Digital Services Act – a new trend of litigation?
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The EU Digital Services Act ("DSA") will be applicable across the EU from 17 February 2024, being the date by which EU Member States need to empower their Digital Services Coordinator ("DSC").
However, in recent weeks the EU Commission has been the subject of legal challenge from two of the very large online platforms ("VLOP's") previously designated on 24 April 2023. We have discussed the legal challenges brought by Amazon and Zalando below.
VLOP'S
Following a deadline of 17 February 2023, all platforms and search engines, regardless of size, were required to publish their user numbers to the European Commission. The EU Commission designated 17 VLOP's and 2 very large online search engines ("VLOSE'") who satisfy the criteria of having 45 million or more average monthly active users in the EU. Those designated have 4 months from the time of designation to comply with the Regulation and will thereby be subject to more stringent obligations in respect of managing and mitigating systematic risks to protect its users from hate speech, illegal content and much more. We have previously discussed these obligations here.
Challenge brought by Amazon and Zalando.
Amazon is the first of the 'Big Tech' designated companies to bring a legal challenge regarding its designation and follows German online retailer Zalando in doing so.
It has been reported that Amazon argues that it does not fit the description of a VLOP under the DSA and therefore should not be designated as such. Amazon submits that as the majority of its revenue comes from "retail business" it is not the intended target of the DSA:
"The DSA was designed to address systematic risked posed by very large companies with advertising as their primary revenue and that distribute speech and information". (Amazon).
Amazon alleges that it has been "unfairly singled out" in comparison with other retailers in EU countries. Indeed, part of Amazon's legal challenge is that the designation was based on discriminatory criterion:
"…we are not the largest retailer in any of the EU countries where we operate, and none of these largest retailers in each European country has been designated as a VLOP". (Amazon)
It has also been reported that a similar approach has been adopted by Zalando who lodged their challenge on 27 June 2023. Zalando also made the "retailer" argument referred to above and further critiqued the methodology process for designation by the EU Commission claiming it lacked clarity and consistency. A further aspect to Zalando's challenge is that the EU "misinterpreted" its user numbers, claiming that it has 31 million active users per month in comparison with the 45 million user threshold under the DSA.
What next?
Ultimately, it will be a matter for the EU General Court to decide on this point of designation. The benefits of non-designation will mean that companies have less regulatory responsibility which will ultimately reduce administration, cost and time burdens.
The EU Commission has said that "it would defend its position in court and added that Amazon still must comply with the rules by end of August, regardless of the appeal."
It remains to be seen if other designated VLOP's and/or VLOSE's will challenge their designation or if they will wait to see what approach is taken by the EU General Court. What is clear however is that those designated must comply with the DSA requirements which are set to take effect on 25 August 2023.
Tiktok, a VLOP with its European Headquarters in Dublin, recently took part in a voluntary inspection from the European Commission who conducted a "stress test". The EU Commissioner, Terry Breton, commented that "more work is needed to be fully ready for the compliance deadline".
With less than a month to go until the DSA takes effect for VLOP's and VLOSE's, the clock is very much ticking.
If you require any advice or assistance, please do not hesitate to contact Sinéad Taaffe or Damien Watson of this office.