[Interview] Two new European proposals for the digital sector: the Digital Service Act and the Digital Markets Act
There are two new legislative proposals on the European legal horizon that promise new things for the sector, specifically for technology companies: the Digital Service Act (DSA) and the Digital Markets Act (DMA).
Since the law of electronic commerce, there hasn’t been much news in this field, but it seems that the European legal framework is continuing to slowly update. The goal of the proposals that are on the European Parliament's table is to create a safer digital space that promotes equal conditions in company innovation, growth, and competitiveness.
Complete analysis of the Digital Service Act (DSA) and the Digital Markets Act (DMA)
To learn all we can about the DSA and DMA, we interviewed Marta Becerra, the Acting Director General at Adigital. Her knowledge about the sector will help us to better understand the reach of these two proposals and the impact that they could have on companies that provide digital services and on the end user. In addition, Adigital is the Asociación Española de Economía Digital (Spanish Association of Digital Economy) and one of the main promoters of the digitalization of our business network.
WAM: What exactly is the Digital Services Act (DSA) that the European Commission is proposing?
Marta Becerra: The Digital Services Act or DSA was born to update and complement the Directive about Electronic Commerce, developed at the end of the last century and which came into effect in Spain through the Information Society Services and Electronic Commerce Law.
The directors of the European Commission detected that the current digital paradigm is far from the environment we were in when this law came into effect in 2000, which is why an update to the current legislative framework is deemed necessary.
WAM: So what does this law seek to do?
In a few words, and using what the European Commission has said, this legislation seeks to modernize the digital service rules while maintaining the essential principles that have allowed for the evolution and consolidation of these business models, clarifying the concepts of responsibility of digital service providers and increasing the accountability of these services.
WAM: And the Digital Markets Act (DMA)?
M.B.: It’s a new rule that will affect the large technology companies that act as gatekeepers in the digital market environment, according to European Commission criteria. The Digital Markets Act serves to establish new rules that facilitate the establishment of a competitive digital market environment, avoiding the legislative fragmentation of the interior market on behalf of the regulations that are being carried out at a national level in this environment.
WAM: What is this proposal responding to?
M.B.: It is responding to the European Commission consideration that, due to the diverse impacts that services have on different environments, both economic and social, they have the capacity to establish their own paradigm and, on occasion, are even capable of controlling the entire platform ecosystems.
WAM: What impact can they have on consumers?
M.B.: The initiatives have the goal of reinforcing the protection of consumers and their fundamental rights online, establishing a solid framework of transparency and accountability for online platforms and at the same time pushing innovation, growth, and competition in the single market.
In short, it’s about creating a fairer business environment for companies that, in some way, depends on big companies offering their services in the single market and reaching a place where consumers can choose between more and better digital services.
WAM: Currently, there are two proposals, is there a chance they are approved? When would they come into effect?
M.B.: To continue with their possible processing, the European Parliament and Member States must first debate the Commission’s proposal according to the normal legislative process. This process can last months, even years, depending on the amendments and consensus that it generates. If at the end both proposals are adopted, they will be directly applicable to the entire European Union.
WAM: What type of digital companies would they affect?
M. B.: This new European regulation will establish requirements that all digital companies must meet, from the smallest companies to the biggest. However, the regulation differentiates between four types of companies to establish responsibilities according to their size, their role, and their impact on the digital ecosystem. In other words, the goal is that the measures are proportional; therefore, the same won’t be demanded of a small web hosting company as large companies.
WAM: Are organizations prepared to adapt to this new regulation?
M. B.: Instead of seeing if they are prepared for this new regulation, it would be more interesting to analyze if the moment is right and if it will be beneficial for companies. In short, it’s the large technology companies that have permitted the development of the spectrum of digital platforms and the consolidation of a true community digital market, given that it has provided a place where supply and demand can meet.
Therefore, the Commission must keep this in mind when regulating and offer a flexible framework of guarantees that responds to the ever-changing digital environment where the most important thing is innovating, offering solutions to citizens, and pursuing progress that improves the life of everyone.
WAM: Since the Directive about Electronic Commerce was approved in 2000, practically nothing has changed, legislatively speaking.
M.B.: This is something that deserves a deep analysis. The reality is that after twenty years of development and the consolidation of the digital ecosystem, adapting the regulations to a new environment is relevant and makes a lot of sense. When regulating, especially in such a dynamic sector, one must not lose sight of the repercussion and impact of the proposal on the economy, technological development, and innovation, and in this case, especially in Europe.
It’s fundamental to look introspectively and ensure that the law is born from a real need and not from pressure. Digitalization is necessary for the progress and modernization of society.
WAM: Are these two laws enough to renew the legal framework of the European Union and respond to current needs?
M.B.: Regulating the digital market is a must. But the DSA and DMA aren’t going to bridge the gap between the old continent and the two poles of power that configure the path of the next few years. In the coming months, the cooperation between community institutions and the digital economy industry will be vital to find a coherent solution that protects, improves, and doesn’t worsen the day to day of the European consumer, which will ultimately bear the brunt of the differences with American and Chinese competitors.
The European Union must pursue a balanced regulation for large digital companies: the balance between the need, on one hand, of maintaining undistorted competition, and, on the other hand, the reality of favoring consumer interests.
WAM: In 2020, 7 out of 10 companies accelerated their digital transformation, especially SMEs. How will they be affected by or benefit from the proposals?
M. B.: Although in theory one of the goals of the law is to eliminate the access and growth barriers, it will be interesting to see if they end up being a danger for the digital transformation of companies.
In other words, a law like the DMA, which is fundamentally intended for big tech, can damage the entire digital business fabric, given that these big companies are what sustain the European digital market. If this new regulation means an economic loss for big technology companies, it will end up producing a domino effect which will also be harmful to small and medium-sized companies.
WAM: What will the proposals mean for big players (Google, Amazon..)?
M.B.: For big online platforms, the DSA will establish specific requirements in areas such as control or transparency. In addition, for these big companies, the DMA will be established, which will demand measures like its interoperability. These regulations establish sanctions between 6% and 10% of the global business volume of these companies in case they do not meet some of the adopted measures. Disproportion regulation would damage the development and business of these companies and negatively affect the entire European digital ecosystem.
In conclusion, after analyzing the responses of Marta Becerra, it can be affirmed that the new digital proposals will bring important regulatory changes to the digital panorama (especially between the big technology companies). However, everything points to there still being a way to go until the proposals are approved, giving companies a margin to prepare themselves for possible new requirements.
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