Clifford Chance

1. Introduction

On 15 December 2020, the EU Commission presented its draft Digital Services Act (DSA). Although some of its new standards have already been applicable since 16 November 2022, the DSA will enter fully into force on 17 February 2024. As of this date, the entire DSA is directly applicable as a fully harmonising regulation throughout the European Union with the intention of harmonising the various national laws that have emerged at national level to address illegal content and disinformation by modernising the legal framework. While the European Commission is entrusted with the supervisory power to monitor and enforce the regulations for very large online platforms and very large search engines with more than 45 million users, some regulations require execution by the Member States.

2. Enforcement Responsibilities as per the DSA

In particular, the enforcement of the DSA vis-à-vis smaller service providers is one of the main responsibilities of the respective Member State. In accordance with Article 49 et seq. of the DSA, a permanent supervisory structure is to be set up to ensure effective supervision of online platforms in Europe. As a new supervisory authority, a coordinator for digital services is to be appointed in each Member State, which is to receive complaints from users from the respective Member State and be given access to the data of the platforms. Furthermore, Article 52 of the DSA requires Member States to establish effective, proportionate, and dissuasive sanctions. In Germany, the Federal Ministry of Digital Affairs and Transport has taken up this regulatory mandate and has now published a draft Digital Services Act (Digitale-Dienste-Gesetz; "DDG E"), which complements the EU's Digital Service Act and is to enter into force on 17 February 2024.

a. Regulatory Content of the DDG

Pursuant to Section 12 (1) DDG-E, the Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway (Bundesnetzagentur für Elektrizität, Gas, Telekommunikation, Post und Eisenbahn; the "Federal Network Agency"), based in Bonn, shall in principle be responsible for the enforcement of the DSA in Germany. In doing so, it acts as a coordinator for digital services within the meaning of Article 49 et seq. of the DSA (pursuant to §§ 1 para. 4 no. 2, 14 para. 1 DDG-E) and acts completely independently in the performance of its tasks and powers. It is not subject to direct or indirect external influence and does not accept instructions (section 15 DDG-E). In addition to the basic responsibility of the Federal Network Agency, the DDG draft also stipulates further special responsibilities. Thus, regarding certain regulations, the Federal Agency for the Protection of Children and Young People in the Media (Bundeszentrale für Kinder- und Jugendmedienschutz), the Federal Commissioner for Data Protection and Freedom of Information (Bundesbeauftragter für den Datenschutz und die Informationsfreiheit) as well as the Federal Criminal Police Office (Bundeskriminalamt) are put in charge to ensure compliance with the relevant stipulations of the DDG-E (sections 12 (2), 13 DDG-E).

b. Applicable Sanction Regime

When observing its control function, the Federal Network Agency is also responsible for imposing sanctions. Section 25(4) of the DDG draft lists a total of 36 sanctions that relate to the obligations arising from the DSA. Further sanctions relate to breaches of obligations arising directly from the DDG draft (Section 25(2) DDG-E) and obligations arising from EU Regulation 2019/1150 on promoting fairness and transparency for business users of online intermediation services (Section 25(3) DDG-E). The sanctions stipulated are primarily of an economic nature. In the case of violations of the information and disclosure obligations resulting from the DDG draft itself, a fine of up to EUR 50.000 can be imposed. Regarding the obligations arising from the Regulation on promoting fairness and transparency for business users of online intermediation services and those of the DSA, the fine in question is either up to EUR 100.000 or even up to EUR 300.000, depending on the provision violated (Section 25 (5) DDG-E). In the case of violations of obligations under the DSA, there is also the additional particularity that if the provider of the intermediary service in breach of the obligation is a legal entity, a fine of up to 6% can be imposed for an annual turnover of EUR 5 Mio. and for an annual turnover of EUR 10 Mio., a fine of up to 1% of the worldwide turnover of the previous year can be imposed (Section 25 (6) DDG E).

c. Additional Competencies

In addition, the DSA gives the competent authorities operational powers, including the possibility to block services. Pursuant to Sections 26, 28 DDG-E, Sections 202(1), (2) and (5) (enforcement of obligations), 203(1) sentence 1 and (6) sentence 1 and sentences 3 to 6 (requests for information and further rights of investigation, obligations to provide information), 204 to 207 (provision of information, investigations, seizure and provisional orders) of the Telecommunications Act (Telekommunikationsgesetz) shall apply correspondingly to the exercise of these powers. The measures of the coordinating authority are immediately enforceable due to the exclusion of the suspensive effect of legal remedies regulated in section 29 para. 1 DDG-E.

3. Repeal of National Laws and further Adaptations

Due to the fully harmonising effect of the DSA, some national regulations whose expiry is determined in the DDG-E will lapse. Both the Telemedia Act (Telemediengesetz; "TMG") and the Network Enforcement Act (Netzwerkdurchsetzungestz; "NetzDG") are to expire when the DDG enters into force on 17 February 2024. While a large part of the provisions of the Telemedia Act will be adopted with identical content except for some editorial adjustments, other provisions will be expanded or limited in their scope of application. The previous sections 1 and 2 of the TMG will be merged and continued as section 1 of the DDG-E. The scope of application regulated in Section 1 (1) of the DDG-E has been significantly tightened in comparison to Section 1 of the TMG and, due to the above-mentioned fully harmonising effect, reduced to the remaining subjects of regulation required under national law. The term "telemedia" (Telemedien), previously legally defined in Section 1 (1) sentence 1 TMG and shaped by national law, is replaced by the term "digital services" (Digitale Dienste) in accordance with the European terminology. The duty to provide information resulting from Section 5 DDG-E corresponds in content to the previous provision of Section 5 TMG. The previous Section 7 (4) of the Telemedia Act is taken over into Section 7 of the DDG-E, extending the circle of addressees to include all digital services which transmit information provided by a user in a communication network or provide access to a communication network.

4. Summary and Conclusion

The EU's DSA was launched with the intention of ensuring a functioning internal market for the provision of digital services and guaranteeing legal certainty for service providers in implementing the requirements placed on them through binding and uniform rules. With the upcoming implementation of the DDG-E, a legal framework was created that serves the goal to provide both consumers and service providers with a transparent national sanctions regime. In view of the steadily growing importance of digital services for social networking, especially also for the formation of political will, the motivation behind the DDG-E and the supervisory structure it creates to reduce reservations about the use of digital services and to strengthen society's trust is understandable and generally to be welcomed. However, service providers will face many new obligations soon, the neglect of which can lead to significant fines and risks of liability. It is therefore advisable that affected companies immediately implement new systems and processes to comply with the legal requirements created. Since enforcement is new for all parties involved, the future will show whether the chosen measures in Germany will have the intended effect or whether adjustments will have to be made.