2020-09-30
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New EU Digital Services Act updates e-commerce rules.

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Posted by Christine Jackson on 30 September 2020

Christine Jackson - Commercial Contracts Solicitor
Christine Jackson Partner

In a recent press conference announcing the approval of amendments to the EU’s Digital Services Act (DSA) by the Commission’s Internal Market Committee, its spokesman noted that the Act provides an ‘opportunity to provide a better, safer digital environment for both companies and users throughout the EU’. Many of the most familiar online platforms (including facebook) did not exist in 2000 when the current E-commerce Directive was adopted and, since then, the digital landscape has undergone significant, fundamental change. More recently, the demands placed on the digital infrastructure by Covid-19 has increased the pressure to revise the regulations governing online commercial activity. The European Parliament is expected to vote on the legislation during the 19-22 October plenary with the expectation that the Act will be adopted before the end of the year.

Protecting consumers online

The Digital Services Act (DSA), following a public consultation in the summer and subsequent revision by MEPs, is designed to create a safe environment for e-commerce and social media use by enhancing transparency and increasing supervision and enforcement in order to protect consumers. The DSA will also ensure free and fair competition for new digital players by introducing ex-ante regulations to stop large digital platforms from preventing SMEs and start-ups from entering the online marketplace.

Guided by the principle of ‘what is illegal offline is also illegal online’, the DSA aims to become a ‘standard-setter for the rest of the world, as it did with data protection’ and will apply to all platforms, regardless of where they are based, that target EU citizens. The DSA, once ratified, will also apply to the UK while we remain in the process of leaving the EU. Even when the UK has left the EU, all UK-based online platforms through which e-commerce is conducted in the EU will have to abide by the new DSA regulations.

Principal changes

The critical areas covered by the DSA include:

  • The requirement for platform providers to be proactive about detecting and removing online retailers selling illegal, counterfeit and unsafe products, including making false claims. Consumers who have bought non-compliant products should be alerted once the products have been removed from the website.
  • The ability for users to alert platforms to illegal content and for those platforms to react quickly and transparently in removing that content.
  • An acknowledged distinction between illegal content and harmful content. The former is subject to EU and national law.
  • Under the principle of ‘know your business customer’, online platforms must prevent fraudulent companies selling unsafe and / or illegal products and services via their services.
  • The right of consumers to know if an online service is enabled by AI and giving them the right to opt-out of such services.
  • Tightening up rules on targeted advertising and micro-targeting of users along with reduced tracking of their online interactions.
  • Ex-ante rules for large platforms to prevent them from stopping smaller players from accessing the online marketplace.

‘Notice and Action’ system to be codified

Under the E-Commerce Directive, platforms have to operate a ‘notice and action’ system, which requires them to remove illegal content but in whichever way they see fit. The DSA now seeks to codify this system by giving the platforms clear guidance on how they must deal with this material so that they all do so consistently. The DSA is not seeking to change the legal liability regime; platforms will not be liable for illegal content uploaded by users but they will be judged on the speed and manner in which they deal with that content as soon as they are aware of it. In essence, the DSA is bringing the regulations around digital services up to date by protecting consumers online and ensuring that all platform providers behave in a transparent, fair and consistent way.

Tags: Commercial

About the author

Christine helps clients manage risk and financial exposure in their day to day business dealings.

Christine Jackson

Christine helps clients manage risk and financial exposure in their day to day business dealings.

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