European parliament backs ‘historic’ reboot to EU’s digital rulebook

The European Parliament has given a final stamp of approval to two major pieces of regulation which will update the EU’s rules for digital businesses.

The Digital Markets Act (DMA) will introduce new ‘ex ante’ competition rules for gatekeeping tech giants to ensure markets are fair and open; and the Digital Services Act (DSA), which applies more broadly — to services and platforms both large and small — will set governance rules around the handling of illegal content and products, as well as dialling up broader accountability on larger platforms which have extra responsibilities under the framework.

The incoming regulations were proposed by the Commission at the end of 2020 so adoption has been swift — reflecting broad consensus by lawmakers around the bloc on the need for tougher and tighter rules for online services.

The regulations are expected to start applying early next year after the formal adoption process is completed. Today’s plenary vote of the parliament follows political agreement on the two files reached between the EU’s co-legislators earlier this year — back in March for the DMA; and April for the DSA.

You can read our earlier coverage of those political deals — which is the core of what the parliament has confirmed its backing for today — here:

The European Commission, which drafted the laws, welcomed the parliament’s formal adoption of the files — with internal market commissioner, Thierry Breton, dubbing the “landslide” vote “historic“.

The parliament voted 588 in favor of the DMA; while 539 MEPs backed the DSA.

Commission EVP Margrethe Vestager also put out a statement — lauding what she described as a “global first”:

“The European Parliament has adopted a global first: Strong, ambitious regulation of online platforms. The Digital Services Act enables the protection of users’ rights online. The Digital Markets Act creates fair, open online markets. As an example, illegal hate speech can also be dealt with online. And products bought online must be safe. Big platforms will have to refrain from promoting their own interests, share their data with other businesses, enable more app stores. Because with size comes responsibility — as a big platform, there are things you must do and things you cannot do.”

From here, there are just a few steps left in the EU’s lawmaking procedure: Notably, formal approval of the texts by the Council — after which they will be published in the EU’s official journal, coming into force 20 days later (so the expected timeline is the fall; although, as noted above, application of the laws won’t start until 2023 — with some DSA provisions having a longer application period).

Enforcement

The Commission will be taking up a major enforcement role for both regulations.

Under the DMA fines for breaches can scale up to 10% of a tech giant’s global annual turnover — or even as much as 20% for repeat offenders. While penalties under the DSA can be up to 6% of global annual turnover. So the stakes are high for all concerned.

Many questions remain over enforcement resourcing, and how generally fit for purpose and ‘fleet of foot’ the EU’s executive will prove to be for such a massive new regulatory duty.

Likely in response to some of this concern, Breton has offered a “sneak peak” of how the Commission is approaching its new oversight duties.

Writing in a blog post published on LinkedIn today, following the parliament vote, he said the Commission will set up dedicated teams within the EU’s Directorate General for Communications Networks, Content and Technology (aka, DG Connect) — which will be “organised around thematic domains”, including “the societal aspects, the technical aspects, and the economic aspects”.

“Issues such as risk assessments and audits will be handled by the societal issues team,” he writes in the post, offering a few examples of how these teams’ duties will shake out. “The technical team will take responsibility for issues such as interoperability of messenger services or the use of non-fungible tokens for product tracing, or the development of standards supporting the new rules.

“Finally, the economic team will cover DMA-related unfair trading practices, such as data accessor so-called FRAND conditions; or ensuring respect to the DSA-related liability exemptions or ‘know-your-business customer’ rules for marketplaces.”

He also notes that the teams will work closely together to avoid too siloed a response to platforms that he acknowledged “usually” create cross-cutting challenges — also with a “program office” taking a coordinating role and dealing with “international issues and litigation”.

So the Commission is clearly preparing for tech giants to push back against its centralized enforcement — and perhaps also to enlist their own politicians to use high level channels to complain (and potentially retaliate; tariffs anyone?) on their behalf.

The EU has said it will boost staffing levels next year and in 2024, and seek to ramp up internal technical expertise, to meet the demands of the enforcement role — in addition to redeploying some existing staff and resource to the new duties. But in the blog post Breton said he expects the dedicated DMA and DSA DG Connect team to have more than 100 full time staff following this recruitment drive.

Questions are likely to remain over whether that level of resource will be enough for the incoming major workload attached to regulating scores of large (and some truly massive) platforms.

The Commission is partially recouping the cost of staffing DSA enforcement by levying a fee on larger platforms and big search engines.

Breton’s post notes this without specifying the fee platform giants will have to pay — but reports have suggested platforms were successful at lobbying to shrink how much they’ll have to shell out for being policed. So the resourcing concern seems likely to stick around.

Another new component of the EU’s oversight of platforms which Breton does include in his sneak peak involves establishing what he refers to as “a high-profile European Centre for Algorithmic Transparency” — which the EU wants to underpin the DSA’s algorithmic transparency requirements for very large online platforms’ (aka VLOPs).

“This new Centre will attract world-class scientific talent in data science and algorithms that will complement and assist the enforcement teams,” he suggests.

Again, though, whether the Commission will be able to pay enough to attract the necessary talent for the scale and complexity of grappling with platforms’ black boxes remains to be seen.