Just as the European Parliament and the EU’s Council of Ministers are gearing up to begin their scrutiny of the European Commission’s December 2020 proposals for a Digital Services Act (DSA) and a Digital Markets Act (DMA), it is timely to recall why BEUC welcomes these proposals as an important step forward to tackle the threats to consumers in the digital economy and what the potential pitfalls are.
These two measures could significantly improve the way Europe’s digital economy works, give consumers a fairer share of the benefits of digital services, and boost consumer protection in the online world.
However, two conditions must be met if the DSA and DMA are to achieve their objectives. First, the European Parliament and EU’s Council of Ministers must close some major loopholes in the Commission’s proposals. Second, they must resist heavy lobbying, notably from tech giants such as Google, Amazon, Facebook, Apple and Microsoft, seeking to dilute and neutralise these proposals.
Strong and weak points of the DSA
The DSA sets forth obligations on platforms to tackle illegal activities online. BEUC particularly welcomes that online marketplaces would have to make sure traders on their platforms could be identified.
We also welcome that the rules would apply to intermediary service providers, including those established outside the EU, that there are rules to ensure greater transparency on online advertising and that consumers would have the possibility to have content recommended to them that is not based on profiling.
However, for the DSA to be more effective the Parliament and Council should close a number of loopholes. As a starting point consumer protection must be defined as an explicit objective of the DSA and this needs to be reflected in the text, especially in the areas of liability, responsibilities and enforcement.
First, the DSA must clearly provide for liability of online marketplaces so that consumers can seek damages in certain cases. Platforms do not need further protection, but consumers do. The proposal partially addresses this, but only in case of confusion over the identity of who the consumer is entering into a transaction with.
Platforms do not need further protection, but consumers do.
Second, platforms need clear responsibilities, so liability is only used as a last resort. Some of the obligations proposed should apply to all platforms, not just very large ones. In addition, some obligations should be strengthened. For example, online platforms should be obliged to conduct random spot-checks on products and services, just like consumer organisations do. Currently, this only happens on a voluntary basis without consequences for failure to act.
At the moment, it only takes minutes to list or promote an illegal product online on a platform like Amazon, as there are no meaningful controls. This happened to UK’s BEUC member organisation Which?. Despite reporting about very dangerous child car seats over the years, Which? could still post them in a matter of minutes, remaining online until Which? decided to remove its post due to platform inaction.
Third, the DSA enforcement system is based on the country-of-origin principle also to determine jurisdiction. BEUC welcomes that a company can act in the whole EU if it is established in one EU market. This opens the door for more competition and consumer choice. However, complaints should be dealt with where consumers are affected, not where a platform is established. This is particularly important for major platforms. The possibility for the Commission to intervene if national authorities fail to take action is positive, but we fear it may be too late to deliver swift and effective redress. The rules on enforcement and redress need to be fine-tuned.
Complaints should be dealt with where consumers are affected, not where a platform is established.
Strong and weak points of the DMA
The DMA would allow the Commission to pro-actively tackle unfair behaviour by gatekeepers and make it easier for new entrants to break into digital markets. This would act as a complement to reactive enforcement under the EU’s competition rules.
BEUC welcomes the fact that the Commission would be responsible for EU-wide enforcement, that gatekeepers will be subject to some strong obligations and prohibitions and that there are provisions to update the rules in line with technical progress and market developments.
However, the Commission’s proposal can only be a starting point. In particular, the European Parliament and Member States should put more focus on consumers whereas the current DMA proposal is mainly concerned with unfairness towards other businesses and business customers.
The DMA should also make it easier for companies to compete with gatekeepers on their core services, rather than just ancillary services. As part of this, the DMA should allow the possibility to impose effective interoperability requirements so that, for example, competitors could offer a competing social media network that would allow consumers to post messages from their social media network to e.g. Facebook.
The European Parliament and Member States should put more focus on consumers whereas the current DMA proposal is mainly concerned with unfairness towards other businesses and business customers.
The DMA would prohibit gatekeepers from using technical and legal barriers to prevent end users from switching providers, being able to uninstall apps, install other apps or app stores or make use of data portability. This is not enough to ensure consumer choice. The DMA must also outlaw the use of ‘dark patterns’ and other non-neutral choice architecture which surreptitiously influence consumers’ behaviour, including in relation to the giving of consent. These can be equally effective barriers to genuine consumer choice.
The currently proposed sanctions for breach of the law are too weak and would take too long to effectively correct infringements. The Commission can impose cease and desist orders and fines but this may well be insufficient to deter violations or to repair the damage they have caused.
The Parliament and Council should make it easier, and quicker, to impose behavioural and structural remedies for non-compliance. Under the current proposal such remedies could only be imposed for systematic non-compliance, for example if the gatekeeper had infringed the rules three times in the last five years and “further strengthened or extended its gatekeeper position” and then only after a market investigation. This is too slow to make sure contestability is not irretrievably harmed in fast moving digital markets.
Deadlines currently tend to favour gatekeepers. For example, a gatekeeper would be entitled, within just three months, to request the Commission to suspend new obligations and prohibitions while decisions on gatekeeper obligations would take significantly longer.
Heavy duty lobbying to water down DSA and DMA
The tech giants and their allies will fight tooth and nail to roll back the Commission’s proposals because the legislation would oblige them to fundamentally change their current, hugely profitable business practices that allow them to game the digital economy to suit their narrow, vested interests.
Indeed, the Commission’s proposals may indicate that the tech giants have already proven the effectiveness of their lobbying, by for example largely limiting the main focus of the DMA to preventing gatekeepers from expanding into additional markets rather than increasing competition in the core services they offer.
The tech giants themselves constitute an extremely well-financed and influential armada of lobbyists. They are also likely to deploy the dozens of supposedly independent think tanks that they are involved with. There is also the problem of academics’ “independent” research that in practice is sponsored by Big Tech.
Nevertheless, BEUC trusts that the EU institutions will not allow the huge resources and firepower of the Big Tech lobby to divert them from reshaping Europe’s digital landscape to the benefit of consumers and other end users.
Ursula Pachl is Deputy Director General at BEUC.