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European Parliament backs ‘historic’ restart of EU’s digital rulebook – londonbusinessblog.com

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The European Parliament has given its final stamp of approval to two key pieces of regulation that will update EU rules for digital businesses.

The Digital Markets Act (DMA) introduces new ‘ex ante’ competition rules for gate-keeping 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 establish governance rules around the treatment of illegal content and products, and establish broader accountability on larger platforms that have additional responsibilities under the frame.

The new regulations were proposed by the Commission at the end of 2020, so adoption has been swift – reflecting the broad consensus of lawmakers across the bloc on the need for stricter and tighter rules for online services.

The regulations are expected to come into effect early next year after the formal approval process is completed. Today’s plenary vote in parliament follows a political agreement on the two dossiers reached between EU co-legislators earlier this year – in March for the DMA; and April for the DSA.

You can read our previous coverage of those political deals – which are at the heart of what Parliament has confirmed its support for today – here:

The European Commission, which drafted the laws, welcome the formal approval of the files by parliament – ​​with internal market commissioner Thierry Breton calling the “landslide vote”historical

Parliament voted 588 for the DMA; while 539 MEPs supported the DSA.

Commission EPP Margrethe Vestager also issued a statement, praising what she described as a “global first”:

“The European Parliament has passed a global first: strong, ambitious regulation of online platforms. The Digital Services Act makes it possible to protect user rights online. The Digital Markets Act creates fair, open online markets. For example, illegal hate speech can also be tackled online. And products purchased online must be safe. Large platforms will have to refrain from promoting their own interests, share their data with other companies, and enable more app stores. Because with size comes responsibility – as a big platform there are things you need to do and things you can’t do.”

From here on, there are only a few steps left in the EU’s legislative procedure: in particular, the formal adoption of the texts by the Council — after which they will be published in the official EU magazine, which will enter into force 20 days later ( so the expected timeline is fall; although, as noted above, application of the laws won’t begin until 2023 – with some DSA provisions having a longer application period).

Enforcement

The Commission will take on an important enforcement role for both Regulations.

Under the DMA, fines for infringements can be as high as 10% of a tech giant’s global annual revenue, or even 20% for repeat offenders. While fines under the DSA can amount to 6% of global annual sales. The stakes are therefore high for all involved.

Many questions remain about the means of enforcement and how generally fit for purpose and ‘smooth-footed’ the EU executive will prove to be for such a huge new regulatory task.

Probably in response to some of these concerns, Breton has offered a “sneak peak” of how the Commission is approaching its new supervisory tasks.

Write in a blog post published on LinkedIn today, after the vote in parliament, he said the Commission will set up dedicated teams within the EU’s Directorate-General for Communications Networks, Content and Technology (also known as DG Connect) – which will be “organized around thematic areas”, including “the social 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, giving a few examples of how the roles of these teams will change. “The technical team will take responsibility for things like messenger service interoperability or the use of non-replaceable tokens for product tracking, or developing standards that support the new rules.

“Finally, the economics team will deal with DMA-related unfair trade practices, such as data access or so-called FRAND terms; or ensuring compliance with the DSA-related liability waivers or know-your-business customer rules for marketplaces.”

He also notes that the teams will work closely together to avoid overreacting to platforms that he acknowledged “mostly” create cross-cutting challenges — including with a “program office” taking on a coordinating role and engaging in it. with “international issues and lawsuits”.

So the Commission is clearly gearing up for tech giants to push back against the centralized enforcement — and perhaps enlist their own politicians to use high-level channels to sue (and potentially retaliate; tariffs?) on their behalf.

The EU has said it will increase staff levels next year and 2024 and will seek to increase in-house technical expertise to meet the demands of the enforcement role – in addition to reallocating existing staff and resources for the new tasks. But in the blog post, Breton said he expects the dedicated DMA and DSA DG Connect team to have more than 100 full-time employees following this recruiting campaign.

Questions will likely remain as to whether that level of resources will be enough for the inbound large workload that comes with regulating dozens of major (and some really massive) platforms.

The Commission partially reimburses the costs of DSA enforcement personnel by levying a fee on larger platforms and major search engines.

Breton’s post notes this without specifying the fee platform giants will have to pay – but reports have suggested that platforms have been successful in lobbying to reduce how much they have to pay to be audited. So the concern for resources seems likely to persist.

Another new element of EU platform oversight that Breton does include in his sneak peak is the creation of what he calls “a high-profile European Center for Algorithmic Transparency” – which aims to support the EU with the DSA’s algorithmic transparency requirements for very large online platforms’ (also known as VLOPs).

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

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


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