EU Commission consultation on the Digital Services Act

Position

EU Commission consultation on the Digital Services Act

Federal Association of German Industry (EU-transparency register number: 1771817758-48)

Status: 07.09.2020

BDI position on the Digital Services Act

Table of contents 1. Executive Summary ................................................................... 4 2. The role of digital platforms and online switching services in the digital economy ................................................................... 5 2.1. Abstain from regulating pure B2B and industrial platforms . 6 2.1.1. Differences between B2B platforms and B2C platforms ................................................................................. 7 2.1.2. Explicitly exempt B2B platforms from regulation .......... 9 2.2. Clear scope of ex-ante regulation for gatekeeper platforms 9 2.3. Clear delineation of ex-ante regulation of gatekeeper platforms in relation to competition law ............................ 10 2.3.1. Competition law abuse control as a regulatory objective? ............................................................... 11 2.3.2. Follow-up problems regarding regulatory oversight ... 12 2.3.3. Criteria for evaluating platforms as gatekeepers ........ 12 3. Illegal goods and services, trademark protection and measures to protect legitimate content, goods and services 13 3.1. Trustworthy digital identities .............................................. 13 3.1.1. WHOIS information not conforming to DSGVO ......... 13 3.1.2. Legal certainty through trustworthy digital identities .. 13 3.2. Measures against illegal activities ..................................... 14 3.3. Database on unsafe products ........................................... 15 4. Transparency............................................................................ 16 5. Creating an innovation-friendly and Europe-wide harmonised legal framework to combat illegal content ............................. 17 5.1. Maintain general regulatory principles .............................. 17 5.1.1. Adequacy of the liability exclusions (liability privilege)18 5.1.2. General supervisory duties ........................................ 18 5.1.3. Country of origin principle .......................................... 18 5.2. Adapting the definition of intermediaries to new technical circumstances .................................................................. 18 5.3. Classification of digital services: taking account of differences ....................................................................... 19 5.4. Notice-and-take-down procedures need further codification ......................................................................................... 19 5.5. Ensure better enforcement by establishing a monitoring authority ........................................................................... 20

BDI statement on the Digital Services Act

About the BDI ................................................................................ 22 Imprint 22 Contact person .............................................................................. 22

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BDI statement on the Digital Services Act

1.

Executive Summary

▪ The BDI welcomes in principle the European Commission's objective of creating balanced and effective competition on digital platforms. A general, sector-independent protection of free and fair competition already exists under EU competition law. New regulatory measures, possibly even bans on entrepreneurial activity, would be a strong encroachment on entrepreneurial freedom and competition in performance, which must be justified by the legislator.

▪ B2B and industrial platforms must be explicitly excluded from a possible ex-ante regulation. Otherwise, the recent successes of European industrial platforms are at risk.

▪ Freedom of contract and private autonomy apply to all companies. The principles of free competition must not be undermined, even in the digital economy.

▪ The liability framework for combating both illegal and harmful content must be further developed in an innovation-friendly and uniform manner throughout Europe, so that parallel developments are avoided. We therefore support the European Commission's plan to improve and update terminology in areas where the E-Commerce Directive is no longer able to keep pace with new technological developments and to improve the notice-and-take-down procedure accordingly. At the same time, it is important to maintain the well proven regulatory principles of the e-commerce Directive.

▪ The principle of privileged liability of host providers as well as the prohibition of the general duty of surveillance must be maintained.

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2.

The role of digital platforms and online switching services in the digital economy

Digital platforms play a central role in the digital economy and are leading to fundamental changes in competitive conditions in many markets. Be it online marketplaces, search engines, social media or comparison and rating platforms - platforms have become a central business model of the digital economy. The importance of the online platform economy continues to grow. According to the European Commission (EU Commission), the 242 largest companies had a total market capitalisation of over six trillion euros in 2018. Although there are more than 10,000 EU platforms, most of them are start-ups and account for only two percent of the total value.1 Especially in the case of traditional consumer platforms and marketplaces in the area of platform-tocompany-to-consumer (P2B2C), a few large players are very strong. This is due to the enormous network effects: The more users a service has, the bigger and faster it can grow, the bigger the service becomes and the more data it generates, the greater the overall benefit for the users. This self-reinforcing cycle results in the emergence of some big top dogs among online intermediaries. Due to their size and often very comprehensive data access, these intermediaries often find it easier to open up new markets, not only in the B2C but also in the B2B sector.

The public debate on the role of platforms, especially the large and powerful ones, has been going on for some time. Questions of market power also lead to the debate on whether online platforms should be subject to specific regulation (ex-ante) or whether existing competition law (ex-post) is sufficient enough or needs to be adapted for digital markets and their modes of operation. If companies are large and successful due to their attractive offer, this cannot be objected based on market economy principles for the time being as long as this market power is not abused or structural factors prevent the emergence of effective competition. At the same time, successful companies should also ask themselves critical questions about their self-image, non-discriminatory competition and possible abuse of their economic (data) dominance. The BDI therefore welcomes in principle the objective of the European Commission to create balanced and fair competition on digital platforms and in neighbouring markets. As far as market distortions occur, these must be compensated. However, in terms of competition policy, self-regulation measures by companies should remain the first means of choice - in addition to ex-post control by competition law. However, if this is proven to be insufficient to address the market distortions in question, new regulatory measures, possibly even bans on entrepreneurial activity, should be carefully considered, as they represent a major encroachment on entrepreneurial freedom and competition in performance which must be justified by the 1

EU-Kommission : https://ec.europa.eu/digital-single-market/en/news/how-do-online-platforms-shape-our-lives-and-businesses-brochure

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BDI statement on the Digital Services Act

legislator. Therefore, the European Commission must carefully examine and weigh up whether and, above all, how a possible ex-ante platform regulation for so-called gatekeeper platforms could be designed. Furthermore, it must also be considered that the Platform-to-Business Regulation (P2B Regulation), which entered into force in June 2019 and is to be applied from 12 July 2020, is still in the initial phase of application. Possible positive effects of the regulation are not yet foreseeable. The P2B Regulation already regulates fairness and transparency principles for platforms and is being examined by the Observatory of the Online Platform Industry. Therefore, to avoid over-regulation, it should be carefully examined and weighed up, especially when determining the scope of possible ex-ante gatekeeper regulation, whether further fundamental platform regulation is necessary at this stage. In any case, a possible ex-ante regulation for platforms should only apply in specified exceptional cases and should be clearly problem oriented. The need should be thoroughly assessed and justified in advance so that over-regulation is avoided.

2.1.

Abstain from regulating pure B2B and industrial platforms

The public and political debate on the regulation of so-called gatekeeper platforms essentially relates to large online platforms, online intermediaries and social networks, which are largely aimed at private consumers. This either in the platform-to-consumer (P2C) or P2B2C relationship. So far, there are no bigger leading players in the industrial platform sector and therefore there is no evidence that there are structural competition problems that would close markets permanently and prevent market entry and innovation, which would justify (ex-ante) regulatory intervention.2 Rather, a flourishing industrial B2B platform ecosystem is currently developing in Europe and Germany that is not accessible to the average consumer.

In the "Industrial Internet of Things" sector, for example, four of the world's fourteen leading "Industrial Internet of Things" platforms are currently operated by German companies.3 New regulatory requirements should not unnecessarily complicate these European business models, which are in the process of developing. Numerous German and European companies - from start-ups and SMEs to international corporations - have platform solutions in their portfolio. Building on their industrial strength, these platforms make an essential contribution to the Europe-wide implementation of Industry 4.0. B2B platforms are thus an important element in maintaining the competitiveness 2

BDI. 2020. German digital B2B-platforms. URL: https://english.bdi.eu/publication/news/german-digital-b2b-platforms/ 3 Forrester. 2019. The Forrester Wave™: Industrial IoT Software Platforms, Q4 2019.

URL: https://www.forrester.com/report/The+Forrester+Wave+Industrial+IoT+Software+Platforms+Q4+2019/-/E-RES146958#

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of European industry. From a macroeconomic perspective, just under seven percent of the value added of industry and industry-related sectors have so far depended substantially on platforms. This corresponds to a gross value added of 112 billion euros.4 Platforms set up by European start-ups and SMEs often compete with offers from large US and Chinese companies. This applies to both marketplace and "Industrial Internet of Things" platforms.

2.1.1.

Differences between B2B platforms and B2C platforms

There are significant structural differences between consumer platforms and genuine B2B platforms, so there are good reasons not to regulate genuine B2B platforms. The ifo Centre for Industrial Economics and New Technologies conducted an analysis of the B2B platform market on behalf of the BDI in the study "Industrial Digital Economy - B2B Platforms"5. The study uses ten German digital B2B platforms as an example to analyse their central mechanisms. The central findings of the study are: ▪ B2B platforms are much more specialised than B2C platforms. While there are cross-sectoral marketplaces as well as B2B logistics platforms and "Industrial Internet of Things" platforms, companies in all these sectors also operate platforms that map the specific needs of a sector. Marketplaces are a good example: In addition to general marketplaces for B2B needs, many companies operate highly specialised marketplaces and ecommerce platforms, e.g. for chemicals, metals and fashion. These highly sector-specific offers reflect the value-added processes of the industry as well as the special security requirements that have to be observed during sale and delivery.

▪ Due to the high degree of specialisation of industrial platforms, scalability is also limited and the network effects are less pronounced than with classic consumer platforms. On B2B platforms, comparatively symmetrical companies meet at eye level with regard to organisation and professionalism.

▪ B2B platforms only have a chance of success if they make processes in companies more efficient, increase their turnover or enable new business models. This usually requires a high degree of service orientation and the associated high investment costs for each newly acquired platform user.

4

Vbw, 2019, Platforms - Infrastructure of digitisation: https://www.vbw-bayern.de/vbw/Aktionsfelder/Innovation-F-T/Forschung-und-Technologie/Plattformen---Infrastruktur-der-Digitalisierung-2.jsp- Infrastructure of digitisation-2.jsp 5 "Industrial digital economy - B2B platforms" ifo i.A. of the BDI: https://english.bdi.eu/publication/news/industrial-digital-economy-b2b-platforms/ and https://bdi.eu/publikation/news/industrielle-digitalwirtschaft-b2b-plattformen/ Page 7 of 22

BDI statement on the Digital Services Act

This factor stands in the way of strong, automated scaling, as is common with standardised offers on B2C platforms.

▪ Large platform users often generate more revenue than the actual platform operator and, in some cases, even (potential) future competitors. As a result, individual commercial users of such platforms have a stronger bargaining power, leading to customised solutions and high investments in platform infrastructure.

▪ There are also significant differences between B2B and B2C platforms regarding the use of data generated on the platform or exchanged via the platform. B2B platform operators currently provide a value-added, neutral infrastructure for the storage, sharing and collaborative use of data. In the case studies considered, no access to stored data, files or information takes place by the operators. In addition, operators and users of digital B2B platforms conclude bilateral agreements in which possibilities for the use of data are defined in a binding and specific manner. This means that even before the platform is used, it is precisely regulated for which purposes platform operators may use the data of their users. This strengthens the relationship of trust between the two contracting parties.

▪ Moreover, operators of B2B platforms operate in a highly competitive market environment. Although the market for general "Industrial Internet of Things" platforms is still at an early stage of development, both technically and in terms of adaptation by users, there is already a broad international field of competitors who are pursuing their own approaches from different sectors. Thus, intensive competition can currently be observed in a relatively early market phase. This competition should not be weakened by regulations that inhibit innovation, but rather promoted by an intelligent location policy.

▪ While B2C platforms, such as general B2C marketplaces, booking platforms and social networks, often generate high profits, digital B2B platforms are often far from profitable: although around 60 percent generate a clearly positive return on investment - here, the additional revenues exceed the additional costs by more than ten percent. However, 31 percent of companies have to bear costs that are significantly higher - i.e. at least ten percent - than the additional revenues generated. 6 On average, B2B platforms are therefore not yet profitable for the companies operating them. Rather, companies, from start-ups and SMEs to internationally active industrial and software groups, operate digital B2B platforms in order

6

Vbw, 2019, Platforms - Infrastructure of digitisation: https://www.vbw-bayern.de/vbw/Aktionsfelder/Innovation-F-T/Forschung-und-Technologie/Plattformen---Infrastruktur-der-Digitalisierung-2.jsp- Infrastructure of digitisation-2.jsp

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to be able to offer their customers digital value-added services and thus increase value-added customer loyalty.

2.1.2.

Explicitly exempt B2B platforms from regulation

All in all, it can be stated that in the area of B2B platforms, a gatekeeper position of individual platforms similar to a monopoly cannot be observed either in marketplaces or in "Industrial Internet of Things", logistics, supply chain management or networking platforms. The factors outlined above rather favour the coexistence of several competing platforms. Moreover, competition between traditional (analogue) business models and digital platformbased business models also creates additional competition, which requires operators of digital B2B platforms to invest heavily in their own platform.

In regulating digital platforms, the European Commission should not ignore the added value that in particular B2B platforms bring toEurope's industrial base7 in order to ensure its future viability. Building on the structural differences between B2C and pure B2B and industrial platforms outlined above, the latter should be explicitly excluded from platform regulation if they act exclusively as B2B platforms. Otherwise, the young European industrial platforms will be put at risk already before they can grow strong.

2.2.

Clear scope of ex-ante regulation for gatekeeper platforms

The goal of the European Commission’s deliberations on regulating so-called gatekeeper platforms is to limit the increasing and consolidating market dominance of particularly large and strong structural platforms, which is facilitated by network effects, and to introduce certain rules for markets already consolidated due to these platforms and neighbouring markets, so that other players on platforms and new platforms also have a chance to gain a larger market share in the concerned market. However, it is unclear which platforms the Commission considers to be "large" or "gatekeepers", in particular which the criteria for assessing these characteristics will be. Drawn from the scientific discussion about the dominance of large international online platforms in the B2C business, appropriate and practicable thresholds for the scope of application should be created to ensure other smaller platforms serving only niche markets are not also regulated too. Otherwise, the European Commission's real objective, namely, to create a diverse and competitive European platform ecosystem, would be completely missed.

7

Bitkom e. V. 2020. digital platforms 2020. URL: https://www.bitkom.org/Bitkom/Publikationen/ Chart Report - Digital Platforms-2020

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2.3.

Clear delineation of ex-ante regulation of gatekeeper platforms in relation to competition law

In view of the simultaneous ongoing consultation on the New Competition Tool (NCT), it is still unclear whether possible ex-ante rules for gatekeeper platforms will be linked to antitrust law and how the relation to the parallel initiative for the NCT, whether there will be links to existing abuse control or not, is supposed to be designed. While competition law provides a general ex-post control of conduct, which is not limited to specific markets, and an ex-ante merger control, ex-ante rules in general create specific requirements for specific conduct in certain markets and therefore, the scope of application of competition law and ex-ante rules must be kept strictly separate. In this context, reference is also made to the BDI position paper on the parallel consultation on the NCT.

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2.3.1.

Antitrust control of abuse of dominant positions as the regulatory objective?

In its "Inception Impact Assessment" on ex-ante rules in the Digital Services Act (DSA), the European Commission has identified the following problems which should be addressed: 1. An imbalance in bargaining power between large online platforms on the one hand and their users and rivals on the other, due to increasing dependence of traditional businesses on a limited number of these large online platforms; 2. In the long-run, risk of reduced competition and dynamism and consequently reduced choice for consumers and businesses users, due to difficulties for businesses to bring innovative solutions, including innovative alternatives to existing large online platforms, to the consumer, in particular, due to an increasing number of “online platform ecosystems� operated by large online platforms; 3. The increasing risk of so-called "tipping" - tilting of markets into a dominant position - regarding markets adjacent to themarkets, in which these large online platforms are active, due to large online platforms being able to easily enter adjacent markets by improving or offering new services also since the benefit from advantages of data collected in another sector.

To 1..: The dependence of (traditional) undertakings on other undertakings (here: large online platforms) is a classic problem addressed by the antitrust control of abuse of a dominant position under competition law (Art. 102 TFEU).

To 2..: Difficulties for undertakings to establish competitive offers in a market is the question regarding market access being possible or, if this is in principle possible , the competitiveness of the new offer.

Preventing market access or squeezing out of offers from competitors not caused by demand (prevention of functioning competitive forces, also referred to as "market failures") are other classic applications of antitrust control of abuse of a dominant position under competition law (Article 102 TFEU). However, if supply in a market is determined by demand, it can be assumed that there are functioning competitive forces. Supply on a market can only ever be offered after market access. If there is no demand for an offer in a market with functioning competitive forces, this is basically the consequence of a lack of competitiveness of the offer, since other offers are more attractive to the demanders. This is not prohibited in a free market economy, but desirable.

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To 3..: Since the creation of a dominant position is not prohibited per se, nor does it eliminate competitive forces, problematic “tipping" of markets leads to the creation of a dominant position which is used to impair the functioning of competitive forces in the market and is therefore also a case of antitrust control of abuse of a dominant position under competition law (Art. 102 TFEU)ďżźďżź. However, since 26 July 1952 (entry into force of the Treaty of Paris) and the creation of the European Coal and Steel Community, the antitrust law of the Communities and, at present, of the Union is characterised by the principle that internal growth of undertaking is not limited. The acquisition of a dominant position is therefore not subject to any sanction or antitrust regulation under EU law, so long as the dominant position is not created by a merger or abused through specific 89 Preventing "tipping" would further restrict competition on the merits and could in particular prevent undertakings from growing internally, such as B2B platforms, which could in the long term counterbalance the already powerful digital undertakings if they had the chance to achieve an internationally competitive size in their niche markets. In economic terms, intervention for these reasons is only really justifiable when it is limited and only in a few cases , if an undertaking - possibly with its platform - has critical market power and abuses it.

2.3.2.

Follow-up problems regarding regulatory oversight

It is unclear which authority shall be responsible in the event of possible exante rules for platforms under the DSA. In competition law, the Directorate General for Competition (DG Competition) has the competence for application and enforcement. If ex-ante rules in the DSA are not clearly distinguished from control of competition law and another authority is given competence regarding the ex-ante rules in the DSA, there is a high risk of conflicting decisions in relation to decisions taken by DG Competition, whom will continue to oversee platform behaviour in respect to EU competition law. This potential tension must be explicitly taken into account.

2.3.3.

Criteria for evaluating platforms as gatekeepers

The criteria proposed by the European Commission for the platforms subject to the ex-ante rules are in part too abstract and unsuitable. Insofar as the criteria describe specific consequences of an abuse of a dominant position, these consequences are already prohibited under Art. 102 TFEU, the antitrust

9

See Nettesheim/Thomas, Unbundling in German antitrust law, 2011, p. 158

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control of abuse of a dominant position, and therefore, these criteria are unsuitable for a linkage to ex-ante rules.

3.

Illegal goods and services, trademark protection and measures to protect legitimate content, goods and services

The security of users on the Internet must be protected just as effectively as consumer confidence in digital products and services and consumer access to digital industry offerings, including in the context of regulating digital services through the DSA.

3.1.

Trustworthy digital identities

User security on the Internet can be practically guaranteed for all Europeans, mainly through trustworthy digital identities. This will counter the increasing risk of identity theft. This risk is due in particular to the progressive linking of personal data on the Internet, without it being possible to identify them with legal certainty.

3.1.1.

WHOIS information not conforming to DSGVO

At this point it should be noted that WHOIS information data and related information are only accessible to a limited extent, in particular due to the applicable DSGVO. A corresponding reform of the WHOIS database, which is legally compliant with the DSGVO, is still pending.

3.1.2.

Legal certainty through trustworthy digital identities

Access to data must lead to reliable and genuine personal data and the risk of false or incorrect personal data being transmitted must be reduced, avoided and ultimately eliminated. In addition, ensuring trustworthy digital identities facilitates law enforcement and is therefore an essential factor in increasing legal certainty and stability. As a general rule, providers of an online intermediary service that suspends or terminates its services for a commercial user should, as far as possible, inform the user in advance or at least immediately of the suspension and briefly state the reasons for the decision in each individual case. The injured party should be provided with the infringer's contact details in compliance with the principles of transparency in order to enable the seamless enforcement of legal claims (cf. also point 4 Transparency). In particular, in business-to-business contractual relationships - in the context of services primarily aimed at consumers, acting as intermediaries between Page 13 of 22

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the trader and the consumer or providing a commercial interface for the online sale of goods, without prejudice to the rights of data subjects under the General Product Safety Directive - platforms should be obliged, through the application of "know your business customer" measures, to verify vendor information and, in the case of commercial vendors, to display it publicly. This will ensure both that, prior to the presentation of vendor content, it is possible to know with whom contractual relationships have been entered into and that non-EU vendors are effectively identified, and that right-holders can better investigate and take action on infringements. Finally, the protection of rights also leads to the desired effective increase in user safety on the Internet.

3.2.

Measures against illegal activities

It is also crucial to achieve the European Commission's goal of a high level of user safety on the Internet that illegal activities on the Internet are effectively tackled and that infringements are not only reported but that effective measures are also taken by the digital service providers. After all, product piracy in particular is increasingly becoming a major problem for companies and a danger for consumers. Online platforms offering illegal goods and services, albeit unknowingly, must face up to this responsibility. However, selfand co-regulatory measures should be the first means of choice.

Each platform operator is responsible for compliance with the copyright and trademark rights of third parties. This responsibility should lead to appropriate protective measures on the part of the platform operators in order to avoid the possibility of infringing the property rights of third parties. It is also important to effectively counteract product piracy in the interests of consumer safety. If host providers delete contents reported in doubt upon gaining knowledge, this can lead to platform operators wrongly deleting contents in some constellations in practice. In the latter cases, it should be ensured that all parties involved are sufficiently involved in the procedure and are heard.

Positive examples of measures of online platforms are lists of cease and desist declarations developed and maintained by corporate legal departments and an active content management system.

However, as the DSA is ultimately intended to regulate digital services on a meta-level and not to get lost in detailed questions of product counterfeiting and product safety, the BDI advocates at this point that these important questions of differentiation and design of the regulations on guaranteeing product safety - also with regard to the dangers and risks of product and brand piracy - should be addressed separately within the framework of the review phase of the General Product Safety Directive - GPSD - 2001/95/EC. Page 14 of 22

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3.3.

Database on unsafe products

In view of the reported illegal activities and the fact that also, and especially, counterfeit products are increasingly a source of uncertainty, it is essential for increased effective user safety that the two existing databases on unsafe products RAPEX and ICSMS are merged or at least better integrated.

From the point of view of efficient use of the resources of market surveillance authorities, two systems are not very effective as they waste valuable resources. According to some industry sectors, and since ICSMS allows not only the sending of notifications on unsafe products but also an intensive exchange of information on the deficiencies and measures already taken, the better system (ICSMS) should be used in the future. The contents of RAPEX could be integrated into ICSMS. This would require adjustments in the legal provisions of the "General Product Safety" Directive.

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4.

Transparency

Balanced and proportionate transparency principles are welcome for platform operations and also for product recommendations and advertising. Transparency and traceability of decisions taken by digital services will improve the performance and benefits of the platform for all stakeholders, thus contributing to greater trust and confidence in online platforms and other intermediaries.

Many service providers already offer additional information on a voluntary basis to make this service stand out from the crowd. This is because user trust in digital services is central to most providers. However, where there are transparency deficits, it may make sense to make improvements after careful legislative scrutiny. Balanced information obligations towards commercial users of digital intermediaries are also sensible. In principle, for example, the provider of an online intermediary service who suspends or terminates its services for a commercial user should, as far as possible, inform the user in advance or at least immediately of the suspension and briefly give him the reasons for this decision in each individual case. At the same time, the injured party should be provided with the infringer's contact details in order to enable the seamless enforcement of legal claims. Such transparency and information obligations are appropriate and are already partly regulated in the P2B Regulation, which only has to be applied since 12 July.

However, for all transparency obligations, it is important that no disproportionate requirements are imposed. Furthermore, transparency obligations must not lead to the disclosure of business secrets, such as specific algorithms or central modes of operation of the platform service. Revealing too much information about how algorithms work can also lead to their being compromised by fraudulent actors (hackers, spammers, etc.) At best, the publication of generic, non-detailed information should be required. This is already made clear in the P2B Regulation.

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5.

Creating an innovation-friendly and Europe-wide harmonised legal framework to combat illegal content

The Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (the e-commerce Directive) laid the foundations for the successful development of online commerce and the platform economy in Europe and ensured freedom of expression on the Internet. The European-wide principles of the e-commerce Directive, which have been in place for 20 years, have helped businesses to grow strongly, new business opportunities to emerge on the Internet and have been given more choice to consumers. This has made a major contribution to the European economic activity. In order to continue to address the rapidly increasing socio-political and economic importance of Internet services, the planned legislative amendment must be developed in an innovation-friendly and uniform manner throughout Europe. Especially regarding liability issues and the legal framework for combating both illegal and harmful content, it is very important to achieve a genuine harmonisation without parallel developments. We therefore support the European Commission's plan to improve and update terminology in areas where the e-commerce Directive can no longer keep pace with new technological developments and to improve the noticeand-take-down procedure accordingly. At the same time, it is also important to maintain the tried and tested regulatory principles of the e-commerce Directive.

5.1.

Maintain the general regulatory principles of the e-commerce Directive

The liability of online intermediaries is a particularly important area of Internet law worldwide. Without harmonised exclusions of liability - the so-called liability privilege, the country of origin principle and the prohibition of a general duty of supervision - which apply to online intermediaries in the Internal Market, the Internet industry would in all likelihood not have been able to develop and establish itself as it is today. These basic principles will continue to contribute to the success of the Internet and its digital services. It is therefore important to maintain these regulatory principles despite and precisely because of the new policy challenges posed by the increased role and responsibilities of Information Society services.

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5.1.1.

Adequacy of the liability exclusions (liability privilege)

Generally, the exclusions of liability for the various information society services as laid down in the e-commerce Directive (Articles 12-14 of the e-commerce Directive), in particular the so-called liability privilege, are appropriate. However, the current voluntary and active efforts of platform operators to combat illegal activities are not always sufficient. While maintaining the general liability privilege of the e-commerce Directive, possibilities of assuming responsibility should rather be discussed, depending on and differentiated according to the type of service provider and content and with a view to freedom of action and freedom of opinion. Thus, the current legal framework should be used to strengthen incentives for service providers to actively seek infringements, including in the field of intellectual property.

5.1.2.

General supervisory duties

Since the absolute monitoring of offers on the platforms is not possible or only possible at disproportionate expense for the operators, the ban on imposing a general monitoring obligation for all information society services (Art. 15 of the e-commerce Directive) should generally be maintained. Nevertheless, incentives should be created to encourage platforms to search for illegal content on their platforms on a voluntary basis. It could be envisaged that, in general, right-holders would be responsible for monitoring and notification, and intermediaries should then act swiftly in response to this actual notification of an infringement. This would create a good balance on the online marketplace.

5.1.3.

Country of origin principle

With regard to the liability rules and the regulatory principles of the e-commerce Directive as a whole, the country of origin principle (Article 3(1) and (2) of the e-commerce Directive) must be strengthened, particularly for the future. A departure from the country of origin principle, a basic prerequisite for the free choice of the place of establishment of providers and the free movement of digital services in the Digital Single Market, would send the wrong signal.

5.2.

Adapting the definition of intermediaries to new technical circumstances

Since the entry into force of the e-commerce Directive the internet has developed rapidly, hence several of today´s intermediaries can no longer be Page 18 of 22

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subsumed under the original definitions - provision of access, caching and hosting. In order to respond to this technical development and to remove uncertainties, a clear legal definition of intermediaries and a corresponding adaptation of the concepts of "mere conduits", "caching services" and "hosting services" is necessary. Although certain established services, such as an online shop, can be easily subsumed under the term host provider, newer technologies, such as keyword advertising for brands, cannot easily be assigned to the term host provider. The same applies to the other terms mentioned, which are not only linguistically out of date.

In addition, the terms "of a purely technical, automatic and passive nature" used in recital 42 of the e-commerce Directive need to be overhauled. While these terms continue to apply to some services, such as cloud infrastructure services, they are no longer appropriate for other services. In fact, even the ECJ has consistently found it extremely difficult to classify new technologies as "purely technical, automatic and passive". This is made clear by the case law of the Court of Justice of the European Union in its decision L'OrĂŠal vs. eBay, in which it introduced a "neutrality requirement" for host providers, which cannot be inferred from the wording of the 42nd recital and has therefore rightly been heavily criticised in the literature.

5.3.

Classification of digital services: taking account of differences

The classification of digital services must take account of differences according to defined criteria. The criteria for different treatment of platform operators should be based on content rather than sector. For example, a streaming platform should be distinguished from an online marketplace with physical products, while the latter can in principle be treated equally in different sectors. On the basis of these criteria, the codification of platforms should also be based on separate notice-and-take-down procedures.

5.4.

Notice-and-take-down procedures need further codification

The notice-and-take-down procedure, together with the liability privilege, should be further codified within the existing legal framework and as far as technically feasible. There must be clarity as to what content is actually illegal and from which services it must be removed. The control influence that online intermediaries have over content should be taken into account. New obligations should only apply to those online intermediaries who are actually able to edit and moderate content distributed to the public. Only then can existing legal uncertainties be removed and online intermediaries be given more responsibility.

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In order to define the conditions that notifications or statements must fulfil to be valid and what is necessary to prevent unlawful notifications, errors and abuses, differentiated guidelines should be used. The clearer the conditions for illegal content, the better and faster the response. Some platform operators already use such procedures (e.g. Google trademark complaint) to be channelled and fully informed about infringements on their platforms. It should be noted, however, that these procedures are designed differently on each platform, that different information is requested for the same infringements on different platforms, that the processing time can vary and that there is no independent complaints body for unauthorised deletions. It would therefore be helpful to have EU-wide guidelines on how notice-and-take-down procedures should look in detail, that they should be unbureaucratic and simple and that they can be found and filled in with just a few clicks. This would also be conceivable together with a harmonised, trustworthy labelling system ("flagging").

Furthermore, it should also be regulated what needs to be done in the disputed case of a notice-and-take-down procedure by taking into account the specifics of the respective branches and sectors and measurable by the principle of proportionality and should be designed in different ways, as different providers face different challenges due to their different offer of services and content. In other words, they also have different procedural requirements.

However, where a notice-and-take-down procedure has taken place in respect of undisputed illegal content and goods, the appearance of such content and goods which have been previously reported and checked should also be proactively prevented to the best of our efforts ("best efforts") (stay-down).

Furthermore, it could be uniformly regulated that contents which are literally identical with the illegal statement are to be deleted (ECJ judgement of 04.10.2019, Ref. C-18/18).

5.5.

Ensure better enforcement by establishing a monitoring authority

Improving enforcement, accompanied by a new approach to commitments, will require appropriate supervision or monitoring to ensure uniform application and enforcement of the rules applicable across Europe and to ensure consistency for all parties. The benefit of a monitoring authority will be to help online intermediaries to meet their responsibilities and to ensure a control mechanism for taking proportionate measures. It is crucial that the focus of the Authority's work is limited to monitoring the actions of service providers. It could also serve as a complaints body, similar to the European Union Online Dispute Resolution Platform, for disputed deletions on online Page 20 of 22

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platforms, in order to resolve legal disputes on online platforms in a discreet and unbureaucratic way.

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BDI statement on the Digital Services Act

About the BDI The BDI communicates the interests of German industry to those with political responsibility. In this way it supports companies in global competition.

It has an extensive network in Germany and Europe, in all important markets and in international organisations. The BDI provides political support for international market development. And it offers information and economic policy advice on all industry-related topics. The BDI is the umbrella organisation for German industry and industry-related service providers. It speaks for 40 industry associations and more than 100,000 companies with around 8 million employees. Membership is voluntary. 15 state representatives represent the interests of industry at regional level.

Imprint Federation of German Industries (BDI) Breite StraĂ&#x;e 29, 10178 Berlin www.bdi.eu Phone: +49 30 2028-0 Brussels Office: 58 Rue Marie de Bourgogne 1000 Brussels Contact person Kathrin Hintner Senior Manager Phone: +3227921008 k.hintner@bdi.eu Stefanie StĂźndel Senior Manager Phone: +3227921015 s.stuendel@bdi.eu

BDI document number: D 1218

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