Digital Services Act: The European Union seeks to reinforce its GAFAM strategy

, by Noémie Chemla, Translated by Rebecca Wenmoth

All the versions of this article: [English] [français]

Digital Services Act: The European Union seeks to reinforce its GAFAM strategy
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With the latest investigation of Apple for its potential anti-trust violations, the European Commissioner Margarethe Vestager attacked ‘Big Tech’ companies Google, Apple, Facebook, Amazon, and Microsoft (GAFAM). The issue: the fines that have been occasionally handed down are insignificant compared to the financial power of these companies. In December, the European Commission presents a new strategy regarding the giants of the web with the Digital Services Act.

Fair competition, user protection: why does the EU want to set guidelines for digital services and GAFAM?

Regulating the main digital platforms has been a long battle. The repeating disputes that pit the digital giants against the European Commission mainly revolve around three issues: anti-competitive practices and anti-trust violations, platforms’ responsibility for the content and personal data, and more recently their tax optimisation practices. Despite these platforms being called ‘systemic’, they possess an almost hegemonic grip on online services allowing them to impose their own rules and distort competition. Conversely, they are regularly criticised for their lack of user protection from hate speech and illegal content, especially on social networks, as well as their use of personal data. Ultimately, GAFAM wisely chooses its headquarters in Europe to benefit from tax advantages.

Back in 1994, the European Commission forced Microsoft to modify its licensing rules. The 2000 e-Commerce Directive was the first real European legal text that sought to set guidelines for the digital market. In particular, it established rules about transparency, information imposed on online service providers, commercial communications, electronic contracts, and limits on the liability of intermediary service providers. However, in 20 years, the digital market has enormously and rapidly evolved, requiring an urgent update put in place for personal data protection with the 2016 General Data Protection Regulation (GDPR), which determines the collection and usage of data.

In 2014, Margrethe Vestager became the European Commissioner for Competition, before becoming Ursula von der Leyen’s vice-president in 2019. The Danish former minister has a firm approach to GAFAM where the sanctions and open inquiries are increasing [1]: between 2017 and 2019, Google was convicted of anti-trust violations for its Android smartphone operating system, and made to pay fines of up to €4.34 billion. In 2016, the European Commission required Ireland to force Apple to pay €13 billion— an ongoing affair since the European Court invalidated this decision and the Commission then appealed against its validation. Finally, Amazon had to return €250 billion of tax cuts to Luxembourg in 2017. More recently, two inquiries were opened for its anti-competitive practices, namely its use of personal data and ‘Buy Box’ which underlines certain commercial offers.

Unfortunately, these fines seem powerless against the size of these companies: what is a penalty of a few billion euros for multinationals who have a turnover of tens or hundreds of billions? Moreover, the European Union can’t continue to intervene only after the damage is done. Hence, to be efficient the Commission is determined to create a better strategy to act pre-emptively. In this new context, the Commission announced its next law on its strategy for regulating digital platforms: the Digital Services Act.

The Digital Services Act, a tool to regulate the digital market pre-emptively

The Commission’s website introduced the Digital Services Act (DSA) as a set of rules to “foster innovation, growth, and competitiveness, both in the European Single Market and globally”. More specifically, it is a revision of the 2000 e-Commerce Directive. The Digital Services Act modernises the framework and is based on two main pillars: “to establish a powerful transparency and a clear accountability framework for online platforms” for user protection and pre-emptive rules for platforms that have imposed themselves as the online leaders.

Thierry Breton, European Commissioner for Internal Market, explained that the Digital Services Act intends to end the current situation in which the internet is a ‘lawless place’: all illegal content must be removed. With the DSA, platforms could also have to identify and locate anonymous users, if necessary, or be subject to financial penalties. This measure targets criminal content that is sometimes hard to track online: racism, anti-Semitism, harassment, and death threats as well as terrorism, drug trafficking, and child porn.

Another significant issue tackled by the Digital Services Act concerns regulating companies that have too large a presence on the digital market. The size of the user base of these platforms has yet to be decided. Fortunately, the DSA relies on Digital Market Acts seeking to enforce obligations and bans on the ‘too big to care’ multinationals as a means to prevent the internal market’s functioning from being distorted. The threat of being shut down was brought up, but Margrethe Vestager was reassuring: “we will never go that far”, she promised [2], explaining that this measure is not part of the Act’s regulations. For the moment, it seems that the DSA does not have its focus on the financial dimension therefore avoiding the sensitive issues of GAFAM’s taxation and tax optimisation. Initially planned for the 2nd of December, the Commission delayed the two laws’ publication until the 9th of December.

The Empire strikes back?

Naturally, this task isn’t easy: GAFAM doesn’t intend to give in and is preparing its retaliation. Recently, Sundar Pichai, Google’s CEO, apologised to Thierry Breton [3] after a confidential document outlining the strategy to lobby against him was revealed. Though certain lobbying tactics are quite classic such as opinion polls, ‘op-ed’s, and events, this strategy took out the big guns: enlisting the American government to confirm that the law jeopardises transatlantic relations, weakening support for the DSA in the EU by presenting it as a threat to the Directorate-General for Trade, rallying consumers and European companies, and so on. Pinchai maintained that he had never seen this document before and apologised during a conversation with Thierry Breton.

Less aggressively, Neal Mohan, YouTube’s number two, has already encouraged Europe to be careful [4]: while he maintains his support for the legal reform to ‘protect YouTube’s users and creators’, he asserts that YouTube always had rules for content moderation. For instance, the platform has recently tightened its policy by deleting the channel of Franco-Swiss right-wing ideologue Alain Soral. Mohan hopes that platforms’ responsibility will be limited to ‘illegal content’, leaving each country leeway to set guidelines for hate speech (which is currently a legal grey area), although others want the law to be more restrictive. YouTube is also not in favour of a potential ‘best endeavours’ clause requiring a certain number of moderators and an obligation to remove hate content within 24 hours. These measures have been heavily criticised in similar ways to the French ‘Avia’ Law. Goal-oriented against hate speech, ‘Avia’s’ Law has been recently censured by the Constitutional Council [5] because of the risk of censorship and improper content removals.

Furthermore, Mohan insists on the necessity of applying the DSA to all platforms, whatever their size, as the content may just reappear on smaller sites. The tech giants, especially social networks, worry about the fact that the EU Court of Justice has struck down the Privacy Shield [6], an agreement governing data transfer between the EU and USA and the Irish government’s recent requirements for personal data protection, which they consider prevents them from carrying out their business in Europe.

Consequently, in a few weeks, it will become clear for the EU how the European Commission intends to regulate big platforms. This seems central to the context of the global coronavirus pandemic, which has reinforced GAFAM’s position and the need to protect internet users as well as to regulate competition. Moreover, the pandemic has meant Big Tech has profited financially making it likely for the topic of European taxes on digital companies to resurface, in spite of it, not the DSA’s target. This law and the Commission’s position on GAFAM companies will be equally decisive in the context of the recent US election and a possible renewal or at least a new situation vis-à-vis UE-USA relations.

Sources

[1] https://www.latribune.fr/economie/union-europeenne/l-ue-et-les-gafam-contentieux-a-repetition-et-amendes-records-852815.html

[2] https://www.usine-digitale.fr/editorial/pas-de-demantelement-des-grandes-entreprises-technologiques-envisage-annonce-margrethe-vestager.N1023469

[3] https://www.lesechos.fr/tech-medias/hightech/regulation-le-patron-de-google-presente-ses-excuses-a-thierry-breton-1265034

[4] https://www.lemonde.fr/economie/article/2020/11/14/regulation-des-contenus-youtube-incite-les-autorites-europeennes-a-la-prudence_6059723_3234.html

[5] https://la-rem.eu/2020/11/la-censure-previsible-de-la-loi-avia-par-le-conseil-constitutionnel/

[6] https://www.lesechos.fr/tech-medias/hightech/facebook-menace-de-fermer-instagram-en-europe-1247495

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