The potential of shaping a comprehensive Digital Single Market with the long awaited Digital Single Market Act

Sybe de Vries

This blogpost is the second in a series of short commentaries on the European Commission’s proposals for a Digital Markets Act and a Digital Services Act, released on 15 December 2020. Stay tuned for more.

Twenty years ago, when the widespread use of the Internet was still in its infancy, the EU legislator adopted the e-Commerce Directive. This Directive has been the foundational EU legal framework for online services in the internal market ever since. Now, with the eagerly awaited Proposal for a Regulation on a Single Market for Digital Services (DSA) the question is whether this legal instrument will be able to address the current and future digital challenges of the EU’s internal market. I will briefly discuss the relevance of the DSA’s legal basis in addressing the specific features of the Digital Single Market (DSM), particularly with a view to attain a more comprehensive DSM.

The creation of a Digital Single Market

The DSA is based on Article 114 TFEU, which is the legal basis for internal market legislation. I am not surprised about this. Before the DSA Member States were still, at least to some extent, allowed to have their own rules for online service providers – within the constraints of current EU rules including the e-Commerce Directive. This negatively affects the internal market. Intermediary services providers may after all still have to adhere to 27 different legal regimes across the EU. The harmonisation of the conditions for the provision of online services should prevent that.

There are four other aspects of this choice of legal basis for the DSA that I would like to explore. Firstly, the DSA is actually not a typical ‘internal market measure’. It neither includes a market access clause nor a country of origin principle for online service providers. There is in other words no rule that guarantees the cross-border flow of online services. The DSA is rather a supplementary act as it builds upon the provisions of the e-Commerce Directive, and, according to the Explanatory Memorandum, most notably on the internal market principle set out in Article 3 thereof.

Secondly, it is crucial to note that Article 114 TFEU is not just about promoting market integration through deregulation or market-making but also about re-regulation or (the intensification of) regulation, which view was inter alia strongly supported by Advocate General Maduro in the Vodafone case. This case was about accepting that yet another key legal instrument for the DSM – the former EU Roaming Regulation – could be used for the imposition of price caps on mobile phone operators for roaming services: a form of ‘re-regulation’ in respect of private actors as opposed to State bodies. The regulatory nature of the DSA is clear as it imposes new regulatory obligations for online service providers, including platforms as social media and marketplaces. And the DSA seeks to contribute to online safety and the protection of fundamental rights, as well as it includes a governance structure for the effective supervision of providers of intermediary services.

Thirdly, the DSA – next to the DMA – reflects the important role of private actors in the DSM, not only where their power has ramifications for market access, business and consumers, but also for fundamental rights, the rule of law and public values. The DSA is a further – albeit still careful – step in recognizing the dominant role of (some) private actors in the regulatory domain and of the dilution of the traditional public-private divide, and in adopting a more all-encompassing public law approach, which has been lacking so far . The DSA illustrates that the EU legislator may on the basis of Article 114 TFEU directly impose obligations on private actors, even in the absence of national measures, similarly to other legal instruments of the DSM, like the above-mentioned Roaming Regulation or the Geo-Blocking Regulation, which addresses unjustified geo-blocking and discriminatory practices by private traders.

The creation of a comprehensive Digital Single Market

Fourthly and lastly, as already mentioned, the DSA seeks to protect fundamental rights, including the freedom of information, the freedom of expression, the right to non-discrimination, human dignity and the freedom to conduct a business. The DSA goes as far as to include a provision, albeit limited in scope and quite vaguely formulated, directed at very large platforms on misinformation or disinformation.

Whereas the freedom to conduct a business is strongly related to the market integration rationale of the DSA and is implemented through the adoption of less onerous rules that apply to smaller platforms, the protection of other fundamental rights connects to its regulatory function. The DSA shows that these (opposing) fundamental rights can be integrated and balanced within the context of Article 114 TFEU. But we have to realise that harmonisation within the context of the internal market, which has always been functionally driven, leaves less scope for differing views and sensitivities across the EU Member States on how fundamental rights should be protected and balanced. With a view to creating a more inclusive DSM, this is something we will have to accept.

This post also features on the blog of the Utrecht University focus area Governing the Digital Society