EUROPEAN COMMISSION Brussels, 15.12.2020 COM(2020) 825 final 2020/0361(COD) Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on a Single Market For Digital Services (Digital Services Act) and amending Directive 2000/31/EC (Text with EEA relevance) {SEC(2020) 432 final} - {SWD(2020) 348 final} - {SWD(2020) 349 final}



EXPLANATORY MEMORANDUM 1.CONTEXT OF THE PROPOSAL •Reasons for and objectives of the proposal Since the adoption of Directive 2000/31/EC (the “e-Commerce Directive”), new and innovative information society (digital) services have emerged, changing the daily lives of Union citizens and shaping and transforming how they communicate, connect, consume and do business. Those services have contributed deeply to societal and economic transformations in the Union and across the world. At the same time, the use of those services has also become the source of new risks and challenges, both for society as a whole and individuals using such services. Digital services can support achieving Sustainable Development Goals by contributing to economic, social and environmental sustainability. The coronavirus crisis has shown the importance of digital technologies in all aspects of modern life. It has clearly shown the dependency of our economy and society on digital services and highlighted both the benefits and the risks stemming from the current framework for the functioning of digital services. In the Communication ‘Shaping Europe’s Digital Future’, the Commission committed to update the horizontal rules that define the responsibilities and obligations of providers of digital services, and online platforms in particular. In doing so, the Commission has taken account of the issues identified in the European Parliament’s own initiative reports and analysed the proposals therein. The European Parliament adopted two resolutions on the basis of Article 225 of the Treaty on the Functioning of the European Union (TFEU) on the ‘Digital Services Act – Improving the functioning of the Single Market’ and on the ‘Digital Services Act: adapting commercial and civil law rules for commercial entities operating online’. The European Parliament also adopted a resolution under the non-legislative procedure on the ‘Digital Services Act and fundamental rights issues posed’. In substance, the resolutions are complementary in many aspects. They include a strong call for maintaining the core principles of the e-Commerce Directive and for protecting fundamental rights in the online environment, as well as online anonymity wherever technically possible. They call for transparency, information obligations and accountability for digital services providers and advocate for effective obligations to tackle illegal content online. They also advocate for public oversight at EU and national level, and cooperation between competent authorities across jurisdictions in enforcing the law, especially when addressing cross-border matters. The resolution on ‘Digital Services Act – Improving the functioning of the Single Market’ calls for an ambitious reform of the existing EU e-commerce legal framework while maintaining the core principles of its liability regime, the prohibition of general monitoring and the internal market clause, which it considers to be still valid today. Confirming the objectives of the e-Commerce Directive, the resolution calls for measures which have consumer protection at their core, by including a detailed section on online marketplaces, and which ensure consumer trust in the digital economy, while respecting users’ fundamental rights. The resolution also advocates for rules to underpin a competitive digital environment in Europe, and envisages the Digital Services Act as a standard-setter at global level. The resolution on ‘Digital Services Act: adapting commercial and civil law rules for commercial entities operating online’ calls for more fairness, transparency and accountability for digital services’ content moderation processes, ensuring that fundamental rights are respected, and guaranteeing independent recourse to judicial redress. The resolution also includes the request for a detailed ‘notice-and-action’ mechanism addressing illegal content, comprehensive rules about online advertising, including targeted advertising, and enabling the development and use of smart contracts. The non-legislative resolution on the ‘Digital Services Act and fundamental rights issues posed’ highlights the need for legal clarity for platforms and users, and respect for fundamental rights given the rapid development of technology. It calls for harmonised rules for addressing illegal content online and for liability exemptions and content moderation. The resolution also includes clear reporting and transparency responsibilities for platforms and authorities.The Council’s Conclusions also welcomed the Commission’s announcement of a Digital Services Act, emphasising ‘the need for clear and harmonised evidence-based rules on responsibilities and accountability for digital services that would guarantee internet intermediaries an appropriate level of legal certainty’, and stressing ‘the need to enhance European capabilities and the cooperation of national authorities, preserving and reinforcing the fundamental principles of the Single Market and the need to enhance citizens’ safety and to protect their rights in the digital sphere across the Single Market’. This call for action was reiterated in the Council’s Conclusions of 2 October 2020. Building on the key principles set out in the e-Commerce Directive, which remain valid today, this proposal seeks to ensure the best conditions for the provision of innovative digital services in the internal market, to contribute to online safety and the protection of fundamental rights, and to set a robust and durable governance structure for the effective supervision of providers of intermediary services. The proposal defines clear responsibilities and accountability for providers of intermediary services, and in particular online platforms, such as social media and marketplaces. By setting out clear due-diligence obligations for certain intermediary services, including notice-and-action procedures for illegal content and the possibility to challenge the platforms’ content moderation decisions, the proposal seeks to improve users’ safety online across the entire Union and improve the protection of their fundamental rights. Furthermore, an obligation for certain online platforms to receive, store and partially verify and publish information on traders using their services will ensure a safer and more transparent online environment for consumers. Recognising the particular impact of very large online platforms on our economy and society, the proposal sets a higher standard of transparency and accountability on how the providers of such platforms moderate content, on advertising and on algorithmic processes. It sets obligations to assess the risks their systems pose to develop appropriate risk management tools to protect the integrity of their services against the use of manipulative techniques. The operational threshold for service providers in scope of these obligations includes those online platforms with a significant reach in the Union, currently estimated to be amounting to more than 45 million recipients of the service. This threshold is proportionate to the risks brought by the reach of the platforms in the Union; where the Union’s population changes by a certain percentage, the Commission will adjust the number of recipients considered for the threshold, so that it consistently corresponds to 10 % of the Union’s population. Additionally, the Digital Services Act will set out a co-regulatory backstop, including building on existing voluntary initiatives. The proposal maintains the liability rules for providers of intermediary services set out in the e-Commerce Directive – by now established as a foundation of the digital economy and instrumental to the protection of fundamental rights online. Those rules have been interpreted by the Court of Justice of the European Union, thus providing valuable clarifications and guidance. Nevertheless, to ensure an effective harmonisation across the Union and avoid legal fragmentation, it is necessary to include those rules in a Regulation. It is also appropriate to clarify some aspects of those rules to eliminate existing disincentives towards voluntary own-investigations undertaken by providers of intermediary services to ensure their users’ safety and to clarify their role from the perspective of consumers in certain circumstances. Those clarifications should help smaller, innovative providers scale up and grow by benefitting from greater legal certainty. A deeper, borderless single market for digital services requires enhanced cooperation among Member States to guarantee effective oversight and enforcement of the new rules set out in the proposed Regulation. The proposal sets clear responsibilities for the Member State supervising the compliance of service providers established in its territory with the obligations set by the proposed Regulation. This ensures the swiftest and most effective enforcement of rules and protects all EU citizens. It aims at providing the simple and clear processes for both citizens and service providers to find relief in their interactions with supervising authorities. Where systemic risks emerge across the Union, the proposed Regulation provides for supervision and enforcement at Union level. •Consistency with existing policy provisions in the policy area The current EU legal framework regulating digital services is underpinned, first and foremost, by the e-Commerce Directive. This proposed Regulation is without prejudice to the e-Commerce Directive, and builds on the provisions laid down therein, notably on the internal market principle set out in Article 3. The proposed Regulation provides for a cooperation and coordination mechanism for the supervision of the obligations it imposes. With regard to the horizontal framework of the liability exemption for providers of intermediary services, this Regulation deletes Articles 12-15 in the e-Commerce Directive and reproduces them in the Regulation, maintaining the liability exemptions of such providers, as interpreted by the Court of Justice of the European Union. Depending on the legal system of each Member State and the field of law at issue, national judicial or administrative authorities may order providers of intermediary services to act against certain specific items of illegal content. Such orders, in particular where they require the provider to prevent that illegal content reappears, must be issued in compliance with Union law, in particular with the prohibition of general monitoring obligations, as interpreted by the Court of Justice of the European Union. This proposal, in particular its Article 8, leaves this case-law unaffected. This proposal should constitute the appropriate basis for the development of robust technologies to prevent the reappearance of illegal information, accompanied with the highest safeguards to avoid that lawful content is taken down erroneously; such tools could be developed on the basis of voluntary agreements between all parties concerned and should be encouraged by Member States; it is in the interest of all parties involved in the provision of intermediary services to adopt and implement such procedures; the provisions of this Regulation relating to liability should not preclude the development and effective operation, by the different interested parties, of technical systems of protection and identification and of automated recognition made possible by digital technology within the limits laid down by Regulation 2016/679. •Consistency with other Union policies The proposed Regulation introduces a horizontal framework for all categories of content, products, services and activities on intermediary services. The illegal nature of such content, products or services is not defined in this Regulation but results from Union law or from national law in accordance with Union law.

Sector-specific instruments do not cover all the regulatory gaps evidenced in the impact assessment report: they do not provide fully-fledged rules on the procedural obligations related to illegal content and they only include basic rules on transparency and accountability of service providers and limited oversight mechanisms. In addition, sector-specific laws cover situations where adapted approaches are necessary. In terms of scope, they are limited from two perspectives. First, the sector-specific interventions address a small subset of issues (e.g. copyright infringements, terrorist content, child sexual abuse material or illegal hate speech, some illegal products). Second, they only cover the dissemination of such content on certain types of services (e.g. sub-set of online platforms for copyright infringements, only video-sharing platforms and only as regards audiovisual terrorist content or hate speech). However, it is important that the relationship between the new proposed Regulation and the sector-specific instruments is clarified. The proposed Regulation complements existing sector-specific legislation and does not affect the application of existing EU laws regulating certain aspects of the provision of information society services, which apply as lex specialis. By way of example, the obligations set out in Directive 2010/13/EC, as amended by Directive (EU) 2018/1808, on video-sharing platform providers (“AVSMD”) as regards audiovisual content and audiovisual commercial communications will continue to apply. However, this Regulation applies to those providers to the extent that the AVSMD or other Union legal acts, such as the proposal for a Regulation on addressing the dissemination on terrorist content online, do not contain more specific provisions applicable to them. The framework established in the Regulation (EU) 2019/1150 on promoting fairness and transparency for business users of online intermediation services to ensure that business users of such services and corporate website users in relation to online search engines are granted appropriate transparency, fairness and effective redress possibilities, will apply as lex specialis. Furthermore, the rules set out in the present proposal will be complementary to the consumer protection acquis and specifically with regard to Directive (EU) 2019/2161 amending Council Directive 93/13/EEC and Directives 98/6/EC, 2005/29/EC and 2011/83/EU which establish specific rules to increase transparency as to certain features offered by certain information society services. This proposal is without prejudice to the Regulation (EU) 2016/679 (the General Data Protection Regulation) and other Union rules on protection of personal data and privacy of communications. For example, the measures concerning advertising on online platforms complement but do not amend existing rules on consent and the right to object to processing of personal data. They impose transparency obligations towards users of online platforms, and this information will also enable them to make use of their rights as data subjects. They also enable scrutiny by authorities and vetted researchers on how advertisements are displayed and how they are targeted. This proposal will be complemented by further actions under the European Democracy Action Plan COM(2020) 790 final, with the objective of empowering citizens and building more resilient democracies across the Union. In particular, the rules on codes of conduct established in this Regulation could serve as a basis and be complemented by a revised and strengthened Code of practice on disinformation, building on the guidance of the Commission. The proposal is also fully consistent and further supports equality strategies adopted by the Commission in the context of the Union of Equality. The proposal is without prejudice to the Commission’s initiative aimed at improving the labour conditions of people working through digital platforms. Finally, the proposed regulation builds on the Recommendation on illegal content of 2018. It takes account of experiences gained with self-regulatory efforts supported by the Commission, such as the Product Safety Pledge, the Memorandum of Understanding against counterfeit goods, the Code of Conduct against illegal hate speech, and the EU Internet Forum with regard to terrorist content. 2.LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY •Legal basis The legal basis for the proposal is Article 114 of the Treaty on the Functioning of the European Union, which provides for the establishment of measures to ensure the functioning of the Internal Market. The primary objective of this proposal is to ensure the proper functioning of the internal market, in particular in relation to the provision of cross-border digital services (more specifically, intermediary services). In line with this objective, the proposal aims to ensure harmonised conditions for innovative cross-border services to develop in the Union, by addressing and preventing the emergence of obstacles to such economic activity resulting from differences in the way national laws develop, taking into account that several Member States have legislated or intend to legislate on issues such as the removal of illegal content online, diligence, notice and action procedures and transparency. At the same time, the proposal provides for the appropriate supervision of digital services and cooperation between authorities at Union level, therefore supporting trust, innovation and growth in the internal market. •Subsidiarity Taking into account that the Internet is by its nature cross-border, the legislative efforts at national level referred to above hamper the provision and reception of services throughout the Union and are ineffective in ensuring the safety and uniform protection of the rights of Union citizens and businesses online. Harmonising the conditions for innovative cross-border digital services to develop in the Union, while maintaining a safe online environment, can only be served at Union level. Union level action provides predictability and legal certainty, and reduces compliance costs across the Union. At the same time, it fosters the equal protection of all Union citizens, by ensuring that action against illegal content online by providers of intermediary services is consistent, regardless of their place of establishment. A well coordinated supervisory system, reinforced at Union level, also ensures a coherent approach applicable to providers of intermediary services operating in all Member States. To effectively protect users online, and to avoid that Union-based digital service providers are subject to a competitive disadvantage, it is necessary to also cover to relevant service providers established outside of the Union whose operate on the internal market. •Proportionality The proposal seeks to foster responsible and diligent behaviour by providers of intermediary services to ensure a safe online environment, which allows Union citizens and other parties to freely exercise their fundamental rights, in particular the freedom of expression and information. Key features of the proposal limit the Regulation to what is strictly necessary to achieve those objectives. In particular, the proposal sets asymmetric due diligence obligations on different types of digital service providers depending on the nature of their services and their size, to ensure their services are not misused for illegal activities and providers operate responsibly. This approach addresses certain identified problems only there where they materialise, while not overburdening providers unconcerned by those problems. Certain substantive obligations are limited only to very large online platforms, which due to their reach have acquired a central, systemic role in facilitating the public debate and economic transactions. Very small providers are exempt from the obligations altogether.

As regards digital service providers established outside of the Union offering services in the Union, the Regulation requires the appointment of a legal representative in the Union to ensure effective oversight and, where necessary, enforcement. Proportionate to the obligations, and taking into account the cross-border nature of digital services, the proposal will introduce a cooperation mechanism across Member States with enhanced Union level oversight of very large online platforms. Additionally, the proposal does not amend sector-specific legislation or the enforcement and governance mechanisms set thereunder, but provides for a horizontal framework to rely on, for aspects beyond specific content or subcategories of services regulated in sector-specific acts. By establishing a clear framework, accompanied by cooperation between and with Member States, as well as by self-regulation, this proposal aims to enhance legal certainty and increase trust levels, while staying relevant and effective in the long term because of the flexibility of the cooperation framework. •Choice of the instrument Article 114 of the Treaty on the Functioning of the European Union gives the legislator the possibility to adopt regulations and directives. The Commission has decided to put forward a proposal for a Regulation to ensure a consistent level of protection throughout the Union and to prevent divergences hampering the free provision of the relevant services within the internal market, as well as guarantee the uniform protection of rights and uniform obligations for business and consumers across the internal market. This is necessary to provide legal certainty and transparency for economic operators and consumers alike. The proposed Regulation also ensures consistent monitoring of the rights and obligations, and equivalent sanctions in all Member States, as well as effective cooperation between the supervisory authorities of different Member States and at Union level. 3.RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS •Ex-post evaluations/fitness checks of existing legislation This proposal builds on the evaluation of the e-Commerce Directive, conducted as a ‘back to back’ evaluation with the Impact Assessment accompanying the proposal. The specific objectives of the e-Commerce Directive were to ensure (i) a well-functioning internal market for digital services, (ii) the effective removal of illegal content online in full respect of fundamental rights, and (iii) an adequate level of information and transparency for consumers. As regards the effectiveness of the e-Commerce Directive, the evaluation shows that while the e-Commerce Directive has provided an important incentive for the growth of the internal market for digital services, and enabled entry and scaling up of new providers of such services, the initial objectives have not been fully achieved. In particular, the dynamic growth of the digital economy and the appearance of new types of service providers raises certain new challenges, dealt with differently by Member States, where the initial set of objectives need to be clarified. In addition, these developments put an additional strain on achieving already existing objectives as the increased legal fragmentation shows. The evaluation also showed that while several new regulatory instruments make valuable contributions to the attainment of some of the policy objectives set out in the e-Commerce Directive, they provide only sector-specific solutions for some of the underlying problems (e.g. in addressing the proliferation of specific types of illegal activity). They therefore do not address such issues consistently for the entire digital ecosystem, as they are limited to certain types of services or certain types of illegal content. Furthermore, while self-regulatory initiatives have generally shown positive results, they cannot be legally enforced, nor do they cover all participants in the digital economy. As regards the efficiency of the e-Commerce Directive, the Directive imposed only limited additional costs for Member States' administrations and providers of information society services. The evaluation has not revealed particularly high or disproportionate costs and no substantial concerns have been raised regarding impacts on small and medium-sized enterprises. The main concern in this regard is related to the lack of clarity in the cooperation mechanism across Member States, creating burdens and duplication of costs, despite the opposite objective of the Directive, in particular where the supervision of online platforms is concerned. This has essentially reduced its efficiency in maintaining the functioning of the internal market. In relation to questions about the continued relevance of the objectives pursued by the e-Commerce Directive, the evaluation shows that the objectives of the e-Commerce Directive continue to remain valid, while at the same time there are several new developments that are not well reflected in the existing public policy objectives. First, the open public consultation, targeted submissions by stakeholders, reports issued by the European Parliament as well as Council conclusions confirm that the existing principles and objectives of the e-Commerce Directive remain valid today. However, new information asymmetries and risks have arisen since the entry into force of the Directive, notably related to the emergence of online platforms, in particular very large ones, and the scale of the digital transformation. This is for example the case in the areas of algorithmic decision making (with an impact on how information flows are intermediated online), or in online advertising systems. The evaluation showed that the e-Commerce Directive is coherent with other EU interventions that took place since its adoption. The evaluation also did not identify any internal in-coherence of the e-Commerce Directive. Finally, at least parts of the actual benefits of the e-Commerce Directive that the evaluation identified could be considered as EU added value. It is likely that Member States would have continued applying their own regulatory systems without any common set of principles and that some Member States would have continued to have no horizontal rules in place at all. In the absence of robust evidence, it is however not possible to draw firm conclusions on the extent of this EU added value. •Stakeholder consultations Over the past five years, the Commission has consulted a wide range of different stakeholders, including providers of digital services such as online platforms and other intermediary services, businesses trading online, media publishers, brand owners and other businesses, social partners, users of digital services, civil society organisations, national authorities, academia, the technical community, international organisations and the general public. An array of targeted consultation steps have captured thoroughly stakeholder views on issues related to digital services and platforms over the last years. The open public consultation on the Digital Services Act was open for 14 weeks, between 2nd of June and 8th of September and received 2,863 responses and around 300 position papers from a diverse group of stakeholders. Most feedback was submitted by the general public (66% from Union citizens, 8% from non-EU citizens), companies/ businesses organizations (7.4%), business associations (6%), and NGOs (5.6%). This was followed by public authorities (2.2%), academic/research institutions (1.2%), trade unions (0.9%), and consumer and environmental organisations (0.4%). Overall, there is a general agreement amongst stakeholders for a need for action, both in addressing online safety and in furthering the internal market for digital services.

Stakeholders converge on the continued relevance of the main principles of the e-Commerce Directive and agree that they should be maintained, including the internal market principle for the supervision of digital services, the liability regime, and the prohibition of general monitoring obligations. Stakeholders also broadly agree on the need to upgrade the framework in light of today’s challenges by establishing clear obligations for service providers, harmonised across the EU. A majority of respondents, all categories included, indicated that they have encountered both harmful and illegal content, goods or services online, and specifically noted an alarming spike during the Covid-19 pandemic. A large share of respondents who say they have notified illegal content or goods to digital service providers expressed their dissatisfaction with the response and the ineffectiveness of reporting mechanisms after the exposure took place. Moreover, users perceive there to be a mismatch between providers’ policies as stated and their concrete actions. There is broad consensus, including among service providers responding to the consultation, on the need for simple, standardised, transparent notice and action obligations, harmonised across the internal market. This is considered as essential to enable rapid responses to illegal content and enhance legal clarity for users of platforms and for small platforms seeking to scale in the internal market. Respondents also agree on the importance of a redress mechanisms. Concerning online marketplaces, several stakeholders flagged the need for more targeted measures such as the identification of sellers. Respondents also generally agree that the territorial scope for these obligations should include all players offering goods, information or services in the Union, regardless of their place of establishment. A large share of respondents also emphasized the importance of these issues in particular where large platforms are concerned. There is a general agreement among stakeholders that ‘harmful’ (yet not, or at least not necessarily, illegal) content should not be defined in the Digital Services Act and should not be subject to removal obligations, as this is a delicate area with severe implications for the protection of freedom of expression. However, the way algorithmic systems shape information flows online is an area of concern among a wide category of stakeholders. Several stakeholders, in particular civil society and academics, pointed out the need for algorithmic accountability and transparency audits, especially with regard to how information is prioritized and targeted. Similarly, regarding online advertising, stakeholder views echoed the broad concerns around the lack of user empowerment and lack of meaningful oversight and enforcement. When it comes to enforcement, there is a general understanding among stakeholders that cooperation between authorities should be improved both cross-border and within each Member State. EU oversight is considered crucial and the majority of respondents seems to favour a unified oversight entity. •Collection and use of expertise The preparatory steps for the proposal rest on an array of studies and expert advice, including a number of legal studies commissioned focusing on the implementation of the E-Commerce Directive and the state of legal fragmentation, studies on algorithmic transparency and accountability, as well as internal studies on costs of content moderation, liability regimes for intermediaries, and cost of non-Europe, with the support of the Joint Research Centre of the European Commission. For gathering the views and perceptions of the general public, the Commission ran a Eurobarometer survey in 2018 with a representative sample of over 33,000 respondents from all Member States. The legal analysis also rests on a rich collection of case law, in particular by the Court of Justice of the European Union, of several provisions of the e-Commerce Directive and related acts, such as provisions concerning the interpretation of the notion of “information society services” or provisions concerning the liability of intermediary services providers The Commission also gathered expertise and views through targeted consultations and engagement activities, including a series of workshops, conferences, interviews with experts and judges, consultations of the Expert Group on e-commerce, as well as numerous bilateral meetings and analysis of ad hoc position and research papers from organizations, industry representatives, civil society and academia. Finally, the analysis rests on additional literature review, studies and research papers submitted by academics in the open public consultation and other independent studies, including the collection of studies carried out for the European Parliament. •Impact assessment The Regulatory Scrutiny Board issued a positive opinion with reservations on the impact assessment, including suggestions for improvement. The Impact Assessment report was further revised along these lines, notably in clarifying the interlinks between the Digital Services Act and the broader regulatory framework, providing more detailed descriptions of the policy options, and a more detailed analysis of the underlying evidence addressed in the revised impact assessment report. The importance in our economy and society, but also the growing risks brought by digital services will continue to scale. In the baseline scenario, the Commission will continue to enforce existing rules, including on sector-specific issues, and will support the self-regulatory efforts in place. However, faced with the evolving problems, Member States will continue to legislate independently. The legal fragmentation with the resulting patchwork of national measures will not just fail to effectively tackle illegal activities and protect citizens’ fundamental rights throughout the EU, it will also hinder new, innovative services from scaling up in the internal market, cementing the position of the few players which can afford the additional compliance costs. This leaves the rule setting and enforcement mostly to very large private companies, with ever-growing information asymmetry between online services, their users and public authorities. Three main policy options were assessed, in addition to the baseline. Option 1 would codify the Recommendation of 2018: it would lay down a range of procedural obligations for online platforms to tackle illegal activities conducted by their users. The obligations would also include the necessary safeguards in order to protect users’ fundamental rights and ensure transparency. It would also enhance the administrative cooperation mechanisms for authorities to resolve cross-border issues through a digital clearing house, facilitating information flows. Option 2 would in addition to measures in option 1, remove disincentives for service providers to take voluntary measures against illegal content, and introduce measures to enhance transparency around recommender systems and advertising. The enforcement and cooperation mechanism would be enhanced with the appointment of a central coordinator in each Member State. Option 3, building on the measures outlined in the previous options, includes targeted, asymmetric measures with stronger obligations for very large online platforms which are prone to the highest levels of risks for the EU society and economy, as well as certain limited clarifications of the liability regime for providers of intermediary services and an EU governance system with reinforced oversight and enforcement powers. The assessment of the economic and social impacts identified, and the comparison of its effectiveness, efficiency, coherence and proportionality showed that Option 3 would most effectively meet the objectives of the intervention by establishing the proportionate framework fit for adapting to emerging challenges in the dynamic digital world. The components included in Option 3 are also broadly supported by stakeholders, including positions from the European Parliament and Member States. The preferred option would support the access to the internal market for European Union intermediary service providers and their ability to scale-up by reducing costs related to the legal fragmentation. While costs for compliance with due diligence obligations are expected, it is estimated this is offset by reducing the current fragmentation through harmonisation. It is expected to have a positive impact on competitiveness, innovation and investment in digital services, in particular European Union start-ups and scale-ups offering platform business models but also, to varying extents, on sectors underpinned and amplified by digital commerce. The preferred option intends to define the appropriate division of responsibilities between intermediary services, their recipients and authorities when fighting against illegal content online. To do so, it introduces an asymmetric approach to the due diligence obligations imposed on very large online platforms: this is a supervised risk management approach, with an important role of the governance system for enforcement. The asymmetric obligations are only imposed on very large online platforms, which have, based on the current data, not only the broadest reach, but are also the large companies with important turnover. Consequently, while the targeted measures are more restrictive than for other companies, they are proportionate to the ability of the companies to comply. For public authorities, the proposed option would cut the costs brought by the inefficiencies and duplications in the existing set-up for the cooperation of authorities. While Member States would bear the costs of appointing a competent authority, new or already established, the efficiency gains are expected to outweigh them: for the individual authorities through mutualisation of resources, better information flows, and straight-forward processes for interacting with their counterparts across the internal market, as well as with service providers.

•Regulatory fitness and simplification The Impact Assessment accompanying this proposal identifies the sole added value of Union intervention addressing the risk of legal fragmentation triggered by divergent regulatory and supervisory approaches (hence without accounting for the increased safety and trust on digital services) in a possible increase of cross-border digital trade of 1 to 1.8%, i.e. the equivalent of an increase in turnover generated cross-border of EUR 8.6 billion and up to EUR 15.5 billion. With regard to added value in the enforcement of measures, the initiative creates important efficiency gains in the cooperation across Member States and mutualising some resources for technical assistance at EU level, for inspecting and auditing content moderation systems, recommender systems and online advertising on very large online platforms. This, in turn, leads to an increased effectiveness of enforcement and supervision measures, whereas the current system relies to a large extent on the limited capability for supervision in a small number of Member States. •Fundamental rights Union citizens and others are exposed to ever-increasing risks and harms online – from the spread of illegal content and activities, to limitations to express themselves and other societal harms. The envisaged policy measures in this legislative proposal will substantially improve this situation by providing a modern, future-proof governance framework, effectively safeguarding the rights and legitimate interests of all parties involved, most of all Union citizens. The proposal introduces important safeguards to allow citizens to freely express themselves, while enhancing user agency in the online environment, as well as the exercise of other fundamental rights such as the right to an effective remedy, non-discrimination, rights of the child as well as the protection of personal data and privacy online. The proposed Regulation will mitigate risks of erroneous or unjustified blocking speech, address the chilling effects on speech, stimulate the freedom to receive information and hold opinions, as well as reinforce users’ redress possibilities. Specific groups or persons may be vulnerable or disadvantaged in their use of online services because of their gender, race or ethnic origin, religion or belief, disability, age or sexual orientation. They can be disproportionately affected by restrictions and removal measures following from (unconscious or conscious) biases potentially embedded in the notification systems by users and third parties, as well as replicated in automated content moderation tools used by platforms. The proposal will mitigate discriminatory risks, particularly for those groups or persons and will contribute to the protection of the rights of the child and the right to human dignity online. The proposal will only require removal of illegal content and will impose mandatory safeguards when users’ information is removed, including the provision of explanatory information to the user, complaint mechanisms supported by the service providers as well as external out-of-court dispute resolution mechanism. Furthermore, it will ensure EU citizens are also protected when using services provided by providers not established in the Union but active on the internal market, since those providers are covered too. With regard to service providers’ freedom to conduct a business, the costs incurred on businesses are offset by reducing fragmentation across the internal market. The proposal introduces safeguards to alleviate the burden on service providers, including measures against repeated unjustified notices and prior vetting of trusted flaggers by public authorities. Furthermore, certain obligations are targeted to very large online platforms, where the most serious risks often occur and which have the capacity absorb the additional burden. The proposed legislation will preserve the prohibition of general monitoring obligations of the e-Commerce Directive, which in itself is crucial to the required fair balance of fundamental rights in the online world. The new Regulation prohibits general monitoring obligations, as they could disproportionately limit users’ freedom of expression and freedom to receive information, and could burden service providers excessively and thus unduly interfere with their freedom to conduct a business. The prohibition also limits incentives for online surveillance and has positive implications for the protection of personal data and privacy. All measures in the proposal are fully compliant and aligned with the high standard of personal data protection and protection of privacy of communications and private life, set in EU legislation. 4.BUDGETARY IMPLICATIONS The budgetary impact of the proposal will be covered by the allocations foreseen in the MFF 2021-27 under the financial envelopes of the Digital Europe Programme and Single Market Programme as detailed in the legislative financial statement accompanying this proposal for a regulation.These implications require also reprogramming of Heading 7 of the Financial Perspective. The legislative financial statement accompanying this proposal for a Regulation covers the budgetary impacts for the Regulation itself. 5.OTHER ELEMENTS •Implementation plans and monitoring, evaluation and reporting arrangements The Commission will establish a comprehensive framework for continuously monitoring the output, results and impact of this legislative instrument upon the date of its application. Based on the established monitoring programme, an evaluation of the instrument is envisaged within five years from its entry into force. •Detailed explanation of the specific provisions of the proposal Chapter I sets out general provisions, including the subject matter and scope of the Regulation (Article 1) and the definitions of key terms used in the Regulation (Article 2). Chapter II contains provisions on the exemption of liability of providers of intermediary services. More specifically, it includes the conditions under which providers of mere conduit (Article 3), caching (Article 4) and hosting services (Article 5) are exempt from liability for the third-party information they transmit and store. It also provides that the liability exemptions should not be disapplied when providers of intermediary services carry out voluntary own-initiative investigations or comply with the law (Article 6) and it lays down a prohibition of general monitoring or active fact-finding obligations for those providers (Article 7). Finally, it imposes an obligation on providers of intermediary services in respect of orders from national judicial or administrative authorities to act against illegal content (Article 8) and to provide information (Article 9). Chapter III sets out the due diligence obligations for a transparent and safe online environment, in five different sections. Section 1 lays down obligations applicable to all providers of intermediary services, in particular: the obligation to establish a single point of contact to facilitate direct communication with Member States’ authorities, the Commission and the Board (Article 10); the obligation to designate a legal representative in the Union for providers not established in any Member State, but offering their services in the Union (Article 11); the obligation to set out in their terms and conditions any restrictions that they may impose on the use of their services and to act responsibly in applying and enforcing those restrictions (Article 12); and transparency reporting obligations in relation to the removal and the disabling of information considered to be illegal content or contrary to the providers’ terms and conditions (Article 13).

Section 2 lays down obligations, additional to those under Section 1, applicable to providers of hosting services. In particular, that section obliges those providers to put in place mechanisms to allow third parties to notify the presence of alleged illegal content (Article 14). Furthermore, if such a provider decides to remove or disable access to specific information provided by a recipient of the service, it imposes the obligation to provide that recipient with a statement of reasons (Article 15). Section 3 lays down obligations applicable to all online platforms, additional to those under Sections 1 and 2. The Section specifies that it does not apply to online platforms that are micro or small enterprises within the meaning of the Annex to Recommendation 2003/361/EC (Article 16). The Section lays down the obligation for online platforms to provide an internal complaint-handling system in respect of decisions taken in relation to alleged illegal content or information incompatible with their terms and conditions (Article 17). It also obliges online platforms to engage with certified out-of-court dispute settlement bodies to resolve any dispute with users of their services (Article 18). It further obliges online platforms to ensure that notices submitted by entities granted the status of trusted flaggers are treated with priority (Article 19) and sets out the measures online platforms are to adopt against misuse (Article 20). Furthermore, this Section includes a requirement for online platforms to inform competent enforcement authorities in the event they become aware of any information giving rise to a suspicion of serious criminal offences involving a threat to the life or safety of persons (Article 21). The Section also obliges online platforms to receive, store, make reasonable efforts to assess the reliability of and publish specific information on the traders using their services where those online platforms allow consumers to conclude distance contracts with those traders (Article 22). Those online platforms are also obliged to organise their interface in a way that enables traders to respect Union consumer and product safety law (Article 22a). Online platforms are also obliged to publish reports on their activities relating to the removal and the disabling of information considered to be illegal content or contrary to their terms and conditions (Article 23). The Section also includes transparency obligations for online platforms in respect of online advertising (Article 24). Section 4 lays down obligations, additional to the obligations laid down in Sections 1 to 3, for very large online platforms (as defined by Article 25) to manage systemic risks. Very large online platforms are obliged to conduct risk assessments on the systemic risks brought about by or relating to the functioning and use of their services (Article 26) and to take reasonable and effective measures aimed at mitigating those risks (Article 27). They are also to submit themselves to external and independent audits (Article 28). The Section includes also a specific obligation in case very large online platforms use recommender systems (Article 29) or display online advertising on their online interface (Article 30). Furthermore, the Section sets out the conditions under which very large online platforms provide access to data to the Digital Services Coordinator of establishment or the Commission and vetted researchers (Article 31), the obligation to appoint one or more compliance officers to ensure compliance with the obligations laid down in the Regulation (Article 32) and specific, additional transparency reporting obligations (Article 33). Section 5 contains transversal provisions concerning due diligence obligations, namely the processes for which the Commission will support and promote the development and implementation of harmonised European standards (Article 34); the framework for the development of codes of conduct (Article 35); and the framework for the development of specific codes of conduct for online advertising (Article 36). There is also a provision on crisis protocols to address extraordinary circumstances affecting public security or public health (Article 37). Chapter IV contains the provisions concerning the implementation and enforcement of this Regulation. Section 1 lays down provisions concerning national competent authorities, including Digital Services Coordinators, which are the primary national authorities designated by the Member States for the consistent application of this Regulation (Article 38). The Digital Services Coordinators, like other designated competent authorities, are independent and perform their tasks impartially, transparently and in a timely manner (Article 39). Member States where the main establishment of the provider is located have jurisdiction to enforce this Regulation (Article 40). The Digital Services Coordinators are granted specific powers (Article 41). Member States are to lay down rules on penalties applicable to breaches of the obligations by providers of intermediary services under this Regulation (Article 42). Digital Services Coordinators can receive complaints against providers of intermediary services for breaches of the obligations laid down in this Regulation (Article 43). Digital Services Coordinators are required to publish annual reports on their activities (Article 44) and to cooperate with Digital Services Coordinators of other Member States (Article 45). Digital Services Coordinators can also participate in joint investigations with regard to matters covered by the Regulation (Article 46). Section 2 lays down provisions regarding the European Board for Digital Services, an independent advisory group of Digital Services Coordinators (Article 47). It also sets out the structure of that Board (Article 48) and its tasks (Article 49). Section 3 concerns the supervision, investigation, enforcement and monitoring of very large online platforms. It provides for enhanced supervision in the event such platforms infringe the provisions of Chapter III, Section 4 (Article 50). It also provides the possibility for the Commission to intervene vis à vis very large online platforms in case the infringements persist (Article 51). In these cases the Commission can carry out investigations, including through requests for information (Article 52), interviews (Article 53) and on-site inspections (Article 54), can adopt interim measures (Article 55) and make binding commitments by very large online platforms (Article 56), as well as monitor their compliance with the Regulation (Article 57). In case of non-compliance, the Commission can adopt non-compliance decisions (Article 58), as well as fines (Article 59) and periodic penalty payments (Article 60) for breaches of the Regulation by very large online platforms as well as for supply of incorrect, incomplete or misleading information in the context of the investigation. The Regulation sets also a limitation period for the imposition of penalties (Article 61) and for their enforcement (Article 62). Finally, the Regulation sets the procedural guarantees in front of the Commission, in particular the right to be heard and of access to the file (Article 63) and the publication of decisions (Article 64). The Section also provides for the cooperation of the Commission with national courts (Article 65) and for the adoption of implementing acts on practical arrangement on the proceedings (Article 66). Section 4 includes the common provisions on enforcement. It first lays down rules on an information-sharing system supporting communications between Digital Services Coordinators, the Commission and the Board (Article 67). It also includes the right of recipients of intermediary services to mandate a body, organisation and association to exercise their rights on their behalf (article 68). Section 5 relates to the adoption of delegated and implementing acts in accordance with Articles 290 and 291 of the Treaty on the Functioning of the European Union, respectively (Articles 69 and 70). Finally, Chapter V contains the final provisions of this Regulation, which concern the deletion of Articles 12 to 15 of the e-Commerce Directive given that they have been incorporated in the Regulation (Article 71), amendments to Directive 2020/XX/EC (Article 72), evaluation of the Regulation (Article 73), and its entry into force and application (Article 74). 2020/0361 (COD) Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on a Single Market For Digital Services (Digital Services Act) and amending Directive 2000/31/EC (Text with EEA relevance) THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof, Having regard to the proposal from the European Commission, After transmission of the draft legislative act to the national parliaments,

Having regard to the opinion of the European Economic and Social Committee, Having regard to the opinion of the Committee of the Regions, Having regard to the opinion of the European Data Protection Supervisor, Acting in accordance with the ordinary legislative procedure, Whereas: (1)Information society services and especially intermediary services have become an important part of the Union’s economy and daily life of Union citizens. Twenty years after the adoption of the existing legal framework applicable to such services laid down in Directive 2000/31/EC of the European Parliament and of the Council, new and innovative business models and services, such as online social networks and marketplaces, have allowed business users and consumers to impart and access information and engage in transactions in novel ways. A majority of Union citizens now uses those services on a daily basis. However, the digital transformation and increased use of those services has also resulted in new risks and challenges, both for individual users and for society as a whole. (2)Member States are increasingly introducing, or are considering introducing, national laws on the matters covered by this Regulation, imposing, in particular, diligence requirements for providers of intermediary services. Those diverging national laws negatively affect the internal market, which, pursuant to Article 26 of the Treaty, comprises an area without internal frontiers in which the free movement of goods and services and freedom of establishment are ensured, taking into account the inherently cross-border nature of the internet, which is generally used to provide those services. The conditions for the provision of intermediary services across the internal market should be harmonised, so as to provide businesses with access to new markets and opportunities to exploit the benefits of the internal market, while allowing consumers and other recipients of the services to have increased choice. (3)Responsible and diligent behaviour by providers of intermediary services is essential for a safe, predictable and trusted online environment and for allowing Union citizens and other persons to exercise their fundamental rights guaranteed in the Charter of Fundamental Rights of the European Union (‘Charter’), in particular the freedom of expression and information and the freedom to conduct a business, and the right to non-discrimination. (4)Therefore, in order to safeguard and improve the functioning of the internal market, a targeted set of uniform, effective and proportionate mandatory rules should be established at Union level. This Regulation provides the conditions for innovative digital services to emerge and to scale up in the internal market. The approximation of national regulatory measures at Union level concerning the requirements for providers of intermediary services is necessary in order to avoid and put an end to fragmentation of the internal market and to ensure legal certainty, thus reducing uncertainty for developers and fostering interoperability. By using requirements that are technology neutral, innovation should not be hampered but instead be stimulated. (5)This Regulation should apply to providers of certain information society services as defined in Directive (EU) 2015/1535 of the European Parliament and of the Council, that is, any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient. Specifically, this Regulation should apply to providers of intermediary services, and in particular intermediary services consisting of services known as ‘mere conduit’, ‘caching’ and ‘hosting’ services, given that the exponential growth of the use made of those services, mainly for legitimate and socially beneficial purposes of all kinds, has also increased their role in the intermediation and spread of unlawful or otherwise harmful information and activities. (6)In practice, certain providers of intermediary services intermediate in relation to services that may or may not be provided by electronic means, such as remote information technology services, transport, accommodation or delivery services. This Regulation should apply only to intermediary services and not affect requirements set out in Union or national law relating to products or services intermediated through intermediary services, including in situations where the intermediary service constitutes an integral part of another service which is not an intermediary service as specified in the case law of the Court of Justice of the European Union. (7)In order to ensure the effectiveness of the rules laid down in this Regulation and a level playing field within the internal market, those rules should apply to providers of intermediary services irrespective of their place of establishment or residence, in so far as they provide services in the Union, as evidenced by a substantial connection to the Union. (8)Such a substantial connection to the Union should be considered to exist where the service provider has an establishment in the Union or, in its absence, on the basis of the existence of a significant number of users in one or more Member States, or the targeting of activities towards one or more Member States. The targeting of activities towards one or more Member States can be determined on the basis of all relevant circumstances, including factors such as the use of a language or a currency generally used in that Member State, or the possibility of ordering products or services, or using a national top level domain. The targeting of activities towards a Member State could also be derived from the availability of an application in the relevant national application store, from the provision of local advertising or advertising in the language used in that Member State, or from the handling of customer relations such as by providing customer service in the language generally used in that Member State. A substantial connection should also be assumed where a service provider directs its activities to one or more Member State as set out in Article 17(1)(c) of Regulation (EU) 1215/2012 of the European Parliament and of the Council. On the other hand, mere technical accessibility of a website from the Union cannot, on that ground alone, be considered as establishing a substantial connection to the Union. (9)This Regulation should complement, yet not affect the application of rules resulting from other acts of Union law regulating certain aspects of the provision of intermediary services, in particular Directive 2000/31/EC, with the exception of those changes introduced by this Regulation, Directive 2010/13/EU of the European Parliament and of the Council as amended, and Regulation (EU) …/.. of the European Parliament and of the Council – proposed Terrorist Content Online Regulation. Therefore, this Regulation leaves those other acts, which are to be considered lex specialis in relation to the generally applicable framework set out in this Regulation, unaffected. However, the rules of this Regulation apply in respect of issues that are not or not fully addressed by those other acts as well as issues on which those other acts leave Member States the possibility of adopting certain measures at national level. (10)For reasons of clarity, it should also be specified that this Regulation is without prejudice to Regulation (EU) 2019/1148 of the European Parliament and of the Council and Regulation (EU) 2019/1150 of the European Parliament and of the Council,, Directive 2002/58/EC of the European Parliament and of the Council and Regulation […/…] on temporary derogation from certain provisions of Directive 2002/58/EC as well as Union law on consumer protection, in particular Directive 2005/29/EC of the European Parliament and of the Council, Directive 2011/83/EU of the European Parliament and of the Council and Directive 93/13/EEC of the European Parliament and of the Council, as amended by Directive (EU) 2019/2161 of the European Parliament and of the Council, and on the protection of personal data, in particular Regulation (EU) 2016/679 of the European Parliament and of the Council. The protection of individuals with regard to the processing of personal data is solely governed by the rules of Union law on that subject, in particular Regulation (EU) 2016/679 and Directive 2002/58/EC. This Regulation is also without prejudice to the rules of Union law on working conditions. (11)It should be clarified that this Regulation is without prejudice to the rules of Union law on copyright and related rights, which establish specific rules and procedures that should remain unaffected. (12)In order to achieve the objective of ensuring a safe, predictable and trusted online environment, for the purpose of this Regulation the concept of “illegal content” should be defined broadly and also covers information relating to illegal content, products, services and activities. In particular, that concept should be understood to refer to information, irrespective of its form, that under the applicable law is either itself illegal, such as illegal hate speech or terrorist content and unlawful discriminatory content, or that relates to activities that are illegal, such as the sharing of images depicting child sexual abuse, unlawful non-consensual sharing of private images, online stalking, the sale of non-compliant or counterfeit products, the non-authorised use of copyright protected material or activities involving infringements of consumer protection law. In this regard, it is immaterial whether the illegality of the information or activity results from Union law or from national law that is consistent with Union law and what the precise nature or subject matter is of the law in question. (13)Considering the particular characteristics of the services concerned and the corresponding need to make the providers thereof subject to certain specific obligations, it is necessary to distinguish, within the broader category of providers of hosting services as defined in this Regulation, the subcategory of online platforms. Online platforms, such as social networks or online marketplaces, should be defined as providers of hosting services that not only store information provided by the recipients of the service at their request, but that also disseminate that information to the public, again at their request. However, in order to avoid imposing overly broad obligations, providers of hosting services should not be considered as online platforms where the dissemination to the public is merely a minor and purely ancillary feature of another service and that feature cannot, for objective technical reasons, be used without that other, principal service, and the integration of that feature is not a means to circumvent the applicability of the rules of this Regulation applicable to online platforms. For example, the comments section in an online newspaper could constitute such a feature, where it is clear that it is ancillary to the main service represented by the publication of news under the editorial responsibility of the publisher. (14)The concept of ‘dissemination to the public’, as used in this Regulation, should entail the making available of information to a potentially unlimited number of persons, that is, making the information easily accessible to users in general without further action by the recipient of the service providing the information being required, irrespective of whether those persons actually access the information in question. The mere possibility to create groups of users of a given service should not, in itself, be understood to mean that the information disseminated in that manner is not disseminated to the public. However, the concept should exclude dissemination of information within closed groups consisting of a finite number of pre-determined persons. Interpersonal communication services, as defined in Directive (EU) 2018/1972 of the European Parliament and of the Council, such as emails or private messaging services, fall outside the scope of this Regulation. Information should be considered disseminated to the public within the meaning of this Regulation only where that occurs upon the direct request by the recipient of the service that provided the information. (15)Where some of the services provided by a provider are covered by this Regulation whilst others are not, or where the services provided by a provider are covered by different sections of this Regulation, the relevant provisions of this Regulation should apply only in respect of those services that fall within their scope.

(16)The legal certainty provided by the horizontal framework of conditional exemptions from liability for providers of intermediary services, laid down in Directive 2000/31/EC, has allowed many novel services to emerge and scale-up across the internal market. That framework should therefore be preserved. However, in view of the divergences when transposing and applying the relevant rules at national level, and for reasons of clarity and coherence, that framework should be incorporated in this Regulation. It is also necessary to clarify certain elements of that framework, having regard to case law of the Court of Justice of the European Union. (17)The relevant rules of Chapter II should only establish when the provider of intermediary services concerned cannot be held liable in relation to illegal content provided by the recipients of the service. Those rules should not be understood to provide a positive basis for establishing when a provider can be held liable, which is for the applicable rules of Union or national law to determine. Furthermore, the exemptions from liability established in this Regulation should apply in respect of any type of liability as regards any type of illegal content, irrespective of the precise subject matter or nature of those laws. (18)The exemptions from liability established in this Regulation should not apply where, instead of confining itself to providing the services neutrally, by a merely technical and automatic processing of the information provided by the recipient of the service, the provider of intermediary services plays an active role of such a kind as to give it knowledge of, or control over, that information. Those exemptions should accordingly not be available in respect of liability relating to information provided not by the recipient of the service but by the provider of intermediary service itself, including where the information has been developed under the editorial responsibility of that provider. (19)In view of the different nature of the activities of ‘mere conduit’, ‘caching’ and ‘hosting’ and the different position and abilities of the providers of the services in question, it is necessary to distinguish the rules applicable to those activities, in so far as under this Regulation they are subject to different requirements and conditions and their scope differs, as interpreted by the Court of Justice of the European Union. (20)A provider of intermediary services that deliberately collaborates with a recipient of the services in order to undertake illegal activities does not provide its service neutrally and should therefore not be able to benefit from the exemptions from liability provided for in this Regulation. (21)A provider should be able to benefit from the exemptions from liability for ‘mere conduit’ and for ‘caching’ services when it is in no way involved with the information transmitted. This requires, among other things, that the provider does not modify the information that it transmits. However, this requirement should not be understood to cover manipulations of a technical nature which take place in the course of the transmission, as such manipulations do not alter the integrity of the information transmitted. (22)In order to benefit from the exemption from liability for hosting services, the provider should, upon obtaining actual knowledge or awareness of illegal content, act expeditiously to remove or to disable access to that content. The removal or disabling of access should be undertaken in the observance of the principle of freedom of expression. The provider can obtain such actual knowledge or awareness through, in particular, its own-initiative investigations or notices submitted to it by individuals or entities in accordance with this Regulation in so far as those notices are sufficiently precise and adequately substantiated to allow a diligent economic operator to reasonably identify, assess and where appropriate act against the allegedly illegal content. (23)In order to ensure the effective protection of consumers when engaging in intermediated commercial transactions online, certain providers of hosting services, namely, online platforms that allow consumers to conclude distance contracts with traders, should not be able to benefit from the exemption from liability for hosting service providers established in this Regulation, in so far as those online platforms present the relevant information relating to the transactions at issue in such a way that it leads consumers to believe that the information was provided by those online platforms themselves or by recipients of the service acting under their authority or control, and that those online platforms thus have knowledge of or control over the information, even if that may in reality not be the case. In that regard, is should be determined objectively, on the basis of all relevant circumstances, whether the presentation could lead to such a belief on the side of an average and reasonably well-informed consumer. (24)The exemptions from liability established in this Regulation should not affect the possibility of injunctions of different kinds against providers of intermediary services, even where they meet the conditions set out as part of those exemptions. Such injunctions could, in particular, consist of orders by courts or administrative authorities requiring the termination or prevention of any infringement, including the removal of illegal content specified in such orders, issued in compliance with Union law, or the disabling of access to it. (25)In order to create legal certainty and not to discourage activities aimed at detecting, identifying and acting against illegal content that providers of intermediary services may undertake on a voluntary basis, it should be clarified that the mere fact that providers undertake such activities does not lead to the unavailability of the exemptions from liability set out in this Regulation, provided those activities are carried out in good faith and in a diligent manner. In addition, it is appropriate to clarify that the mere fact that those providers take measures, in good faith, to comply with the requirements of Union law, including those set out in this Regulation as regards the implementation of their terms and conditions, should not lead to the unavailability of those exemptions from liability. Therefore, any such activities and measures that a given provider may have taken should not be taken into account when determining whether the provider can rely on an exemption from liability, in particular as regards whether the provider provides its service neutrally and can therefore fall within the scope of the relevant provision, without this rule however implying that the provider can necessarily rely thereon. (26)Whilst the rules in Chapter II of this Regulation concentrate on the exemption from liability of providers of intermediary services, it is important to recall that, despite the generally important role played by those providers, the problem of illegal content and activities online should not be dealt with by solely focusing on their liability and responsibilities. Where possible, third parties affected by illegal content transmitted or stored online should attempt to resolve conflicts relating to such content without involving the providers of intermediary services in question. Recipients of the service should be held liable, where the applicable rules of Union and national law determining such liability so provide, for the illegal content that they provide and may disseminate through intermediary services. Where appropriate, other actors, such as group moderators in closed online environments, in particular in the case of large groups, should also help to avoid the spread of illegal content online, in accordance with the applicable law. Furthermore, where it is necessary to involve information society services providers, including providers of intermediary services, any requests or orders for such involvement should, as a general rule, be directed to the actor that has the technical and operational ability to act against specific items of illegal content, so as to prevent and minimise any possible negative effects for the availability and accessibility of information that is not illegal content. (27)Since 2000, new technologies have emerged that improve the availability, efficiency, speed, reliability, capacity and security of systems for the transmission and storage of data online, leading to an increasingly complex online ecosystem. In this regard, it should be recalled that providers of services establishing and facilitating the underlying logical architecture and proper functioning of the internet, including technical auxiliary functions, can also benefit from the exemptions from liability set out in this Regulation, to the extent that their services qualify as ‘mere conduits’, ‘caching’ or hosting services. Such services include, as the case may be, wireless local area networks, domain name system (DNS) services, top–level domain name registries, certificate authorities that issue digital certificates, or content delivery networks, that enable or improve the functions of other providers of intermediary services. Likewise, services used for communications purposes, and the technical means of their delivery, have also evolved considerably, giving rise to online services such as Voice over IP, messaging services and web-based e-mail services, where the communication is delivered via an internet access service. Those services, too, can benefit from the exemptions from liability, to the extent that they qualify as ‘mere conduit’, ‘caching’ or hosting service. (28)Providers of intermediary services should not be subject to a monitoring obligation with respect to obligations of a general nature. This does not concern monitoring obligations in a specific case and, in particular, does not affect orders by national authorities in accordance with national legislation, in accordance with the conditions established in this Regulation. Nothing in this Regulation should be construed as an imposition of a general monitoring obligation or active fact-finding obligation, or as a general obligation for providers to take proactive measures to relation to illegal content. (29)Depending on the legal system of each Member State and the field of law at issue, national judicial or administrative authorities may order providers of intermediary services to act against certain specific items of illegal content or to provide certain specific items of information. The national laws on the basis of which such orders are issued differ considerably and the orders are increasingly addressed in cross-border situations. In order to ensure that those orders can be complied with in an effective and efficient manner, so that the public authorities concerned can carry out their tasks and the providers are not subject to any disproportionate burdens, without unduly affecting the rights and legitimate interests of any third parties, it is necessary to set certain conditions that those orders should meet and certain complementary requirements relating to the processing of those orders. (30)Orders to act against illegal content or to provide information should be issued in compliance with Union law, in particular Regulation (EU) 2016/679 and the prohibition of general obligations to monitor information or to actively seek facts or circumstances indicating illegal activity laid down in this Regulation. The conditions and requirements laid down in this Regulation which apply to orders to act against illegal content are without prejudice to other Union acts providing for similar systems for acting against specific types of illegal content, such as Regulation (EU) …/…. [proposed Regulation addressing the dissemination of terrorist content online], or Regulation (EU) 2017/2394 that confers specific powers to order the provision of information on Member State consumer law enforcement authorities, whilst the conditions and requirements that apply to orders to provide information are without prejudice to other Union acts providing for similar relevant rules for specific sectors. Those conditions and requirements should be without prejudice to retention and preservation rules under applicable national law, in conformity with Union law and confidentiality requests by law enforcement authorities related to the non-disclosure of information. (31)The territorial scope of such orders to act against illegal content should be clearly set out on the basis of the applicable Union or national law enabling the issuance of the order and should not exceed what is strictly necessary to achieve its objectives. In that regard, the national judicial or administrative authority issuing the order should balance the objective that the order seeks to achieve, in accordance with the legal basis enabling its issuance, with the rights and legitimate interests of all third parties that may be affected by the order, in particular their fundamental rights under the Charter. In addition, where the order referring to the specific information may have effects beyond the territory of the Member State of the authority concerned, the authority should assess whether the information at issue is likely to constitute illegal content in other Member States concerned and, where relevant, take account of the relevant rules of Union law or international law and the interests of international comity. (32)The orders to provide information regulated by this Regulation concern the production of specific information about individual recipients of the intermediary service concerned who are identified in those orders for the purposes of determining compliance by the recipients of the services with applicable Union or national rules. Therefore, orders about information on a group of recipients of the service who are not specifically identified, including orders to provide aggregate information required for statistical purposes or evidence-based policy-making, should remain unaffected by the rules of this Regulation on the provision of information. (33)Orders to act against illegal content and to provide information are subject to the rules safeguarding the competence of the Member State where the service provider addressed is established and laying down possible derogations from that competence in certain cases, set out in Article 3 of Directive 2000/31/EC, only if the conditions of that Article are met. Given that the orders in question relate to specific items of illegal content and information, respectively, where they are addressed to providers of intermediary services established in another Member State, they do not in principle restrict those providers’ freedom to provide their services across borders. Therefore, the rules set out in Article 3 of Directive 2000/31/EC, including those regarding the need to justify measures derogating from the competence of the Member State where the service provider is established on certain specified grounds and regarding the notification of such measures, do not apply in respect of those orders. (34)In order to achieve the objectives of this Regulation, and in particular to improve the functioning of the internal market and ensure a safe and transparent online environment, it is necessary to establish a clear and balanced set of harmonised due diligence obligations for providers of intermediary services. Those obligations should aim in particular to guarantee different public policy objectives such as the safety and trust of the recipients of the service, including minors and vulnerable users, protect the relevant fundamental rights enshrined in the Charter, to ensure meaningful accountability of those providers and to empower recipients and other affected parties, whilst facilitating the necessary oversight by competent authorities. (35)In that regard, it is important that the due diligence obligations are adapted to the type and nature of the intermediary service concerned. This Regulation therefore sets out basic obligations applicable to all providers of intermediary services, as well as additional obligations for providers of hosting services and, more specifically, online platforms and very large online platforms. To the extent that providers of intermediary services may fall within those different categories in view of the nature of their services and their size, they should comply with all of the corresponding obligations of this Regulation. Those harmonised due diligence obligations, which should be reasonable and non-arbitrary, are needed to achieve the identified public policy concerns, such as safeguarding the legitimate interests of the recipients of the service, addressing illegal practices and protecting fundamental rights online.

(36)In order to facilitate smooth and efficient communications relating to matters covered by this Regulation, providers of intermediary services should be required to establish a single point of contact and to publish relevant information relating to their point of contact, including the languages to be used in such communications. The point of contact can also be used by trusted flaggers and by professional entities which are under a specific relationship with the provider of intermediary services. In contrast to the legal representative, the point of contact should serve operational purposes and should not necessarily have to have a physical location . (37)Providers of intermediary services that are established in a third country that offer services in the Union should designate a sufficiently mandated legal representative in the Union and provide information relating to their legal representatives, so as to allow for the effective oversight and, where necessary, enforcement of this Regulation in relation to those providers. It should be possible for the legal representative to also function as point of contact, provided the relevant requirements of this Regulation are complied with. (38)Whilst the freedom of contract of providers of intermediary services should in principle be respected, it is appropriate to set certain rules on the content, application and enforcement of the terms and conditions of those providers in the interests of transparency, the protection of recipients of the service and the avoidance of unfair or arbitrary outcomes. (39)To ensure an adequate level of transparency and accountability, providers of intermediary services should annually report, in accordance with the harmonised requirements contained in this Regulation, on the content moderation they engage in, including the measures taken as a result of the application and enforcement of their terms and conditions. However, so as to avoid disproportionate burdens, those transparency reporting obligations should not apply to providers that are micro- or small enterprises as defined in Commission Recommendation 2003/361/EC. (40)Providers of hosting services play a particularly important role in tackling illegal content online, as they store information provided by and at the request of the recipients of the service and typically give other recipients access thereto, sometimes on a large scale. It is important that all providers of hosting services, regardless of their size, put in place user-friendly notice and action mechanisms that facilitate the notification of specific items of information that the notifying party considers to be illegal content to the provider of hosting services concerned ('notice'), pursuant to which that provider can decide whether or not it agrees with that assessment and wishes to remove or disable access to that content ('action'). Provided the requirements on notices are met, it should be possible for individuals or entities to notify multiple specific items of allegedly illegal content through a single notice. The obligation to put in place notice and action mechanisms should apply, for instance, to file storage and sharing services, web hosting services, advertising servers and paste bins, in as far as they qualify as providers of hosting services covered by this Regulation. (41)The rules on such notice and action mechanisms should be harmonised at Union level, so as to provide for the timely, diligent and objective processing of notices on the basis of rules that are uniform, transparent and clear and that provide for robust safeguards to protect the right and legitimate interests of all affected parties, in particular their fundamental rights guaranteed by the Charter, irrespective of the Member State in which those parties are established or reside and of the field of law at issue. The fundamental rights include, as the case may be, the right to freedom of expression and information, the right to respect for private and family life, the right to protection of personal data, the right to non-discrimination and the right to an effective remedy of the recipients of the service; the freedom to conduct a business, including the freedom of contract, of service providers; as well as the right to human dignity, the rights of the child, the right to protection of property, including intellectual property, and the right to non-discrimination of parties affected by illegal content. (42)Where a hosting service provider decides to remove or disable information provided by a recipient of the service, for instance following receipt of a notice or acting on its own initiative, including through the use of automated means, that provider should inform the recipient of its decision, the reasons for its decision and the available redress possibilities to contest the decision, in view of the negative consequences that such decisions may have for the recipient, including as regards the exercise of its fundamental right to freedom of expression. That obligation should apply irrespective of the reasons for the decision, in particular whether the action has been taken because the information notified is considered to be illegal content or incompatible with the applicable terms and conditions. Available recourses to challenge the decision of the hosting service provider should always include judicial redress. (43)To avoid disproportionate burdens, the additional obligations imposed on online platforms under this Regulation should not apply to micro or small enterprises as defined in Recommendation 2003/361/EC of the Commission, unless their reach and impact is such that they meet the criteria to qualify as very large online platforms under this Regulation. The consolidation rules laid down in that Recommendation help ensure that any circumvention of those additional obligations is prevented. The exemption of micro- and small enterprises from those additional obligations should not be understood as affecting their ability to set up, on a voluntary basis, a system that complies with one or more of those obligations. (44)Recipients of the service should be able to easily and effectively contest certain decisions of online platforms that negatively affect them. Therefore, online platforms should be required to provide for internal complaint-handling systems, which meet certain conditions aimed at ensuring that the systems are easily accessible and lead to swift and fair outcomes. In addition, provision should be made for the possibility of out-of-court dispute settlement of disputes, including those that could not be resolved in satisfactory manner through the internal complaint-handling systems, by certified bodies that have the requisite independence, means and expertise to carry out their activities in a fair, swift and cost-effective manner. The possibilities to contest decisions of online platforms thus created should complement, yet leave unaffected in all respects, the possibility to seek judicial redress in accordance with the laws of the Member State concerned. (45)For contractual consumer-to-business disputes over the purchase of goods or services, Directive 2013/11/EU of the European Parliament and of the Council ensures that Union consumers and businesses in the Union have access to quality-certified alternative dispute resolution entities. In this regard, it should be clarified that the rules of this Regulation on out-of-court dispute settlement are without prejudice to that Directive, including the right of consumers under that Directive to withdraw from the procedure at any stage if they are dissatisfied with the performance or the operation of the procedure. (46)Action against illegal content can be taken more quickly and reliably where online platforms take the necessary measures to ensure that notices submitted by trusted flaggers through the notice and action mechanisms required by this Regulation are treated with priority, without prejudice to the requirement to process and decide upon all notices submitted under those mechanisms in a timely, diligent and objective manner. Such trusted flagger status should only be awarded to entities, and not individuals, that have demonstrated, among other things, that they have particular expertise and competence in tackling illegal content, that they represent collective interests and that they work in a diligent and objective manner. Such entities can be public in nature, such as, for terrorist content, internet referral units of national law enforcement authorities or of the European Union Agency for Law Enforcement Cooperation (‘Europol’) or they can be non-governmental organisations and semi-public bodies, such as the organisations part of the INHOPE network of hotlines for reporting child sexual abuse material and organisations committed to notifying illegal racist and xenophobic expressions online. For intellectual property rights, organisations of industry and of right-holders could be awarded trusted flagger status, where they have demonstrated that they meet the applicable conditions. The rules of this Regulation on trusted flaggers should not be understood to prevent online platforms from giving similar treatment to notices submitted by entities or individuals that have not been awarded trusted flagger status under this Regulation, from otherwise cooperating with other entities, in accordance with the applicable law, including this Regulation and Regulation (EU) 2016/794 of the European Parliament and of the Council. (47)The misuse of services of online platforms by frequently providing manifestly illegal content or by frequently submitting manifestly unfounded notices or complaints under the mechanisms and systems, respectively, established under this Regulation undermines trust and harms the rights and legitimate interests of the parties concerned. Therefore, there is a need to put in place appropriate and proportionate safeguards against such misuse. Information should be considered to be manifestly illegal content and notices or complaints should be considered manifestly unfounded where it is evident to a layperson, without any substantive analysis, that the content is illegal respectively that the notices or complaints are unfounded. Under certain conditions, online platforms should temporarily suspend their relevant activities in respect of the person engaged in abusive behaviour. This is without prejudice to the freedom by online platforms to determine their terms and conditions and establish stricter measures in the case of manifestly illegal content related to serious crimes. For reasons of transparency, this possibility should be set out, clearly and in sufficiently detail, in the terms and conditions of the online platforms. Redress should always be open to the decisions taken in this regard by online platforms and they should be subject to oversight by the competent Digital Services Coordinator. The rules of this Regulation on misuse should not prevent online platforms from taking other measures to address the provision of illegal content by recipients of their service or other misuse of their services, in accordance with the applicable Union and national law. Those rules are without prejudice to any possibility to hold the persons engaged in misuse liable, including for damages, provided for in Union or national law. (48)An online platform may in some instances become aware, such as through a notice by a notifying party or through its own voluntary measures, of information relating to certain activity of a recipient of the service, such as the provision of certain types of illegal content, that reasonably justify, having regard to all relevant circumstances of which the online platform is aware, the suspicion that the recipient may have committed, may be committing or is likely to commit a serious criminal offence involving a threat to the life or safety of person, such as offences specified in Directive 2011/93/EU of the European Parliament and of the Council. In such instances, the online platform should inform without delay the competent law enforcement authorities of such suspicion, providing all relevant information available to it, including where relevant the content in question and an explanation of its suspicion. This Regulation does not provide the legal basis for profiling of recipients of the services with a view to the possible identification of criminal offences by online platforms. Online platforms should also respect other applicable rules of Union or national law for the protection of the rights and freedoms of individuals when informing law enforcement authorities. (49)In order to contribute to a safe, trustworthy and transparent online environment for consumers, as well as for other interested parties such as competing traders and holders of intellectual property rights, and to deter traders from selling products or services in violation of the applicable rules, online platforms allowing consumers to conclude distance contracts with traders should ensure that such traders are traceable. The trader should therefore be required to provide certain essential information to the online platform, including for purposes of promoting messages on or offering products. That requirement should also be applicable to traders that promote messages on products or services on behalf of brands, based on underlying agreements. Those online platforms should store all information in a secure manner for a reasonable period of time that does not exceed what is necessary, so that it can be accessed, in accordance with the applicable law, including on the protection of personal data, by public authorities and private parties with a legitimate interest, including through the orders to provide information referred to in this Regulation. (50)To ensure an efficient and adequate application of that obligation, without imposing any disproportionate burdens, the online platforms covered should make reasonable efforts to verify the reliability of the information provided by the traders concerned, in particular by using freely available official online databases and online interfaces, such as national trade registers and the VAT Information Exchange System, or by requesting the traders concerned to provide trustworthy supporting documents, such as copies of identity documents, certified bank statements, company certificates and trade register certificates. They may also use other sources, available for use at a distance, which offer a similar degree of reliability for the purpose of complying with this obligation. However, the online platforms covered should not be required to engage in excessive or costly online fact-finding exercises or to carry out verifications on the spot. Nor should such online platforms, which have made the reasonable efforts required by this Regulation, be understood as guaranteeing the reliability of the information towards consumer or other interested parties. Such online platforms should also design and organise their online interface in a way that enables traders to comply with their obligations under Union law, in particular the requirements set out in Articles 6 and 8 of Directive 2011/83/EU of the European Parliament and of the Council, Article 7 of Directive 2005/29/EC of the European Parliament and of the Council and Article 3 of Directive 98/6/EC of the European Parliament and of the Council. (51)In view of the particular responsibilities and obligations of online platf