
This is a new episode of German Vault, my pro EU podcast. If you don’t know me yet, I’m York Stroi and I’ve been a consumer affairs journalist for over 20 years. That’s also the reason why I’m doing this podcast, because when it comes to consumer issues, many things come from the EU. And there is a lot going on in the digital sector, DMA, DSA, AI Act, to name just a few of the major regulations. In this episode, I look at the DMA and DSA. Incidentally, this is part of the „Kai out of the box“ section. My section for current development, which is somewhat cynical aimed at the fact that EU consumer issues always takes us in Germany by surprise because they supposedly come into force overnight. Of course, this is not the case. All regulations and directives have a long lead time. As always, this is not a shed, but a focused article for which I have interviewed some experts.
New episodes are always published in the middle of the month, on the 2nd Monday of the month in German (indicated by a [de]). One week later, on the 3rd Monday of the month, there is the same episode in English (indicated by the [en] in the title). It is not exactly identical to the de-episode, but almost.
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Transcription:
„Over the last two decades, digital platforms have become an integral part of our lives. It’s hard to imagine him doing anything online without Amazon, Google or Facebook. While the benefits of this transformation are obvious, the dominant position that some of these platforms have achieved gives them a massive advantage over their competitors but also an undue influence on democracy, fundamental rights, society and the economy. The large online platforms often determine future innovations or consumer choices and act as gatekeepers between companies and internet users. To address this imbalance, the EU is improving the current legislation on digital services by introducing the Digital Markets Act and the Digital Services Act. These laws will create a standardized, EU-wide set of rules.“
This is how the European Parliament describes the purpose of the DMA and DSA in an article. The DSA was implemented on 7th of February 2024, followed by the second law, the DMA, on 7th of March. Both laws come into force several years earlier in November 2022 and even the first version of the European Parliament’s article on this was published on the 5th of December 2021.
In other words, the fact that we in Germany were surprised by the DMA at the beginning of March 2024, the law particularly jumped out of the box is not due to the fact that it had not been known for a long time.
DMA and DSA – two important european laws
The Digital Service Act (DSA) regulates better protection for citizens. The aim is to create a safer online environment. This includes, for example, due diligence obligations for platforms or better and clearer reporting of illegal content, products or services.
Birgit Schmeitzner, spokeswoman for the EU Commission, describes it like this:
„Everyone who lives here is online a lot every day. I use many different platforms and services. This makes my everyday life and all of our everyday lives easier. But there is also the other side of the coin, very large providers have a lot of market power, can exploit the whole thing and can act in a non-transparent way. Consumers can also sometimes be uncertain What am I getting into when I open an account somewhere? What have I signed up for? And is it all legal what this platform actually knows about me, what it can access from me, data and so on? Where can I be ripped off? Where is data being used in an uncontrolled way? This is where the DSA comes in.
There are stricter rules for large platforms which can exert more influence. The fact that they do not immediately start proceedings against various companies that also happens, but the first step is to ask OK. We have a feeling that things are not running smoothly on this platform in Area X, for example content moderation. So why don’t you inform us as a platform? What mechanisms have you put in place to protect consumers and make sure that everything is done by the book. This is slowly starting to happen and I would say that the DSA has already developed some teeth.“
Extensive List of web companies in the DSA
The DSA provides special regulations for companies that reach more than 10% of the 450 million consumers in Europe. The extensive list includes Aliexpress, Amazon, Apple, Google, Microsoft, Twitter, and Zalando.
The Digital Market Act (DMA) is a 66-page regulation. It contains numerous regulations in form of obligations and prohibitions that platforms that have been identified as so-called gatekeepers must comply with.
It stated somewhat abstractly, for example, that these companies must enable their commercial users to access data that they generate when using the gatekeeper platform. Our users may no longer be prevented from uninstalling pre-installed software or apps if they wish so.
Rene Repasi, MEP for the Social Democratic S&D group, describes the reasons for the development here:
„If you look at the situation in the digital sphere, the term digital markets is misleading because it assumes that there are markets. That’s not the case at all. We have a Wild West in the digital markets. They have been unregulated for decades. Of course, digital markets don’t work like the chocolate bar market where you have competing products that set the price and the best quality product will eventually win. Here we are working with data because whoever has the most data can target and offer the services that are most in demand. If you have an advertising budget of euro 100,000 and a businessman says I’m going to advertise to exactly those people who are thinking about buying your product or maybe don’t even know that they want to buy it.
Then, of course, you give it to them. The person who says, I’ll just make posters doesn’t get it. Google has so much data about us that they can promise any advertiser I can target your ads to the consumer you want to reach. They are sucking up market share because they have collected data and because we consumers have given up our data in our browsing behavior. And that’s why we have data ownership by a few giant companies outside the EU who can do whatever they want with the market. Because they open the door to the small companies that want to access the services, that’s why they’re called gatekeepers and then they can do whatever they want with it. At the same time, they are still competing with them.
Let’s take shopping portals Google shopping has an information advantage over other shopping portals. Then they can give themselves an advantage. So we had a situation where the person who is supposed to be subject to the rules writes the rules of the market and can change them at any time. You won’t find that anywhere else. That was the case 100 years ago with the oil companies in America. It’s only there today. Competition law, which was supposed to clean up the mess, could not keep up. It took us decades. We now have another Google shopping case before the European Court of Justice, ECJ. It started 15 years ago. In digital markets, it is a matter of weeks or months to get a market position that has been entrusted to you. That’s why we had to approach them and say we don’t need the lengthy competition procedures, we need a regulatory approach. And that’s what the Digital Markets Act did which said here, Commission, these are such blatant cases, we suspect a problem, act here.
We then did the same for consumer relations. Then came the Digital Services Act, particularly large platforms have particularly large responsibilities. And we can act immediately if something goes wrong. In the Digital Services Act, it is even the case that the regulated companies have to pay for their supervision, so that at the same time we create the men and women power to enforce it. And that was absolutely necessary because we have a market that is no longer working.
Now we have to see if we can fix it at all. Some people say that the baby has already fallen into the well, and that is the litmus test. That’s where we are now.“
DMA is looking on Gatekeepers
Both laws directly and specifically affect consumers and are intended to prove their position in the digital world. In case of the DMA, the main aim is to enforce alternatives for them.
Miika Blinn, an expert at the Federation of German Consumer Organizations, gives an example for this:
„Companies like Amazon or Google are not allowed to favor their own products in their rankings. This means that there is a chance that more suitable and cheaper offers will end up at the top of the rankings, not just your own. That really is a direct benefit. Another benefit for consumers is that third parties are now allowed to contact consumers directly and give them offers and discounts. This was previously undermined by the gatekeepers, especially those that control mobile systems. Spotify, for example, could not pass on discounts to Apple directly to consumers.
They then had to pay the Apple tax, which is a commission. And this option is now also available for contracts for apps, subscriptions, streaming services, etc. Outside these ecosystems that are controlled by the gatekeepers. And that’s why these third parties can give the discounts directly to the consumers because they also save money by not having to pay this commission directly to the gatekeepers.“
The EU commission has so far identified Alphabet – the parent company of Google -, Amazon, Apple, Booking, Bytedance, Tiktok, Meta – it’s a parent company of Facebook, Instagram and Whatsapp – and Microsoft as gatekeepers within the meaning of the DMA.
The first steps have therefore been taken with the DMA and the DSA. In the case of the gatekeepers in the DMA, they have been obligated to implement their requirements since 7th of March 2024.
However, this is not working very well, as Miika Blinn describes:
„The Federation of German Consumer Organizations (VZBV) dealt with this directly on 7th of march. And they found that not all providers implement all the requirements. Individual specific aspects were highlighted and then found out, for example, that on 7th of March the operating system updates, that should have taken place to give consumers all these options, were not necessarily carried out by the end of March.
So we did a follow-up in the summer. And then we also looked at how, for example, the right to decide what information is aggregated by individual services of the gatekeepers, this right to decide whether you want it or not, was being implemented by the gatekeepers. And it has already been established that pretty much all of the providers analyzed have tried to influence consumers through manipulative design in order to get them to agree to the merging of data across the various gatekeeper services. Such manipulative design tricks are well known. We know this from cookies, where the consent button is particularly green and bright and red, and the reject button is somehow small. Or in some cases, the gatekeepers have used longer click paths.
Then there was a simple visual design of the user interfaces. It just looked more attractive to accept. And the language used was also very striking in some cases. For example, they deliberately played on people’s fears that if they didn’t agree, they might have to pay for everything. Or that if you refused, you would have certain disadvantages and that you would have limited use of these services. It was extremely unpleasant that the gatekeepers used it in this way when it was actually clear that they would take a closer look.“
The EU Commission is now called upon to penalize these violations. It’s a moment it is carrying out checks, which could result in proceedings and penalties. Birgit Schmeitzner, spokesperson for the EU Commission, assesses the two laws as positive overall:
„If we look at the DSR and the DMA in this package, you could actually describe it quite boldly as what we see as the new constitution of the internet in Europe. Where we want there to be fair competition, we want the powerful platforms to be regulated so that there is no uncontrolled growth, that there can be growth, but not unregulated and not at the expense of the rights of people and companies. And that innovation is stimulated, but in a way that minimizes risk.“
Further developments in the area of digital consumer protection
Many agree that this is an important step to the right direction. But of course, there is also room for improvement.
Andreas Schwab is MEP for the conservative EPP group in the European Parliament. He sees important tasks for the future:
„The last legislature was very much about looking at the centers of interaction between consumers and digital platforms. In fact, we used less real consumer policy and more regulatory requirements for platforms. There was also a revision of the product safety regulation, which was changed from a directive to a regulation. The toy safety regulation, which was a directive, has been strengthened.
But above all, with the Digital Services Act, we have very strongly revised the platforms, the responsibility of the platform, in contrast to the e-commerce directive from the year 2000. And with the Digital Markets Act, we have specified the competitive conditions for the large platforms. And above all, we have moved from ex post to ex-ante regulation because the speed of digital markets is simply so great that we needed a change. And we are already seeing again, using Temu as an example. Temu has gained as many customers in six months as the European platforms have gained in six years.
That the speed we give the authorities to react is probably not enough, but that we need to make adjustments and create even more speed for the authorities. Digitalization is certainly an opportunity, but of course it will only remain an opportunity if the authorities can react as quickly as the speed of these platforms. Although there are coordinated actions by market surveillance authorities. These have become relatively thin in many member states over the last 30 or 40 years. Unfortunately, these coordinated actions do not provide the full transparency that we would need to assess the risk after the platforms have analyzed it in order to prove real wrongdoing and thus their own liability.
We need to get better at this, and we will certainly look at whether we need to tighten the laws in this parliamentary term.“
From a consumer protection perspective, Miika Blinn is calling for even tougher action as he believes it is often difficult for consumers to enforce their rights:
„There are discussions in the EU to look more generally at the extent to which consumer law is up to date and can effectively protect consumers from abusive techniques. For example, manipulative user interface design is a problem. This is often difficult to grasp. We would certainly like to see the digital fairness act that the European Commission is working on, a kind of consumer law ordered to see if these digital markets are fair and clean, to look at this problem more closely and put a stop to it. So in general, when it comes to legislation and law enforcement, you have to ask yourself whether the system we have been using is really fit for purpose. It is often the case that you have specifications in the legal text and if you feel that companies are breaking the law, you have to prove it to the companies and the burden of proof is on you. In many cases de facto, this is not really possible. Especially when it comes to cases of discrimination, for example if you use an AI and you feel discriminated against by that AI, how do you as a consumer prove that you have been treated unfairly? So I think in many cases the burden of proof has to be reversed, that you have a reasonable suspicion that you’ve been treated unfairly.“
One thing is clear in any case, this issues continue to be hotly debated in the EU. And the company’s target are also reacting, sometimes in a manipulative matter for this new legislation.
And with the Digital Fairness Act, the next legislative project is already on the agenda.
Transparency Notice for this episode about digital consumer policy in the EU
I receive support from various EU institutions for the realization of my podcast. For example, I was paid travel expenses to Strasbourg for my interviews with EU parliamentarians. I also met use of the studios and services for journalists on site. Of course, I’m not influenced in terms of content.