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Digital Services Act (‘DSA’) and Digital Markets Act (‘DMA’) – the home stretch!

13-01-2022

On January 1, France took over the presidency of the European Union from Slovenia. Until June 30 this year, the Élysée Palace takes lead in guiding European policy, and one of France’s priorities is to conclude negotiations on the Digital Services Act (“DSA”) and Digital Markets Act (“DMA”).

On December 15, 2020, the European Commission presented the DSA and DMA, and there has been considerable progress over the past year. Last Tuesday, trilogue negotiations between the European Parliament, European Commission and the Council of the European Union (‘Council’) on the DMA began. The negotiators would like to conclude these as early as March 29. So far, we see that the Parliament is most ambitious to curb the power of big tech companies, where the Council has stayed closer to the Commission’s original text proposal. The same is true for the DSA.

This blogpost provides a brief insight into what has happened so far, and looks ahead to the final phase of the legislative process

Route The Hague – Paris

More than a year and a half ago (May 2019), we first wrote about the Dutch ambitions in terms of digital platform regulation here. On May 17, 2019, then State Secretary for Economic Affairs, Mona Keijzer, proposed several measures to be able to intervene at the European level in competition issues.

Keijzer found support from the French, among other Member States, resulting in joint positions on the subject: a modest novelty. Historically, Paris and The Hague have difficulties finding each other on important European issues, but Brexit has forced the Netherlands to seek new allies. In addition, both countries are often at the forefront when it comes to regulating the digital platform economy. On behalf of the Netherlands, the new Minister of Economic Affairs Micky Adriaansens (VVD), who took office this week, now seems to be the designated Minister to represent the Dutch DMA and DSA position – although Hans Vijlbrief, State Secretary for Competition, might also be eligible to take on the DMA dossier. A decision on this will reportedly be made next week. In any case, both can make good use of the ‘French-Dutch axis’ that has been created around the theme of tech regulation.

Brussels at Full Steam Ahead

After the publication of the DMA and DSA in December 2020, the Council proceeded quickly, and began tinkering and negotiating the proposals in Council’s Working Group in January 2021. At the EU Competition Council on May 27, the first progress could already be validated by the responsible Ministers. In the months that followed, work was continued by the Council’s preparatory groups, and on 25 November the Competitiveness Council reached an agreement on the Council’s “general approach”. Including the following changes:

DMA

  • A shortening of deadlines for the designation of platforms with a gatekeeper function and tightening of the definition criteria;
  • Adjustment of the structure and scope of the obligations (Art. 5 and 6) in several areas. For example, end users should be able to unsubscribe from core platform services more easily;
  • For the sake of harmonization, it is confirmed that only the Commission may enforce, but Member States may authorize their competition authorities to investigate possible non-compliance and to transmit their findings to the Commission.

DSA

  • Adds additional obligations for online marketplaces and search engines, and stricter rules for very large online platforms;
  • The text allows national authorities to give digital platforms direct orders regarding illegal online content and obliges platforms to keep authorities informed of their actions (“feedback obligation”);
  • In terms of enforcement, it retains the country-of-origin principle but at the same time grants exclusive enforcement powers to the Commission, allowing it to tackle systemic infringements by very large online platforms and search engines.

The European Parliament began their scrutiny a bit later, due to a competence fight between different Parliamentary committees. It finally cut the knot in April: the IMCO (internal market) committee was put in charge of both DMA and DSA. ECON (economic affairs) and ITRE (industry) were designated as “co-responsible,” and were even given “additional opportunities” for a say in the final Parliament position.

German MEP Andreas Schwab (EPP) was put in charge of writing the DMA report from IMCO, and Danish Christel Schaldemose (S&D) that on DSA. Based on their draft reports, other MEPs submitted thousands of amendments, between which compromises were sought from September onwards. On December 15, there could be a plenary vote on the DMA position of the EP. There was more disagreement on the DSA, and it will follow later this month. Key EP positions on the DMA and DSA include:

DMA

  • Quantitative criterion of market capitalization to designate ‘gatekeepers’ is increased from 60 to 80 billion;
  • Additional requirements on use of data for targeted or micro-targeted advertising and interoperability of services;
  • Provides for restrictions on “killer acquisitions”: in cases of systematic non-compliance, the Commission can prohibit digital gatekeepers from making acquisitions that harm emerging competition.

DSA

  • Certain exemptions from DSA obligations for micro and small businesses;
  • Greater protection of minors for direct marketing and targeted advertising for commercial purposes;
  • Online platforms should be prohibited from using deceptive or nudging techniques to influence users’ behavior through “dark patterns”

The Home Stretch?

Last Tuesday, the trilogue negotiations on the DMA began, with the aim of agreeing on a final text. The Parliament, through rapporteur Schwab and his “shadow rapporteurs” will defend its position, and the French Presidency will do the same for the Council. Commissioners Vestager and Breton, and (senior) Commission officials, are acting on behalf of the Commission as an ‘honest broker’ in these negotiations. In recent months a ‘DMA task force’ has been set up for that purpose, consisting of officials from DG COMP and DG CNECT. They have also held numerous discussions with interested companies, NGOs, governments and citizens, and must steer the discussions between Parliament and Council at a technical level.

The negotiators are aiming for an agreement by the end of March, in order to be ready before the French presidential elections. It is doubtful whether this will be possible, given the differences in insight that still need to be bridged between Parliament and Council.

Public Matters advises companies and other organizations that are active in the tech sector, or that are indirectly / directly affected by the impact that the DSA and DMA will have. Check out this page for more information.

"So far, we see that the Parliament is most ambitious to curb the power of big tech companies, where the Council has stayed closer to the Commission's original text proposal."

Jonathan Provoost

Consultant

+31 (0)70 3046 499

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