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The Federation of Finnish Enterprises position on the proposal for a regulation on a Single Market for Digital Services (Digital Services Act)

To the European Commission

 

1. General remarks on the proposal

For the European Digital Single Market to function properly and cohesively, its rules must be aligned with the evolution of technology and the rise of new digital services. Fragmentation of the single market regulation hampers growth and is particularly detrimental to the prospects of small and medium-sized enterprises that provide and use digital services.

We support the primary goal of the Commission’s proposal for the Digital Services Act which is to establish a common set of rules on digital services and for their providers. The Europe-wide digital markets need to be more open, more trustworthy, and more just. A more harmonized EU-level regulatory landscape reduces administrative burden, creates new opportunities for smaller providers of digital services and offers SMEs greater room for expansion.  

Although improving the functioning of the Digital Single Market is vital, it is worth reminding that regulation will bring the EU and European companies only so far when it comes to achieving increased competitiveness and productivity. In short, the EU cannot regulate its way to the top. Therefore, more attention needs to be paid to enhancing the capacity of European businesses, especially SMEs and startups, to not just follow the digital trendsetters elsewhere but to be trailblazers in the emerging digital fields. 

Keeping this in mind, it is imperative that the EU together with the Member States adopt a more committed stance towards investing in education and training, research, development and innovation (RDI) and deployment of new technology.

2. The scope of the proposal

The proposal covers certain online services imposing on them new obligations which are grouped based on the role and size of the service provider. The categories of providers are intermediary services, hosting services, online platforms (e.g., online marketplaces and social media) and very large platforms (reaching more than 10 % of 450 million consumers monthly in Europe). Micro- and small companies are exempted from most of the new obligations.

We support this approach. The categorisation makes it easier to match the obligations with the features of a given online service. By considering the size of a provider, the regulation is made more proportionate and better adjustable to the scale and scope of the risks a provider may pose. It is also important in limiting the burden of smallest providers and enabling their competitiveness in the digital economy. Furthermore, we do agree with the premise that smaller businesses should be encouraged to comply with the practices, laid out in the act for bigger digital players, on a voluntary basis.

The regulation would apply to online services that are offered to recipients based in the EU, irrespective of the place of establishment of the provider of those services. This provision is key in ensuring a level playing field between EU-based and non-EU-based providers. To enforce this provision in practice, it is vital to oblige services which do not have a place of establishment in the EU to designate a legal representative in one of the Member States. So that the regulation can be effectively enforced on digital service providers that have their main establishment outside the EU, additional provisions may be required.

We also view it necessary to include users outside the EU in the counting of active monthly users of very large online platforms. If these non-EU users are left out, the regulation would give several platforms, whose size and impact amount de facto to that of a very large platform, an unfair competitive advantage over EU-based platforms as they first enter the Digital Single Market from third countries.   

3. The obligations for digital service providers

To sustain the innovation capacity of the digital markets, it is also important to preserve the well-established principle which conditionally exempts providers of intermediary services from liability for the information they transmit or store upon the request of their clients. To retain this exemption, service providers would, however, need to take the necessary steps to stop or remove the illegal information in the event they become aware of it.

The illegal nature of different content, products or services would not be defined in this regulation but would result from other EU or national regulation. For the legal and operational certainty of service providers, we stress that it is crucial that these other pieces of legislation specify in precise and plain terms what is considered illegal in different instances. These definitions and interpretations should be as uniform as possible across the Member States, to minimize friction in the digital trade of products and services within the single market.

Some of the proposed obligations would apply to all digital service providers, some only to hosting services and online platforms, some only to platforms, and some only to very larger platforms. Providers that fall into the category of micro or small companies would face a limited set of obligations. We regard the exemptions allowed for these smaller businesses as well founded and the obligations they would need to meet as reasonable.

In general, the new obligations aimed at larger service providers, not included in the exemptions, and their different categories are in our view well measured. When in place and adhered to, they will increase the trust of consumers and business users in digital services. The duties proposed for very large online platforms are particularly significant as they are to improve the position of SME users vis-à-vis dominant platforms, on one hand, and users that engage in fraudulent and deceptive commercial practices, on the other.     

Because many SMEs are dependent on platforms for marketing and selling their products and services and for running their essential business processes, it is welcome that the proposition improves the ability of a business user to seek swift remedies when a platform decides, for example, to remove an SME user’s content or suspend the provision of its service. Articles 17 (internal complaint-handling system) and 18 (out-of-court dispute settlement) function well to this end. It should also be noted that many business users suffer from misplaced or inappropriate notifications or fake reviews made on their lawful content. To decrease this harm, business users should be provided a separate fast-track mechanism to report these baseless actions to the service provider. 

We are also in favour of the obligations that would mandate platforms to remove illegal products and services and to deal with users behind them. Articles 19 (trusted flaggers), 20 (measures and protection against misuse), 21 (notification of suspicions of criminal offences) and 22 (traceability of traders) are at the core of this effort.

In case of repeated misuse concerning illegal products, services, or content, and when temporary suspensions have no desired effect, it is worth considering whether Article 20 should be expanded to give platforms the option to remove these rogue users indefinitely, even permanently.      

Article 22, which establishes the know-your-business-customer principle, will likely prevent misuse, and make it easier to trace abusive users. However, the information required from a business user should always be limited to items that are necessary for identifying a user, so as not to build hurdles for smallest businesses to access platform ecosystems. For example, users should not be obliged to provide information on their professional qualifications.

The additional obligations placed by the proposition on very large online platforms are in our assessment necessary in tackling systemic risks. Given the size and resources of these platforms, the obligations do not seem excessive. As smaller platforms often generate similar systemic risks, it would be advised to encourage them to comply with these additional obligations on a voluntary basis.

We are also supportive of the Commission’s efforts to support and facilitate the creation of voluntary industry standards and codes of conduct for providers of digital services, as they improve the technical and organisational implementation of the new rules and increase interoperability between different providers, making it easier for business users to adopt to changes in their ecosystems.  

4. Enforcement and monitoring

The future performance of the Digital Single Market is to a considerable extent dependent on how the new rules on digital services are implemented across the EU. Once the legislation is passed, it is therefore vital to focus on its effective and coordinated enforcement and monitoring by the Commission and the Member States.

From this perspective, the establishment of European Board for Digital Services, projected to function as a coordinating and consultative body among competent national and EU authorities, is welcome. The Board should have sufficient resources to carry out its advisory and supportive role in a timely manner. Moreover, it should not stand in the way of national authorities implementing the regulation.  

Penalties imposed on non-compliant service providers need to be proportionate to the harm caused, yet tough enough to discourage illegal behavior. The performance of very large platforms should be supervised especially closely.

Finally, we would like to see the final text include provisions to the effect that business users can report any misuse of a service provider to competent authorities without fear of restrictive or retaliatory measures by the provider.

 

The Federation of Finnish Enterprises

 

Joonas Mikkilä

Head of Digital and Educational Affairs

 

Karoliina Katila

Legal Counsel