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European Parliament Passes Law Setting Rules For Online Services

The Digital Markets Act to force greater transparency on large platforms operating in Europe, including tech giants Apple and Amazon.

LONDON — The European Parliament passed sweeping legislation governing how online platforms and marketplaces — including those of the world’s biggest tech companies — tackle the spread of illegal content, while also placing new obligations on digital services around the sharing of information.

Members of the European Parliament (MEPs) approved the Digital Services Act on Tuesday in its first reading with 539 votes in favor, 54 votes against and 30 abstentions. In the same voting session, held in Strasbourg, France, the Parliament also adopted the Digital Markets Act (DMA), which passed with 588 votes for, 11 votes against and 31 abstentions.

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Although neither bill is specifically targeted at the music industry, both establish clear rules and regulations for all online services operating in the European Union, including ticket resale sites like Viagogo and StubHub, social media platforms such as Twitter and Facebook that heavily feature music content, and tech giants like Apple, Amazon and Google.

The DMA targets large online platforms that the European Commission terms “gatekeepers” because their dominant online position make them hard for consumers to avoid. The new laws will force those companies to allow third party services to operate more freely within their platforms. Gatekeepers will also be required to provide other businesses, such as apps, access to the data they generate in the dominant platform, allowing smaller services to contact their customers directly.

The new laws come three years after the European Union’s Copyright Directive — and its central Article 17 provision — officially came into force, governing how user generated content (UGC) platforms like YouTube and Dailymotion operate. The Digital Services Act and Digital Markets Act are far broader pieces of legislation that apply to all digital platforms operating in the 27 EU member states, not just UGC platforms, and they are intended to “comprehensively regulate the gatekeeper power of the largest digital companies.”

The legislation will force big platforms “to refrain from promoting their own interests, share their data with other businesses, [and] enable more app stores — because with size comes responsibility,” Margrethe Vestager, Executive Vice-President for a Europe Fit for the Digital Age, said following the bills’ adoption.

Commissioner for the Internal Market Thierry Breton said the Digital Services Act (DSA) and Digital Markets Act (DMA) turn “the page on ‘too big to care’ platforms” creating a “safer and fairer digital space” for more than 450 million EU citizens.

New obligations introduced in the Digital Services Act include the requirement for online platforms to prevent the distribution of all forms of illegal content and quickly remove any copyright infringing material or links to illegal content or tools that exist on their platform. That includes streamripping apps or links to streamripping sites that are currently easily accessible on search engines like Google or Microsoft Bing.

Platforms and digital service providers will also be subject to increased transparency, reporting and accountability requirements, providing vetted researchers and regulators with access to their data and algorithms that determine how they recommend content to users.

Online platforms with more than 45 million monthly users in the EU face a set of stricter obligations, including preventing the spread of disinformation and other societal risks that impact on electoral processes, users’ mental health or encourage acts of violence.

The Digital Services Act strengthens the protection of creators’ rights online and helps tackle music piracy but is also significant for what it does not contain, says John Phelan, director general of ICMP, the global trade body representing the music publishing industry.

According to ICMP, tech firms will spend €97million Euros ($99 million) in this financial year on lobbying EU policy makers; an earlier draft version of the DSA text included a “safe harbor” style liability exemption for search engines. The European Parliament earlier had proposed that automatic content recognition technology could not be used online at scale to tackle the distribution of unlicensed music. “Removing those [measures] are two of a few wins by the industry,” Phelan tells Billboard. “Sometimes clearing the ball off the line is as good as a goal at the other end.”

While Article 17 was hailed a victory by the music industry, in terms of scope, “the Digital Services Act is almost as important, as it is set to govern all non-copyright claims including trademark claims, publicity claims, or NFT claims in relation to an artist or a song,” says Sophie Goossens, a partner at global law firm Reed Smith.

She calls the legislation, which effectively replaces 2000’s eCommerce Directive, “the biggest change in internet laws in 22 years,” impacting not just on current online platforms and services, but also regulating future iterations of the digital market such as Web3.

New Laws Will Crack Down on Ticket Scalping

For ticket resale marketplaces such as Viagogo or StubHub, there will be tougher checks on traders, including the requirement to collect and verify information on professional sellers before they are allowed to list tickets.

Platforms selling concert tickets will also be required to conduct random spot-checks for listings that contravene national laws, as well as produce annual transparency reports on takedowns of illegal content. The legislation bans what it terms as “dark patterns” – manipulative advertising practices, such as pop-ups, that try to pressure buyers into making purchases they did not intend to make.

Last month, Italy’s communications regulator fined Viagogo 23.5 million euros ($24.8 million) for violating the country’s strict rules around the resale of concert tickets and selling tickets to concerts by Maneskin, Pearl Jam and Dua Lipa, among others, at vastly inflated rates. The Court of Justice of the European Union has been asked to rule on whether the laws restricting the commercial resale of tickets in Italy are compatible with EU legislation.

“This is a landmark moment for Europe’s live performance industry, which sees billions of euros drained from it annually by ticket scalping,” says Sam Shemtob, director of The Face-value European Alliance for Ticketing (FEAT). Shemtob says the Digital Services Act “will be instrumental in helping to protect consumers and live events businesses from exploitation at the hands of ticket scalpers.”

To ensure that the rules of the DMA are followed, the European Commission has the authority to carry out market investigations. In instances where a platform is found to not be complying with the law, the Commission can impose fines of up to 10% of a company’s total worldwide turnover in the preceding financial year, or up to 20% in cases of repeated non-compliance.

Following Tuesday’s vote, the European Council will formally adopt both bills later this year (the DMA in July and the DSA in September), and they will enter into force 20 days after their publication in the EU Official Journal. The terms of the Digital Markets Act apply six months after it enters law; the Digital Services Act comes into effect 15 months after its adoption, or from Jan. 1, 2024, depending on which comes later.

Unlike the EU Copyright Directive, EU member states are not required to transpose the terms of the bills into their own national law, a scenario that can lead to different interpretations of how the law is applied. Instead, all 27 EU countries are required to implement the legislation as it is written in the final EU text.

“The EU is looking to be a blueprint, showing the way to other legislators,” says Goossens. “This is going to have a massive impact on the whole online industry.”

UPDATE This article was updated at 7:15 pm EST on July 5, 2022, to include more industry reaction.