Insights House of Commons European Scrutiny Select Committee publishes report on EU Commission’s proposals for the Digital Services Act and Digital Markets Act

In essence, the Committee says that the Commission’s proposed new laws, which include potential fines of up to ten per cent of a company’s annual global turnover if the regulations are not adhered to, could have “a significant impact on the UK” because they will apply to companies exporting digital services from the UK into the EU. In 2019, the UK exported £51.9 billion worth of such services, 40% of which was to the EU.

The Committee also says that the EU’s actions may also present risks and opportunities for the UK ‘s own approach to regulating tech companies through the Government’s upcoming legislation under the Online Safety Bill and Digital Markets Unit.

The report notes that the EU’s Digital Services Act, which creates new content moderation requirements for internet hosting services designed to ensure that illegal content such as child sex abuse materials or adverts for counterfeit goods are taken down quickly, covers similar ground to the UK Government’s forthcoming Online Safety Bill.

As for the proposed EU Digital Markets Act, which is meant to address market failures arising from the enormous power wielded by some large online platforms such as Facebook and Amazon, the report notes that its objectives are broadly similar to those of the UK Government’s planned Digital Markets Unit, which will oversee the enforcement of a new UK competition regime for large online platforms.

The report also says that the UK clearly “has an interest in seeking to influence the final shape of the EU legislation, and, where appropriate, seek mutually beneficial convergence”, noting that the UK Government has itself said that different regulatory practices between countries could see companies “flip”, or switch between jurisdictions, to take advantage of the differing rules. Indeed, the Committee notes, the Government has made regulatory diplomacy relating to standards in the digital economy a cornerstone of its recent foreign policy review.

The Committee has written to the Minister for Digital and Culture, Caroline Dinenage MP, to ask her to set out the Government’s plans for engagement with the EU proposals.

The new laws on large online companies, the Committee’s report says, are likely to be subject to “considerable lobbying efforts by the mainly American corporations involved”. To read the Committee’s press release in full and for a link to the full report, click here.