COMBINED EVALUATION ROADMAP/INCEPTION IMPACT ASSESSMENT

This combined evaluation roadmap/Inception Impact Assessment aims to inform citizens and stakeholders about the Commission's work in order to allow them to provide feedback on the intended initiative and to participate effectively in future consultation activities. Citizens and stakeholders are, in particular, invited to provide views on the Commission's understanding of the current situation, problem and possible solutions and to make available any relevant information that they may have, including on possible impacts of the different options.

Title of the initiative

Digital Services Act package: deepening the Internal Market and clarifying responsibilities for digital services

Lead DG – responsible unit – AP Number

CONNECT F.2

Likely Type of initiative

Legislative instrument

Indicative Planning

Q4 2020

Additional Information

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This combined roadmap/Inception Impact Assessment is provided for information purposes only. It does not prejudge the final decision of the Commission on whether this initiative will be pursued or on its final content. All elements of the initiative described by this document, including its timing, are subject to change.

A. Context, Evaluation, Problem definition and Subsidiarity Check

Context

The Commission announced 1  that it intends to propose new and revised rules to deepen the Internal Market for Digital Services, by increasing and harmonising the responsibilities and obligations of digital services and, in particular, online platforms and reinforce the oversight and supervision of digital services in the EU.

The horizontal legal framework for digital services 2  is unchanged since the adoption of the e-Commerce Directive in 2000. The Directive harmonised the basic principles allowing the cross-border provision of services and has been a foundational cornerstone for regulating digital services in the EU. In addition, several measures taken at EU level address, through both legislative instruments 3 and non-binding ones 4 and voluntary 5 cooperation, targeted issues related to specific illegal or harmful activities conducted online by users’ of digital services and online platforms in particular.

Technologies, business models and societal challenges are evolving constantly. The wider spectrum of digital services is the backbone of an increasingly digitised world. This spectrum incorporates a wider range of services, including cloud infrastructure or content distribution networks. Online platforms like search engines, market places, social networks, or media-sharing platforms intermediate a wide spectrum of activities and play a particularly important role in how citizens communicate, share and consume information, and how businesses trade online, and which products and services are offered to consumers. Online advertising and recommender systems are a core feature of most online platforms.

This digital transformation has brought major benefits but also challenges. For example, the online sale of counterfeit, dangerous products or other illegal goods puts citizens at risk and harms legitimate businesses. Digital services are exploited by certain users to spread illegal content online such as child sexual abuse material or illegal hate speech. Infringements to property rights are also observed. Other risks are related to the systematic abuse of digital services and their algorithmic processes for amplifying the propagation of disinformation online. The safety of vulnerable users, and in particular children, is also a challenge. The outbreak of the COVID-19 pandemic has clearly confirmed both the importance of digital services and their vulnerabilities. Further concerns relate to the social impact in the use of online platforms, and the opportunities and challenges they bring for workers and individuals offering services through platforms.

To address these issues effectively and to avoid the emergence of an increasingly fragmented legal landscape in the internal market, the Commission has committed to update the horizontal rules that define the responsibilities and obligations of digital services. Against this context, the high-level goals of the Commission’s intended proposal for a new Digital Services Act are to reinforce the internal market for digital services, to lay down clearer, more stringent, harmonised rules for their responsibilities in order to increase citizen’s safety online and protect their fundamental rights, whilst strengthening the effective functioning of the internal market to promote innovation, growth and competitiveness, particularly of European digital innovators, scale-ups, SMEs and new entrants. This Inception Impact Assessment sets out this intervention logic.

The issues covered in this Inception Impact Assessment are closely connected to additional measures the Commission is exploring:

Evaluation

Ahead of the Impact Assessment for the Digital Services Act, the Commission will conduct an evaluation of the e-Commerce Directive, in line with the ’evaluate first’ principle of the Better Regulation guidelines.

This Directive covers all information society services ranging from the very ‘backbone’ of the Internet (e.g. internet service providers) to online intermediaries such as web hosts, cloud services and online platforms.

Its main objectives are:

It is clear that these objectives remain valid. The core principles of the Directive have been the corner stone of the internal market for digital services. Whilst they may need certain adjustments, the underpinning basis is as valid today as it has been 20 years ago. The evaluation will be informed by a process of evidence-collection, not least related to the legal and economic barriers emerging in the internal market for digital services. The effectiveness, efficiency, relevance, coherence and EU added value of the measures in place will be evaluated, including in light of more recent measures, such as the Recommendation of 2018, on measures to effectively tackle illegal content online, as well as changes in the nature and diversity of digital services and risks they entail, notably with the increased use of services provided from outside the Union, which are not covered today by the E-Commerce Directive. It will cover the entire period, from the entry into force of the Directive until the present, and use a comparative methodology, building on previously published implementation reports (2003 and 2012), and on more recent and ongoing studies. The evidence collection will focus in particular on the past 10 years, most prominently marked by a rapid evolution of information society services, new forms of online behaviours and case law.

Problem the initiative aims to tackle

The rapid and widespread development of digital services has been at the heart of the digital transformation, including the rise of e-commerce and unprecedented opportunities for information to be freely shared online. While there is a broad consensus on the benefits of this transformation, the scale of problems arising from digital services is substantially different from 20 years ago. In particular, the impact of online sales of counterfeit, dangerous or unauthorised products or other illegally traded goods (including those imported from traders based outside of the EU) is increasing, and so is the online dissemination of illegal content such as hate speech or child sexual abuse material.

An entirely new set of issues has also emerged with the scale of information intermediated online: recommender systems and online advertising play an important part in optimising consumers’ access to information. At the same time, services are also abused to disseminate harmful content such as online disinformation (which is not, per se, illegal), exploiting algorithmic systems to amplify the spread of the messages.

These new challenges have an important bearing on fundamental rights online, and the appropriate division of responsibilities between the relevant stakeholders, including private and public actors...

The relative scale and impact of these issues is particularly important where the most prominent online platforms structure at scale information flows online, having become de facto ‘public spaces’ in the online world.

While a range of targeted, sector-specific interventions have been taken at EU level, significant gaps and legal burdens remain unaddressed.

The Impact Assessment will analyse in detail a series of problems:

In response to the increasing role of digital services in the online trade in or dissemination of illegal goods and content, Member States are increasingly passing laws with notable differences in the obligations imposed on digital services, in particular online platforms, and with a variety of different enforcement mechanisms. This creates a fragmentation of the single market that can negatively affect EU citizens and businesses in the absence of harmonised rules and obligations. It also entails a lack of legal clarity and certainty for digital services in the internal market, and is likely to be less effective in achieving the underlying public policy objectives.

Existing cross-border cooperation mechanisms appear insufficient for addressing local problems posed by the use of online platforms. Stronger, more systematic and agile cooperation between authorities on the basis of common rules for addressing illegal goods and content would strengthen their mutual trust and the effective enforcement. Options for addressing harmful, but not necessarily illegal content, would also be in scope, while respecting the important distinction between the two. This would help better protect users, improve the functioning of the single market, especially if combined with a capacity to gather all relevant information from platforms. Experience from existing cooperation structures (such as BEREC, CPC Network, RAPEX) will be taken into consideration, as well as the new competences introduced under the AVMSD for audiovisual regulatory authorities and their cooperation mechanism under the European Regulators Group for Audiovisual Media Services (ERGA).The underlying regulatory and market evolutions pose risks to the competitiveness of the internal market, by restricting the freedom of establishment of digital businesses and their freedom to provide cross-border services. Facing potentially 27 different regimes across the EU, an innovative digital service would struggle to benefit from the Single Market to grow and scale up: only the largest platforms can absorb the costs of diverging rules and procedures. This is also ineffective in protecting Europeans in a consistent and comprehensive manner across the single market.

Online platforms continue to play a significant role in the spread illegal goods, illegal services and content online. In the absence of clearly defined responsibilities at EU level for digital services in general, and platforms in particular, the level of protection for citizens’ safety online is not consistent across all services. When platforms do take steps to address illegal behaviour, they can face uncertainty under the existing legal framework (notably for voluntary measures to detect illegal content).

At the same time, protections of users’ rights – including the freedom to receive or impart information – are not always sufficiently robust across the board.

In many instances, there is also a lack of accountability in the private decisions taken by online platforms, and the current legal framework does not allow any scrutiny of how platforms shaping information flows online, including the role played by associated online advertising services. Further strengthening of the cooperation between service providers and authorities is also needed to ensure public policy objectives on safety and security.

In addition, while the e-Commerce Directive does not currently apply to services established in third countries, services without legal establishment in the EU are increasingly gaining importance in the EU, be it in the field of e-Commerce or in social media services. Today, these remain effectively unregulated.

3.Significant information asymmetries and ineffective oversight across the single market 

There is currently a lack of oversight over digital services in the current legal framework, with significant information asymmetries between the services and their users (citizens and businesses), as well as with regards to public authorities. Transparency reports published by online platforms on measures taken to counter the spread of illegal goods or content are generally voluntary, partial, and difficult to compare across services. In addition, when services take measures against “harmful” content, which is not per se illegal, such measures, as well as their impacts – on reducing individual and social harms, but also on freedom of expression -, are difficult to scrutinise. There is also no structured, legally binding cooperation or dialogue for emerging issues, such as unforeseen issues relating to “harmful” content, or unexpected forms of manipulation of platforms’ services. This accountability gap also concerns algorithmic processes used by online platforms – e.g. recommender systems, content moderation tools, or ad placements.

Basis for EU intervention (legal basis and subsidiarity check)

The intervention addresses the freedoms of establishment and to provide services and the proper functioning of the Single Market for digital services. As such, the legal basis considered likely would be Article 114 of the Treaty of the Functioning of the European Union and, potentially, Articles 49 and 56.

Given the fundamentally cross-border nature of many digital services and of the risks and opportunities they bring, the intervention is best taken at EU level. The objectives cannot be effectively reached by any Member State acting alone.

B. Objectives and Policy options

The general objective is to provide for a modern legal framework for digital services, strengthening the Digital Single Market and ensuring that digital service providers present in the Union act responsibly to mitigate risks emanating from the use of their service, respecting Union rights and values, and protecting fundamental rights. This initiative aims at establishing a balanced and effective governance online and at clarifying roles, procedures and responsibilities.

In the baseline scenario, the Commission would make no changes to the current legal framework, in particular to the E-Commerce Directive. The Commission would monitor the take-up of the Commission’s Recommendation on measures to effectively tackle illegal content online, and the transposition of the Directive on Copyright in the Digital Single Market, the recently amended Audiovisual Media Services Directive and the Terrorist Content Regulation, once adopted.. Further action would focus in particular on more self-regulatory actions, which are naturally limited to some services participating on a voluntary basis, and with limitations regarding the enforcement or monitoring of the results. Courts would continue to interpret the obligations of new digital services against the framework of existing EU law, in particular the provisions for hosting services in Article 14 of the E-Commerce Directive.

In the absence of further EU legislation, legal fragmentation is likely to increase. A patchwork of national measures would not effectively protect citizens, given the cross-border and international dimension of the issues. The proliferation of illicit goods sold online and the dissemination of illegal content would likely continue, and no harmonised safeguards against over-removal of legal content would exist. Barriers for promising European companies to scale up in the internal market would increase, reinforcing the stronghold of large online platforms, and reducing the competitiveness of the internal market.

Other policy options will be impact-assessed following the general lines presented below. The approach presented in option 3 is complementary to the others.

·It would harmonise a set of specific, binding and proportionate obligations, specifying the different responsibilities in particular for online platform services. 8  In addition to a basic set of generally applicable obligations, further asymmetric obligations may be needed depending on the type, size, and/or risk a digital service presents, as well as a cooperation framework and due process requirements for crisis situations.

Obligations could include:

oharmonised obligations to maintain ‘notice-and-action’ systems covering all types of illegal goods, content, and services, as well as ‘know your customer’ schemes for commercial users of marketplaces 

orules ensuring effective cooperation of digital service providers with the relevant authorities and ‘trusted flaggers’ (e.g. the INHOPE hotlines for a swifter removal of child sexual abuse material) and reporting, as appropriate 

orisk assessments could be required from online platforms for issues related to exploitation of their services to disseminate some categories of harmful, but not illegal, content, such as disinformation 

omore effective redress and protection against unjustified removal for legitimate content and goods online

oa set of transparency and reporting obligations related to the these processes

·It would explore extending coverage of such measures to all services directed towards the European single market, including when established outside the Union, with a view to identifying the most effective means of enforcement.

·The instrument would also establish dissuasive and proportionate sanctions for systematic failure to comply with the harmonised responsibilities or the respect of fundamental rights.

For all the options, coherence with sector-specific regulation – e.g. the Directive on Copyright in the Digital Single Market, the revised Audiovisual Media Services Directive, the proposal for a Regulation on Terrorist Content Online – as well as the EU’s international obligations will be ensured. The intervention would not seek to modify rules established under these recently adopted or proposed acts, but complement these rules by renewing the horizontal rules for digital services.

C. Preliminary Assessment of Expected Impacts

The impact assessment will assess, for each option, the following types of likely impacts:

Likely economic impacts

The expected economic impacts are mainly related to benefits deriving from the removal of legal barriers in the internal market for digital services, and greater legal certainty, to be assessed against the cost of harmonised rules for such services across the EU. Particular attention will be paid to the impacts on innovative European SMEs, and their ability to scale up across borders in the internal market of the EU. The competitiveness of digital services in the single market will be a decisive factor in ensuring a swift economic recovery following the COVID-19 crisis. A strong digital services sector will to a large extent drive growth and enable a series of subsequent services, including the sale of goods to thrive. There would also be positive indirect impacts for businesses engaged in legitimate trade in goods and services, including quality media.

The impacts on service providers from third countries would also be assessed, given that those would be in scope of Option 2.

The assessment of economic impacts would consider the size of the targeted service providers, the capacity of the provider, and, will be assessed against costs for mechanisms already implemented today.

Likely social impacts

Importantly, digital services are fundamental means of communication – from offering the infrastructure, to intermediating flows of information. Greater trust that citizens’ safety is protected will also ensure greater uptake of digital services. The analysis will also assess impacts on the protection of consumers against illegal goods sold online, a reduction of hate speech online, better protection of minors as well as emerging systemic harms with an impact on our society and our democratic systems. The ability for public authorities to effectively ensure that the law is applied online will also be taken into account.

Likely environmental impacts

Environmental impacts are expected to be relatively marginal for all options compared to the baseline. The initiative is not expected, following an initial assessment, to increase environmental footprint of digital services, nor the absolute volumes of e-commerce compared to the baseline, even though the shipping of illegal goods is expected to decrease significantly. However, given the variety of sectors online platforms are active in (tourism activities, sales of goods, transport, etc.), the environmental implications could also be diverse and the Impact Assessment would need to analyse them in more detail.

Likely impacts on fundamental rights

A range of fundamental rights are affected by the regulation of intermediaries, as confirmed by case law of the CJEU and the ECHR. This concerns in particular, but not exclusively, the freedom to receive and impart information and ideas without interference by public authority and regardless of frontiers and the right to an effective remedy. The options will be assessed in particular against the opportunity to design at EU level a system with the appropriate and effective checks and balances to ensure that fundamental rights are protected online.

The impact assessment will pay particular attention to direct effects and incentives which could lead to the restriction of any fundamental right. Where there is a risk that such negative impacts could emerge, appropriate responses will be designed to ensure effective redress and a fair balance for the protection of rights online, in compliance with the Charter of Fundamental Rights of the European Union and international standards.

Other fundamental rights to be considered relate in particular to the protection of personal data and privacy, non-discrimination and gender equality, freedom of assembly, the rights of the child, the right to an effective remedy, the freedom to conduct a business and the protection of intellectual property.

Likely impacts on simplification and/or administrative burden

Whereas all options are expected to lead to some costs on public authorities for smooth enforcement and cooperation, it is likely that these costs will be counterbalanced by the significant efficiency gains in the enforcement of the law across the Union. This will be further assessed in the Impact Assessment.

D. Evidence base, Data collection and Better Regulation Instruments

Impact assessment

Following the evaluation of the e-Commerce Directive, an Impact Assessment will be conducted to further define the problem analysis and the policy options and to compare their impacts. The Impact Assessment is expected to be finalised and submitted to the Regulatory Scrutiny Board of the European Commission in the second half of 2020.  

Evidence base and data collection

The evaluation and the impact assessment will further build on detailed evidence gathered over the past years 9 , in particular concerning the legal assessment of current implementation of the e-Commerce Directive and evidence of emerging legal fragmentation. In addition, more granular data is being collected regularly on specific types of illegal content and goods in the context of the structured dialogues and voluntary cooperation coordinated by the Commission on several policy areas such as unsafe products, illegal hate speech, child sexual abuse material (and related cooperation between law enforcement, hotlines and industry), counterfeit products, dissemination of terrorist content, amongst others. Evidence will be also gathered through the parallel initiative on the evaluation and revision of the General Product Safety Directive.

The Commission will further launch targeted studies in particular in relation to the economic analysis underpinning the impact assessment, the state of the art in content moderation technologies, as well as evolution of certain digital services.

Consultation strategy

The evaluation and the impact assessment will be underpinned by a broad stakeholder consultation, with a threefold objective:

-Gather stakeholders’ views on the current and emerging problems in the environment of digital services

-Gather evidence and concrete data underpinning the problems

-Collect informed views on the potential policy approach, options, and perceived impacts.

The consultation strategy will in particular aim at collecting views from the most concerned stakeholders, including users of online platforms (and organisations representing their interests), digital services and intermediaries ranging from internet service providers, to cloud infrastructure services, content distribution networks, cloud-based software services, domain names service providers, etc., third party businesses involved in the ecosystem (such as providers of content moderation tools, users of online platforms, payment providers, data intermediaries, advertisers, content creators, right holders, brands, etc.) and organisations representing them; civil society representing different interests such as the protection of digital rights, consumer protection, defence of vulnerable groups and victims, social partners, and other business or employee associations, individual professionals/workers, as well as national authorities and academia, and individual citizens.

The consultation strategy will include an online open public consultation, covering a wider spectrum of issues and problems than the scope of this Inception Impact Assessment, as well as a series of targeted consultation tools, including expert workshops and an exchange of experience with Member States.

Will an Implementation plan be established?

Pending further analysis of the options and their complexity in the impact assessment, an implementation plan could be developed.