Technology regulation – the what, when and how of upcoming changes

Right now, the regulation of technology is high on the agenda for policymakers and regulators. A series of legislative initiatives across the EU and UK are aimed at making the laws that apply to technology fit for purpose for the digital age. Organisations who interact with technology on a daily basis face a host of new obligations and the prospect of enforcement.

As the regulation of technology becomes more complex and changes loom on the horizon, we set out key recent and upcoming developments, including measures to:

• Tackle online harms.
• Place pro-competition obligations on the largest digital firms.
• Regulate the use of artificial intelligence.
• Prevent fake and misleading reviews.
• Enhance consumer rights in relation to subscription services.
• Carry out investigation and enforcement work in digital markets.

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Tackling online harms
 
EU – Digital Services Act
 
The Digital Services Act (DSA) proposed by the European Commission on 15th December 2020, aims to provide EU consumers with greater protection against online illegal content, clarifying the liability rules that apply to intermediaries and ensuring a coherent approach at EU level across this area of the law. The DSA introduces harmonised rules on the provision of intermediary services in the internal market by addressing mainly illegal content online, liability exemptions and content moderation.
 
Next steps: The Council of the European Union is expected to formally adopt the DSA in September, after which it will be published in the Official Journal of the European Union and come into force 20 days later. The DSA will be directly applicable across the EU and will apply fifteen months or from 1 January 2024, whichever comes later, after entry into force. The obligations for very large online platforms and very large online search engines will apply from an earlier date.
 
Access our webinar and blog series on the implementation of the DSA.
 
UK – Online Safety Bill
 
The Online Safety Bill (OSB) sets out a new regulatory framework for identifying and removing illegal and harmful content on the internet. It is an ambitious (and contentious) attempt to reign in the "wild west" of self-regulation. The OSB will require services which host user-generated content and search engines to have systems and processes for protecting individuals from certain types of harm online, and require pornography providers to ensure children are not normally able to encounter pornographic content. Any such service which has significant numbers of UK users or which is targeted at the UK market will have new duties and must comply with the new law.
 
Next steps: The OSB was introduced in the UK Parliament on 17 March 2022 and initially expected to pass early next year, but has now been delayed following the UK political upheaval. In the meantime, Ofcom has launched a call for evidence closing on 13 September 2022 on the approaches and techniques platforms can employ to help them meet their proposed duties under the OSB.
 
Read our updates on:

• things you can start doing now to help ensure that you are in compliance by the time the OSB becomes law;
• parallel developments in the United States to address online harassment and abuse;
• the impact of the OSB on the gaming industry. 

Digital competition regulation

EU – Digital Markets Act

The new Digital Markets Act (DMA) will place significant obligations on the largest tech firms with the aim of creating fairer business environments and encouraging competition. The DMA will apply to "gatekeeper" firms – i.e. firms offering "core platform services" such as social networks, search engines and video sharing platforms, which meet defined turnover and user base thresholds. The DMA will impose positive obligations on gatekeepers and grant the Commission substantial enforcement powers for non-compliance. The new rules mark a key shift towards upfront competition regulation, imposing prescriptive rules regulating the conduct of the largest firms by virtue of their market position.

Next steps: The EU is in the final stages of adopting the DMA – the next step is for the DMA to be published in the Official Journal of the European Union, following which it will start to apply after six months.

Read our update on the proposals for the DMA.
 
UK – Digital Markets Unit

The Digital Markets Unit (DMU) is a new regulator that was established in shadow form within the UK's Competition and Markets Authority (CMA) in 2021. Its proposed aim is to 'to promote competition by addressing both the sources of market power and the economic harms that result from the exercise of market power'. The DMU will be responsible for deciding which firms have Strategic Market Status (i.e. firms with substantial and entrenched market power in respect of at least one digital activity, and which provides them with a strategic position). Firms with Strategic Market Status will be subject to a new, enforceable code of conduct that will set out how they are expected to behave.

Next steps: The latest Queen's Speech in May 2022 did not include plans to provide the DMU with statutory powers, placing the new regime in limbo. However, in its subsequent consultation response on the DMU's proposed powers, the Government still committed to legislating when Parliamentary time allows.
 
Read our updates on the impact of the DMU and Government consultation on its powers.
 
Regulation of artificial intelligence
 
EU – Artificial Intelligence Act
 
The European Commission has come up with an ambitious proposal for a comprehensive legal framework regarding the use of AI. It aims to be human-centric and is focused on the complete utilisation of the technology (and the risks potentially deriving from it). The draft regulation introduces certain prohibited AI practices, a strict regime for high-risk AI systems, as well as lighter-touch obligations for low-risk AI systems.
 
Next steps: The Commission presented its proposal on 21 April 2021. The European Parliament and Member States will need to adopt the Commission's proposals in the ordinary legislative procedure.
 
Read our key takeaways on the proposal.
 
UK – publication of AI strategy
 
In September 2021, the UK launched its National AI Strategy, a ten-year plan to encourage growth in artificial intelligence and consolidate the UK's position as a science and AI superpower. The strategy focuses on: (a) making sure the country invests in the long term growth of AI; (b) AI benefiting all sectors and regions of the economy; and (c) governing AI effectively by adequate rules which encourage innovation and investment, and protect the public and the country’s fundamental values. Earlier this year, the UK piloted an AI Standards Hub to ensure AI governance strikes the right balance between innovation and investment while ensuring the public, and societal fundamentals, are protected.
 
While it is unlikely that the UK will pursue an EU-style AI Act, we expect that the UK will look to revisit existing legislation and pursue reforms to regulation at the sector level.
 
Next steps: In July 2022, the Government published a paper setting out its emerging thinking on its approach to regulating AI. It has invited views on its proposals ahead of publishing a White Paper later this year.
 
Read out updates on:

• the UK's National AI Strategy;
• the launch of the AI Standards Hub;
• UK policy changes for AI and IP;
• AI and healthcare.

Prevention of fake reviews

EU – Better Enforcement and Modernisation Directive

On 28 May 2022, the Better Enforcement and Modernisation Directive (Directive (EU) 2019/2161) came into force. The Directive clarified the position on misleading reviews by explicitly stating that selling, buying and submitting fake consumer reviews in order to promote products is prohibited. The new directive also requires Member States to impose a clear obligation on marketplaces to inform consumers about the procedures that are in place to handle reviews.

UK – reforms on misleading reviews

The UK Government announced reforms in April 2022 to protect the public from misleading reviews in marketplaces. Proposed new legislation will seek to prevent traders and marketplaces from (a) commissioning users to submit fake reviews, (b) hosting consumer reviews without taking reasonable steps to check their authenticity, and (c) offering or advertising to submit, commission or facilitate fake reviews. The Government is set to give the CMA enhanced powers to award compensation to consumers, as well as impose fines for breach of consumer law more widely.

Next steps: As the issue of fake reviews becomes an increasing focus for regulators, online sites and marketplaces in the UK and EU can expect to face increased scrutiny from enforcement authorities, particularly with EU rules now in force and changes proposed to UK law.
 
Read our update on the EU and UK stance on fake reviews.
 
Changes to UK consumer rights in relation to subscription services

The UK government is making changes to subscriptions rules and will legislate to (a) increase existing pre-contract information requirements for subscription contracts, (b) introduce a specific requirement on traders to send reminders to consumers before a contract rolls over (or auto-renews) onto a new term, (c) improve the information traders must provide to consumers when their contract is ending or when the consumer wishes to exit.

Significantly however, the Government has abandoned proposals to require traders to offer an option to take subscriptions without auto-renewal terms, or obtain explicit consent from consumers to continue their subscriptions at the end of a free trial. Those reforms had been the most radical, sea change proposals liable to affect businesses in a wide range of sectors – from pay TV to video games and fitness – whose business models rely on auto-renewing subscriptions.
 
Next steps: On 20 April 2022, the Government published its long-awaited response to the consultation "Reforming competition and consumer policy". No timetable has yet been set for when all of the reforms outlined in the response will be implemented.
 
Read our previous (pre-April 2022) update.
 
CMA investigation and enforcement work
 
While plans for the DMU appear to be on hold for now (see above), the Government and CMA are continuing to use their existing powers to focus on digital markets. Recent action has included:

• Publication of the CMA's final report of its market study into mobile ecosystems on 10 June 2022.
• The CMA's consultation (which closed on 22 July 2022) on the proposal to make a market investigation reference into the supply of mobile browsers and cloud gaming.
• The CMA's ongoing investigation suspected abuses of dominance by Apple in relation to its imposition of certain terms and conditions governing app developers’ access to the App Store.
• Publication of the CMA's analysis of the music and streaming market (read our blog on the launch of the study), which proposed not to make a market investigation reference.
• The Government's response to a call for evidence on loot boxes in video games (see our blog on EU and UK actions in this area).