This blogpost is part of 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.
On 15 December 2020, the draft Digital Services Act (DSA) was published by the European Commission. The DSA will regulate digital services that act as intermediaries, connecting consumers with goods, services and content. Amongst other goals, the DSA aims to provide better protection to consumers online and should lead to a fairer digital market. What will the DSA mean for the future enforcement of consumer protection law through and against platforms? These are my initial thoughts on this topic.
The importance of platforms for consumer transactions
Platforms are becoming increasingly important in the context of consumer transactions and marketing. This applies to social media platforms, which have become essential channels for advertising, but also to e-commerce platforms such as Amazon and Booking, which offer products and services to consumers from a wide range of third party sellers on their platforms. A development which is likely to make platforms even more relevant is the growing importance of voice-operated smart assistants such as Amazon’s Alexa and Google Assistant. As argued by Niraj Dawar (professor of marketing at Ivey Business School) in the Harvard Business Review, smart assistants are in the future likely to become the central instrument for consumers to buy products. According to Dawar, this will make the platforms behind these smart assistants extremely powerful players in the marketing of goods. In other words: platforms are already essential players for consumer purchasing now, and are likely to become even more important in the future.
Enforcement through platforms
So far, enforcement of consumer protection law typically takes place directly against the trader in question, e.g. against the manufacturer that tries to sell products by presenting allegedly false or misleading claims. The trader then has the possibility to defend itself and provide proof of the claims made. Hence, consumer protection enforcement is typically a matter of direct interaction between an enforcement authority (or other complainant) and a trader.
I think that the DSA may change this picture. The DSA includes measures to counter illegal content online, including goods and services that do not comply with EU consumer protection law. Mechanisms will be introduced for users and interests groups to flag such content to platforms. In addition, when enabled by national laws, Member State authorities will be able to order any platform operating in the EU to remove illegal content.
As a result, I think we will see a shift in enforcement in consumer protection law: from the current standard of case-by-case complaints by consumer protection authorities and other stakeholders to the trader, to platforms removing product offers and advertising on the basis of, for example, orders of consumer protection authorities or complaints by users or interest groups. Platforms will have reason to take action, taking into consideration that they can be held liable if they don’t.
I expect that this increases the possibilities for swift enforcement, which is likely to have a positive impact in terms of consumer protection. At the same time, enforcement through platforms does raise issues of freedom of speech (which also applies to traders), freedom of enterprise and the risk of overly defensive action taken by platforms.
Enforcement against platforms
As noted, the DSA introduces a liability regime for platforms (including e-commerce platforms) in relation to illegal content published by third parties on their platforms, including breaches of EU consumer law. In essence, the platform is only liable if it fails to take action after a complaint has been filed to the platform.
The question whether e-commerce platforms can currently be held liable for breaches of consumer law in relation to offers by third party sellers on their platforms is difficult to answer. In fact, the answer is likely to depend on the applicable EU consumer protection Directive and on the specific facts of the case. In some cases, it is even explicitly left to the Member States whether e-commerce platforms can be held liable. The big question is how this complicated regime of platform liability under EU consumer law relates to the platform’s limited liability regime under the DSA. The DSA has in my view not provided clarity in this regard, which would have been more than welcome.