On April 23, 2022, the European Parliament and Council of the EU announced that they reached a provisional political agreement on the Digital Services Act (“DSA”) during their final trilogue meeting.  The news comes roughly one month after the provisional political agreement on the Digital Markets Act (“DMA”).

Both acts are part of the European Data Strategy and underwent a year and a half of intense negotiations (see our previous blogs here and here).

DSA

The DSA is addressed to providers of intermediary services (e.g., Internet service providers, cloud providers, search engines, social networks and other online platforms, and online marketplaces) and covers a range of issues.

In their final round of negotiations, the EU institutions agreed on the following:

• ban on targeted advertising addressed to minors, or based on special categories of data;
• ban on misleading practices and interfaces (“dark patterns”);
• enhanced transparency on the parameters to recommend, curate or prioritize content to users. Very large online platforms (“VLOP”, i.e., platforms with 45+ million users in the EU) must also provide an offering not based on profiling;
• power to access VLOPs’ algorithms granted to the EU Commission and national authorities;
• “notice and action” procedure to enable the reporting and removal of illegal content online;
• “know your business customer” requirements for online marketplaces to ensure reliability of traders;
• special crisis mechanism to mitigate the effects arising from the manipulation of online information; and
• users’ right to compensation for any damage or loss suffered due to DSA infringements.

The DSA will provide for fines of up to 6% of an organization’s worldwide turnover.

DMA

The DMA applies to specific organizations designated as “gatekeepers”, when they (1) offer one or more “core platform services” (e.g., marketplaces, app stores, search engines, social networks, cloud or advertising services, voice assistants, web browsers); and (2) meet the following criteria:

• annual turnover of €7.5+ billion within the EU in the preceding three years, or market valuation of €75+ billion, and
• 45+ million monthly end users and 10.000+ business users established in the EU.

While the DMA pursues EU competition policy objectives, key provisions also touch upon data protection issues, including:

• ban on the combination and cross-use of personal data collected during the use of a service for the purposes of another service offered by the gatekeeper;
• access for business users to their marketing or advertising performance data; and
• effective portability and continuous and real-time access to data provided or generated by end-users, complementing the GDPR’s right to (personal) data portability.

The DMA establishes fines up to 10% of worldwide turnover, or up to 20% in case of repeated infringements.

Next steps

The legal texts of both the DSA and DMA will be finalized on the basis of the provisional political agreements.  The acts will then be formally adopted in accordance with the EU’s legislative procedure.  They will enter into force on the twentieth day following their publication on the EU Official Journal.  With regards to enforceability, the acts will be applied, respectively:

• DSA:
  • 15 months after entry into force;
  • for VLOPs: 4 months after their designation; and
• DMA: 6 months after entry into force.

The Covington team will keep monitoring the final stages of the DSA and DMA approval and is happy to assist with any inquiry.