rather than extending deletion policies. This is partially envisaged in the DMA, which intends to break up monopolies and grant users a choice of more services with different house rules. This may be preferable to a proposal that platforms be required under law to host all content that is legal, since this would in effect make all platforms the same.

By contrast, Ursula Pachl (The European Consumer Organization) stated that while over-blocking on social media may be a major challenge, where online marketplaces are concerned, the exact opposite is the case. She pointed to the general reluctance and inactivity of online marketplaces in blocking harmful products upon notification. 

Multiple speakers advocated combining public and private enforcement in the DSA, particularly in order to protect consumers on online marketplaces. Hans Schulte-Nölke proposes that collective and individual actions for enforcement should complement the administrative enforcement mechanisms. This could be achieved by creating a positive liability in the DSA that a breach of certain obligations, such as the “know your business customer” rule (Article 22 of the DSA), will give rise to individual claims for damages. 

Gerald Spindler (Georg-August University, Göttingen) and Aneta Wiewiórowska-Domagalska (University of Osnabrück) stated that the due diligence and transparency obligations largely replicate the risk assessment model taken in financial market regulation, which have shown mixed results. Spindler suggested that this requires well-equipped administrative authorities, and that tort law, contract law and unfair competition law should be used alongside these administrative methods.   

Petra Leupold (Johannes Kepler University, Linz) and Gerald Spindler pointed to the shortcoming of only using national public administrative enforcement to accomplish the objectives of the DSA. In particular, because the administrative capabilities and procedures of the members states differ significantly. Platforms will likely look to exploit this flaw by choosing to establish themselves in member states with the weakest national enforcement capabilities. While the new enforcement powers given to the European Commission may partially solve this, the drafting experience of the General Data Protection Regulation shows that this mechanism may not make it to the final draft. 

Revolution?

So how can we answer the original question of the conference?

The DSA and DMA continue certain trends in the regulation of online platforms. The overall exemption from liability for online platforms, for instance, remains essentially unchanged from that contained in the eCommerce Directive. Although it provides certain additions in order to remove liability exemptions in the name of consumer protection, many speakers who practice in the area of consumer law claimed that this was far from sufficient.

On the other hand, the introduction of asymmetric obligations in the DMA and the DSA, which create a different set of rules for different genres of platforms, the use of comprehensive due diligence obligations for platforms in the DSA, and the extension of user rights regarding platforms, were regarded as revolutionary approaches to regulating large online platforms.

It is safe to conclude that the Commission’s proposals represent ambitious and bold steps in the right direction. The way in which the drafters respond to criticism, such as that provided in this conference, will determine whether this legislation provides the fundamental revolution that is required in the governance of online platforms.   

The recording of the ID Law 2021 Conference can be found on the Department of Innovation and Digitalization in Law’s YouTube page.

Special thanks is due for the co-hosts Prof Nikolaus Forgó and Prof Christiane Wendehorst, as well as the conference organizers Catherine Altobelli, Tima Anwana, Yannic Duller, Jakob Hirtenlehner, Sebastian Schwamberger, and Nina-Maria Thomic for their hard work in arranging such a thought-provoking conference.