A new milestone in the regulation of the platform economy: the Digital Services Act and Digital Markets Act
Over the last years, large digital platforms like Amazon, Apple, Amazon, Google or Facebook have changed the way many sectors of our society and economy function. While the benefits of this transformation are evident, the position gained by some of these actors in the online platform ecosystem raises concerns in terms of fair competition and potentially undermines core values of our society and economy, including democracy and the protection of fundamental rights.
In response to this, the European Union is working on two regulatory acts that will upgrade the current rules governing digital services: the Digital Services Act (DSA) and Digital Markets Act (DMA). Specifically, on 24th March 2022 the European Parliament and the EU Council reached a political agreement on the text of the DMA. More recently, on 22nd April 2022, a political agreement was reached on the DSA. Before entering into force, both will need to be formally adopted by the Council and face a final vote in the Parliament. This legislature will represent a major milestone for the creation of guardrails for large platforms operating in the European single market.
Fairer competition in the online platform ecosystem: Digital Markets Act
According to the rapporteur from the Parliament’s Internal market and Consumer Protection Committee Andres Schwab (EPPD, DE), “With the Digital Markets Act, Europe is setting the standards for how the digital economy of the future will function. […] Europe is thus ensuring more competition, more innovation and more choice for users”.
The DMA is a response to many of the issues highlighted by the Observatory for the Online Platform Economy in its research activities as it seeks to prevent Big Tech companies, also known as “gatekeepers”, from misusing their economic power and gatekeeper status and to allow new and smaller firms to grow and innovate. It aims to do so by requiring Big Tech companies to let their core platform services, when identified as gatekeeper services (e.g. browsers, search engines, messaging services) intertwine with those of rivals, therefore stopping them from imposing unfair conditions on other businesses and consumers. By specifically targeting large digital platforms, the law avoids any form of overregulation for small businesses and start-ups to facilitate their entrance in the marketplace, thus ensuring fairer competition.
The Observatory for the Online Platform Economy, supported by its Expert Group and its Support Study, played an important role in the preparatory work for the DMA’s proposal by providing a number of reports and analytical papers feeding into the work on the definition of problems. The Observatory, supported by the contractor, will also continue to monitor the developments in the online platform economy, including the changes in online platform ecosystem brought by the initiative.
Safer digital space: Digital Services Act
While the DMA aims to ensure contestable and fair markets in the digital sector in the internal market, the Digital Services Act focuses on what is offered on the platforms to ultimately curb illegal content and misinformation.
In this regard, the legislation empowers users to control what they see online: they will have information over why certain content is recommended to them and will be able to opt-out of profiling activities. The profiling of users based on the use of sensitive data like sexual orientation, religion and political beliefs will be restricted in the context of providing digital advertising. Additionally, the new rules will improve the timely removal of illegal content and the identification of political or health-related disinformation.
Finally, for the first time, big tech companies will need to provide access to platform data and insights into their algorithms to independent auditors, regulators and third-party researchers to ensure greater scrutiny and accountability.