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Tech & Sourcing @ Morgan Lewis

TECHNOLOGY, OUTSOURCING, AND COMMERCIAL TRANSACTIONS
NEWS FOR LAWYERS AND SOURCING PROFESSIONALS

The European Commission (Commission) published the first draft of the Digital Services Act (DSA) and the Digital Markets Act (DMA) on December 15 2020. Morgan Lewis previously reported on the anticipated DSA.

The DSA and DMA are intended to modernize the legal framework for digital services in the European Union. The Commission announced these legislative reforms in January 2020 as part of its “Shaping Europe’s Digital Future” initiative.

The DSA reforms the ecommerce directive, which was published in 2000. The purpose of the DSA, in addition to modernizing the regulation on digital services, is to “ensure the proper functioning of the internal market, in particular in relation to the provision of cross-border digital services,” with a specific focus on intermediary services.

The key provisions of the DSA are:

  • Chapter II: exemption of liability of providers of intermediary services, including exemptions for conduit, caching, and hosting services
  • Section 1: obligations applicable to all providers of intermediary services, including an obligation to establish a single point of contact with authorities in each member state
  • Section 2: additional obligations applicable to hosting services providers
  • Section 3: obligations applicable to all online platforms, excluding “micro or small enterprises”
  • Section 4: additional obligations for “very large platforms,” which are defined as “online platforms which provide their services to a number of average monthly active recipients of the service in the Union equal to or higher than 45 million”
  • Section 5: transversal provisions concerning due diligence obligations

In addition, the DSA proposes the creation of an independent advisory group of national authorities, called the European Board for Digital Services. Member states, rather than the Commission, will have the responsibility of enforcing the DSA; “very large online platforms” will face further scrutiny by the Commission. For breaches of the DSA, the Commission’s penalty powers includes fines of up to 6% of the offending company’s total turnover, and periodic penalty payments.

The Commission invites any interested stakeholders to provide feedback on both the Digital Services Act and the Digital Markets Act by February 15 2021. Once the DSA and DMA are adopted, they will be directly applicable throughout the European Union. As of the date of publication of this blog post, the United Kingdom has not indicated whether it will adopt the legislation.

Trainee solicitor Rebecca Agliolo contributed to this post.