303Instead, the effectiveness of the instrument is likely to be strictly dependent on the forcefulness of its enforcement. For digital services to behave responsibly and for the framework of the single market to be a nourishing environment for innovative services, establishing and maintaining a high level of trust is paramount. This concerns as much the Member State level supervision of digital services, as the cross-border cooperation between authorities, and, where necessary, infringement procedures launched by the Commission. Yearly activity reports of the EU Board should also be compiled and made publicly available, with sufficient information on its operation and the cooperation and outcome indicators as presented in the table here-above. An evaluation of the instrument should be conducted within five years from the entry into force.

302The legal act would set the overall legal framework for digital services. It should be designed to remain valid in the longer term, allowing for sufficient flexibility to address emerging issues. Consequently, it does not necessitate a short-term review clause in itself.

Monitored through the reported data from the Clearing house system, with qualitative indications based on requests for assistance from Member States, response rates and resolutions.

Response time from Digital Services Coordinators to requests from other Member States (target: no more than 10% over the 1 month deadline)

Number of complaints for content removal escalated to out of court disputes and authorities and leading to reinstatements

Monitoring co-regulatory frameworks launched under the, their reported outcomes and the extent to which they address the underlying concerns and cover all relevant digital services and social partners.

Monitoring of the evolution of CJEU case law, national case law and complaints resolved in out of court dispute resolution mandated by the act.

Monitored through the reported data from the Clearing house system, with qualitative indications based on requests for assistance from Member States, response rates and resolutions.

Legal certainty and consistency in enforcement with regard to the due diligence obligations and the legal clarity in the liability regime for online intermediaries

301Several monitoring actions should be carried out by the Commission, in evaluating continuously the effectiveness and efficiency of the measures.

300The establishment of a robust system for data collection and monitoring is in itself one of the core impacts pursued by the preferred option. This includes both the enhanced ability to monitor and account for the functioning of the cooperation across Member States’ authorities, and the supervision of digital services.

Quantitative estimates cannot be clearly established, as current costs vary from one MS to another, and gains and expenditure under the preferred option will depend on the MS’ supervisory role for digital services and volume of requests to be processed

Coordination and cross-border cooperation costs for national authorities will be significantly streamlined through the Clearinghouse system and the EU body

299Sub-option 3.A is recommended as the preferred option for the EU-level governance by virtue of its speedy feasibility and urgent application, with a comparable effectiveness to 3.B in the short to medium term.

298The preferred option, while preserving the geographical scope of the E-Commerce Directive for its core provisions, would in addition set a gradual and proportionate set of due diligence obligations for different digital services, also applicable to services established outside the Union but offering services in the single market, as follows:

297It would also appropriately manage systemic risks which emerge on very large platforms, while establishing a level playing field for smaller players – both in terms of setting a core set of obligations to make sure online safety and fundamental rights are consistently protected online, and in making sure that all services targeting the European single market comply with the same standards of protection and empowerment of citizens.

296Against this assessment, the preferred option recommended for political endorsement is the third option. This option would best meet the objectives of the intervention and would establish the proportionate framework fit for adapting to emerging challenges in the dynamic digital world. It would set an ambitious governance for digital services in Europe and would reinforce the single market, fostering new opportunities for innovative services.

295The three options follow the same principle of proportionality and necessity of an intervention at EU level: a fragmented approach across Member States is unable to ensure an appropriate level of protection to citizens across the Union, and the supervision of services would remain inconsistent. However, the effectiveness and proportionality of the third option in reaching the objectives is superior, not least in light of a future-proof intervention, allowing the supervisory system to respond to emerging challenges linked to the supervision of digital services and preventing future re-fragmentation of rules. Where the third option imposes sanctions, these are proportionate to the harms posed by the very large platforms concerned.

294All three options are fully aligned and reinforce the principles of the open internet and the technical infrastructure of the network. This supports both the competitiveness of these sectors, but also, importantly, their resilience and their role in maintaining an open internet and protect their users’ rights.

293All the options would also provide for an effective cooperation and supervision system, with different degrees of impacts (see 6.1.1 and 6.2.2) which could further support sector-specific cooperation.

292The three options are also fully compatible and coherent with the Platform to Business Regulation. In particular where the redress and complaint mechanisms for business users restricted by the platform is aligned with the provisions in the three options, and the Regulation allows for exceptions from the conditions its sets for restrictions on the business user of an online intermediation service in connection to illegal activities (see recital 23).

291The Copyright Directive would remain a lex specialis with regard to the liability exemptions for certain types of platforms. At the same time, certain new obligations in the options, such as a harmonised notice and action procedure as well as various transparency obligations, will further enhance enforcement of the copyright acquis and help the fight against online piracy.

290For example, measures on all the proposed options would complement the obligation of a notification system set for video-sharing platforms in the AVMSD with more detailed requirement, with regard to transparency obligations and user complaints, and extending their application horizontally to all types of online platforms and for all types of illegal content.

289The objectives of the instrument are fully aligned with the sector-specific interventions adopted and/or proposed by the Commission, such as the AVMSD, the Copyright Directive, and the proposed Regulation on terrorist content. Each of the three options would complement these initiatives, but would not seek to modify them.

288 All three options are fully coherent with the second initiative. The second and, to a larger extent, the third one, are further complementary with the second intervention, in particular by enhancing transparency and user agency with regard to core features of online platforms such as recommender systems and online ads.

287The definition of very large platforms falling in scope of the asymmetric obligations in option 3 is different in nature and scope from the ‘gatekeeper’ platforms considered for the Digital Markets Act. For the latter, the criteria will relate to the platforms’ economic power in the market place while in the case of the option 3 analysed here, large platforms are understood as those which serve as de facto public spaces in terms of numbers of users. Consequently, not all very large platforms are expected to also be gatekeeper platforms, but many will likely fall also in that category under the Digital Markets Act.

286Both initiatives contribute to shared objectives of reinforcing the single market for digital services, improving the innovation opportunities and empowering users, and improving the supervision over digital services. They complement each other in covering issues which are different in nature. The two initiatives should also reinforce each other in what concerns those very large online platforms falling in scope of both sets of measures, in particular in what concerns empowering users, but also in correcting business incentives for acting responsibly in the single market.

285This initiative is coupled with an intervention to ensure a competitive digital economy and in particular fair and contestable markets. The Digital Markets Act intervention focuses on large online platforms, which have become gatekeepers and whose unfair conduct in the market may undermine the competitive environment and the contestability of the markets, especially for innovative start-ups and scale-ups.

284The third option is similarly costly for all digital services, but requires higher compliance costs from a relatively small number of very large platforms. In what concerns authorities, it includes significant efficiency gains thanks to the cooperation mechanism, as well as higher costs for the effective supervision of services, including at EU level. In sub-option 3.A, a series of costs are streamlined by absorbing into the Commission’s structure most of the investigative, advisory and enforcement EU-level powers. Under sub-option 3.B, the overall costs are higher, since the new agency needs to ensure its own administrative operations and does not directly benefit from the wider pool of expertise of the Commission. .

283The second option entails similar costs for service providers and is expected to lead to comparable costs on authorities, including efficiency gains through the cooperation system. At the same time, the option is globally more effective than the first option at comparable costs.

282The first option comes with lower costs on service providers and an expectation for higher costs on authorities to ensure a better supervision than the current situation, while creating significant efficiency gains in the cross-border cooperation.

281The costs for each of the three options are proportionate to their effectiveness in achieving the four specific objectives.

280The third option would offer an effective mechanism for supervision and cooperation, fit to anticipate future problems and address them effectively. This would rest on a European governance, ensuring that information and capability asymmetries between authorities and platforms are not impeding on effective supervision. It would afford the appropriate oversight powers to authorities and facility access to information to researchers ensuring that issues can be detected as they emerge. Under sub-option 3.A, an agile supervisory system would be set up immediately within the Commission, coupled with a tight structure for the exchanges between Member States’ new digital services coordinators. Under sub-option 3.B, the supervisory structure with an EU body would give statutory powers to the EU Board.

279The second option would further enhance the supervision of all digital services and would offer a robust platform for cooperation across Member States as well as within each Member State.

278The first option would enhance the baseline by establishing a common regulatory benchmark against which Member States can supervise online platforms and further streamlining the cooperation process for supervising the due diligence obligations on online intermediaries.

277The third option would importantly create a risk management framework that includes considerations for fundamental rights, including freedom of expression, where very large platforms are concerned. This ensures that, in particular in those ‘public spaces’ for exchanges, more robust safeguards are in place. This approach is also accompanied by adapted supervisory powers and capabilities for authorities in the context of a solid European governance. This would ensure both that issues are detected, and a co-regulatory framework for solving them as they emerge.

276The second option would in addition give users more agency and information online (e.g. with regard to recommended content or ads online) and an overall better environment for seeking information, for making choices, for holding opinions and participating in democratic processes.

275The first option would significantly improve the current situation by affording users with the necessary due process rights and provisions for defending their rights and interests online.

274For the third option, in addition to the features of option 2, would include stronger obligations and significantly more robust oversight on very large online platforms. This targets a stronger intervention towards service providers where the highest societal risks emerge, while ensuring that smaller online platforms can effectively address illegal content emerging on their services and can also be part on a voluntary basis of codes of conduct. The flexible co-regulatory environment to address in an adapted and speedy manner all emerging issues, would ensure that urgent, palpable results can be achieved, including in crisis situations. This would also be coupled with an effective and well calibrated European governance for enforcement and supervision. The overall effectiveness of sub-option 3.A and 3.B are comparable in this regard, while it is expected that, in the longer-term, option 3.B could deliver a more robust framework for intervention, whereas option 3.A providers for an immediately functional and effective enforcement structure.

273The second option would be expected to produce strong effects in this regard by stimulating targeted and appropriate measures from service providers. Importantly, it would offer an even stronger and responsive cooperation across Member States, supporting the protection of all European citizens both when online intermediaries or other digital services are concerned. It would also extent the scope of concerns tackled by empowering users to better interact with the platforms’ environment, e.g. with regard to ads they see on online platforms.

272The first option would bring a significant improvement to the baseline, in establishing the core measures for tackling illegal activities online and ensuring a consistent level of protection across all services and covering all types of illegal behaviours.

271The third option would similarly significantly improve the conditions for the provision of services in the single market. It would establish a European governance system for the supervision and enforcement of rules fit for solving emerging issues and, importantly, able to appropriately detect and anticipate them. This should maintain a long-lasting trust and cooperation environment between Member States and offer technical assistance to ensure the best supervision of services across the Union. It would also calibrate these efforts and target them towards those services producing the biggest impacts. Overall costs for the majority of companies would remain comparable to those in option 2. This would also ensure proportionality of measures, to create the necessary space for start-ups and innovative companies to develop.

270The second option would significantly improve the effectiveness of the intervention by providing more legal certainty to all online intermediaries and removing disincentives for service providers to protect their services from illegal activities. This can bring relief in particular to innovative start-ups and small service provider. Compared to the first option, the second option will further improve the mechanic in the cooperation and trust between Member States authorities through a reinforced and more agile cooperation mechanism.

269It answers to the most acute and current concerns Member States are raising at this point in time and improves innovation opportunities in the short term. It would also establish a level playing field between European companies and services offered from outside the Union, otherwise not subject to the same rules and costs when targeting European consumers. The positive impacts of the option with regard to addressing the legal fragmentation in the single market might not endure in the medium- to longer-time horizon, since it harmonises the core, yet limited set of measures and relies on case law and self-regulatory measures for addressing emerging concerns.

268The first option improves the conditions for innovative online platforms to emerge in the Union by harmonising across the single market the due diligence obligations imposed on platform services for tackling illegal activities of their users. It also has positive impacts on hosting service providers and online intermediaries. The first option requires costs for service providers, in particular online platforms, but these remain proportionate to the capacities of the companies. The most significant costs are variable costs from the running on the notice and action system, and, consequently, they are proportionate to the risks services providers bring.

267The comparison of options against the first specific objectives rests primarily on the economic impacts of the options on service providers.

266Scores on effectiveness build on the extent to which the impacts screened in section 6 contribute to the achievement of the specific objectives. Scores on costs cumulate here both costs on service providers and on public authorities.

265Summary of the comparison of options against the four criteria is included below. The table visualising the comparison of options should only be read in vertical, ‘+’ pointing to a better performance of the option than the baseline, and ‘++++’ to the best performance among the options; the ‘>’ symbol is used to indicate higher costs than the baseline, and ‘>>>>’ the highest cost among the options.

-Proportionality: whether the options go beyond what is a necessary intervention at EU level in achieving the objectives

264The following criteria are used in assessing how the three options would potentially perform, compared to the baseline:

263In addition, many illegal activities are also related to intense polluting – see, in particular, the case of counterfeit products or the manufacturing of dangerous products or the sale of products that do not comply with EU environmental or energy-saving rules (e.g. eco-design, energy labelling, etc.). A reduction in the ability to place on the European market such products might also reduce in their production. The due diligence obligations would also equally concern non-compliance with the extended responsibility requirements in online sales.

262Digital services are not only energy consumers themselves and generators of digital waste, but are also underpinning services and distribution of goods which have themselves an important environmental footprint – including transport, travel and accommodation, etc. However, the three options are primarily expected to shift the focus towards responsible digital services, with a marginal impact on the overall demand of digital services. This makes it difficult to estimate with sufficient intervals of confidence a causality between the adoption of either three of the policy options and the environmental impacts of digital services.

261Environmental impacts are expected to be relatively marginal for all options compared to the baseline. This is not to say that the environmental impact of digital services will not be important to monitor. Substantial factors will depend on technological evolution, business choices in manufacturing and development chains, consumer behaviour and nudging, etc.

260All the three options will imply compliance costs and adjustments of the business processes to regulatory standards for the platforms. This limitation to the right to freedom to conduct a business is proportionate and will be mitigated and most likely be fully compensated by the fact that the measures will lead to significant cost savings compared to the baseline, in particular in light of the evolving legal fragmentation. Costs are also tailored to be proportionate to the capacity of the given service provider.

259None of the measures in either one of the options should jeopardise the protection of trade secrets or proprietary products of online platforms. Where, in option 3, further requests for disclosure could be made by authorities to very large online platforms, these would entail a secrecy obligation on the public authority with regards to trade secrets.

258All three options would have a similarly positive impact on the right to property by complementing existing rules addressing the violation of intellectual property.

257All three options would have a positive influence in protecting the safety of children online. Consistent, with the analysis in section 6.2.1 the positive impact is strengthened with each option. Option 3 explicitly includes rights of the child as a primary consideration when very large platforms assess the systemic risks posed by the design of their service and take appropriate measures to uphold the best interest of children.

256All options include obligations for redress and complaint mechanisms; they imply that the content removed should be preserved by the service provider for the reasonable duration of such potential proceedings, allowing them, where necessary, to reinstate the content. Such measures have the sole purpose of enabling a ‘due process’ approach following a removal decision and are proportionate to the rights and interests of the content provider, data subjects whose personal data might be retained, and the service provider, which incurs very limited costs for the storage of data for a limited period of time.

255As regards risks posed by automated content moderation and other technologies voluntarily used by platforms for tackling illegal behaviours of their users – see paragraph 244 above – it is understood that a case by case assessment is necessary and, when service providers develop and deploy such tools, they must do so in observance of the rights and obligations established in the GDPR and the ePrivacy Directive. None of the three options would affect in any way this requirement and they do not mandate the use of any automated tool for detection of content. Option 3 would instead potentially create additional opportunities for inspecting compliance in this regard. It also includes considerations for the right to private life in the risk assessment framework very large platforms are subject to.

254Transparency and disclosure requirements included in option 2, as well as requirements regarding the maintenance of ad archives in option 3 are not intended to lead to any additional or disclosing of personal data of the users who had seen the ads; they might include personal data of the advertiser, acting as a trader, and personal data already publicly disclosed in the content of the ad.

253Where option 3 requires service providers to notify to authorities suspicions of serious criminal offences, this is proportionate and justified by the seriousness of the offence and the public interest entailed. At the same time, the provision does not, in itself provide for a legal basis to process personal data of users of the platform, with a view of possible identification of criminal offences.

252Where option 3 requires from large online platforms to facilitate data access for audits and investigations by researchers, such measures should be designed based on an appropriate assessment of risks, in line with GDPR requirements, potentially with the involvement of Data Protection Authorities, and should be organised with the least invasive approach and proportionate costs, exploring options for secure access or protected access.

251Similarly, where option 3 requires further reporting to national authorities, this can entail disclosure of personal data of users of platforms (e.g. accommodation service providers, sellers of goods). This is a necessary measure for protecting the public interest and the protection of consumers online, and remains proportionate by limiting the requirement to data already collected by the platform. It does not cover in any way requirements for citizens using online services to identify themselves. If personal data is part of the request, the requirement would offer a legal basis for data processing by the service provider in line with Article 6 (1) c) of the GDPR and would require Member States to specify the conditions for data processing by the requesting authorities, in the national laws laying the competence for such authorities to issue requests.

250For all three options, obligations to set up a ‘Know Your Business Customer’ policy and collect identification information from traders, as well as obligations to for the identification of advertisers would likely imply processing and disclosure of personal data. However, these measures are limited to traders, and do not concern other users of online platforms. With regard to the data requested for traders under the ‘know your business customer’ obligations, the requirements are limited to the minimum necessary, as established in other similar regulatory initiatives and best practices in industry.

249Furthermore, all measures are aimed to enhance users’ online safety and can be expected to contribute to better responding to illegal content and activities, including content consisting of the non-consensual sharing of users’ private data, including images.

248Nothing in the intervention should prejudice the high standard of personal data protection and protection of privacy of communications and private life set in EU legislation. All measures following from either one of the three options should be fully compliant and aligned.

247The enhanced transparency and oversight measures included in the third option for content moderation, recommender systems and online advertising through very large online platforms would be particularly impactful in offering the means for detecting discriminatory practices and allowing these issues to surface on the policy and public agenda.

246The second and the third option would cater for broader discrimination concerns emerging in the way platforms amplify information, and access to goods and services: they would include transparency provisions for recommender systems and placement of online ads, empowering users to understand and have agency over how they are affected by these systems.

245The three options would address the risks by affording safeguards aimed at improving the possibility for contesting such restrictions (as per 6.3.2). In addition, the third option offers enhanced inspection powers to national authorities for the content moderation processes of very large platforms, where the impact of discriminatory practices can be most acute.

244Second, such groups or individuals could be overly affected by restrictions and removal measures following from biases potentially embedded in the notification system by users and third parties, as well as replicated in automated content moderation tools used by platforms. In addition, to the extent that the second and the third option also include a clarification of the liability exemptions with regard to voluntary measures taken by service providers to tackle illegal activities, it is possible that more service providers would voluntarily engage in content moderation. Currently, in particular for large online platforms, such voluntary measures also include the use of content detection technologies, algorithms predicting abusive user accounts or other filtering technologies. Each of these technologies and the way they are designed, trained, deployed and supervised in specific cases, present different risks for non-discrimination and gender equality, but also to the protection of personal data and privacy of communications.

243All three options would have a positive impact in mitigating risks for persons in vulnerable situations and vulnerable groups to be exposed to discriminatory behaviours and would protect the right to human dignity of all users of online services. This concerns first a disproportionately unsafe online environment. In this regard, each option would have different strengths of impact, as assessed in section 6.2.1 above.

Non-discrimination (Art 21 of the Charter), equality between women and men (Art 23) and the right to human dignity (Art 1)

242Finally, in what concerns restrictions potentially imposed by authorities, the established judicial remedy options would always be available to service providers, as well as to platforms’ users whose content/goods/services are subject to such requests. The enhanced cooperation mechanism across authorities, set up in option 2 and, to a larger extent, in option 3 would further strengthen the checks and balances and the availability of redress in this regard.

241The enhanced transparency provisions, making users aware of the policy applied to hosted content, goods or services, as well as the specific information to the user, once corrective action is taken against them, are sine qua non conditions for an effective remedy. All three options would ensure such a standard and would also sanction systematic failure from service providers to provide redress mechanisms. In addition, where the third option affords enhanced supervisory powers for authorities regarding very large online platforms, where users’ rights can be most severely affected, this additionally supports users’ right to remedy.

240All three options include a complaint and redress mechanism, staged in two steps: obligation to offer and process such complaint by the service provider and availability of out of court dispute settlement mechanisms, expected to absorb escalated issues and to resolve them in a faster and less resource intensive manner than court proceedings. Users would always be able to appeal to the court system, in accordance with the applicable rules of national law.

239The three options would have a fundamental impact on users’ possibilities to challenge decisions by platforms, both in what concerns citizens, and businesses. This is one of the biggest impacts of the intervention, compared to the baseline, ensuring a fair governance and empowering users to exert their rights.

238In addition, the second option would further empower users to better understand and control their online environment through transparency measures concerning recommender systems and online advertising. This is particularly important in allowing citizens to participate in democratic processes or empowering consumers to make informed choices. The third option would establish a higher standard of accountability for those platforms fostering a ‘public space’ for speech and commercial exchanges, by imposing asymmetric obligations for transparency and oversight of such systems, and providing for a more impactful and targeted effect.

237All three options would affect the freedom to receive information by ensuring that legal content, of general interest to users, is not inadvertently removed, as explained in paragraphs 231 to 233 above. In fostering exchanges of information, this can also have spill-overs on users’ freedom of assembly and association.

236Some evidence shows that highly violent online environments, for example, can have a chilling effect on speech, for instance where there is a proliferation of illegal hate speech or other forms of illegal content. Such chilling effect has been reported to e.g. risk influencing individuals’ rights to political participation. All options would empower users to report illegal content and support a safer online environment (see section 6.2.1 above).

235The third option would include an additional important safeguard where very large online platforms are concerned (and where impacts of removals are most severe on users’ rights): it would impose enhanced transparency and reporting obligations on process and outcomes of content moderation, including automated tools, and afford competent authorities with inspection and auditing powers, opening systems for scrutiny also by researchers and experts. It would also include explicitly as part of the mandatory risk mitigation obligations considerations for their users’ freedom of expression, including concerning the way the very large platforms design and maintain their systems. This includes, for example, the design of their recommender systems, but also of the content moderation systems and tools. This would set the highest standard of protection and accountability and maintain a flexible and vigilant possibility to detect and mitigate risks as they emerge.

234The second and the third option would also remove disincentives for European platforms to take measures for tackling illegal content, goods or services shared by their users by clarifying that this does not, in itself, place them outside of the liability exemption for intermediaries; such measures could include the use of automated tools.

233None of the option would require the deployment of such tools. Instead, all three options would preserve the prohibition of general monitoring obligations and would, in addition to the baseline, reinforce safeguards for users to seek redress following removals. Importantly, the second and the third option would extend these obligations to services established outside of the Union but targeting the single market.

232The Court of Justice has repeatedly confirmed that requirements for platforms to deploy automated content moderation ‘could potentially undermine freedom of information, since that system might not distinguish adequately between unlawful content and lawful content, with the result that its introduction could lead to the blocking of lawful communication’. At the same time, service providers use such tools, not least for enforcing their terms of service, with improving levels of accuracy, but also with significant challenges, including but not limited to the inability of such tools to accurately distinguish context-dependent content.

231All three options would add substantial improvements to the baseline situation, by imposing mandatory safeguards when users’ content is removed, including information to the user, complaint mechanism supported by the platform, external dispute resolution mechanism. Coupled with transparency reporting and oversight for systematic compliance by authorities, these are key elements for ensuring the safeguards missing in the baseline and ensuring that users’ rights are respected and they are empowered to defend themselves against erroneous sanctions and removals of their content.

230None of the options include prior authorisation schemes, and they all prohibit Member States from establishing such requirements for digital services. Such measures can amount to a severe limitation of freedom of expression.

229Content moderation decisions by private companies, be it in assessing legality or compliance with their own terms of reference, can impede freedom of expression, in terms of freedom to share information and to hold opinions, but also in terms of freedom for citizens to receive information. While the sale of goods might be seen as less related to freedom of expression, speech can also be reflected in goods, such as books, clothing items or symbols, and restrictive measures on the sale of such artefacts can affect freedom of expression. In this context it is important to underline that all three options will only require removal of content that is illegal. Nevertheless, the options also address the need to provide safeguards in the form of complaint systems and transparency requirements that will mitigate negative consequences of services’ removal of content based on their own terms of service.

228The fundamental rights most clearly touched upon by the intervention are the following:

227Where option 3 requires a regular risks assessment from very large online platforms, this equally includes an assessment of the way the platforms’ systems or use affect the protection of fundamental rights such as freedom of expression, right to private life, non-discrimination or rights of the child. Consequently, they have to adapt the design of their systems and take appropriate measures to address significant risks, without prejudice to their business freedoms. Further, in the design of codes of conduct and crisis protocols under this option, such requirements will continue to apply, and appropriate checks and balances are to be set up, notably through reporting and transparency commitments from all participants, including authorities involved, participation and scrutiny from civil society and academia, and, finally supervision by the EU board and national authorities.

226All three options would also include a requirement to companies to adopt a fundamental rights standard when implementing the due diligence obligations set by the intervention. This would require services to assess and manage risks in a proportionate and appropriate manner.

225All three of the retained options are generally well balanced and are not expected to have a negative impact on fundamental rights. The main differences between the options are rather linked to the extent of their effectiveness in safeguarding fundamental rights and their ability to continue to offer a ‘future proof’ due process faced with the evolving risks emerging in a highly dynamic digital environment.

224The protection of fundamental rights is one of the main concerns in the online environment, marked by the complexity of interests at stake and the need to maintain a fair balance in mitigating risks. This assessment played a core part in the consideration of the wider range of options and determined the discarding of several options.

223The second option gives more agency to users through more robust transparency tools, and the third option sets the highest standard of supervision for all content moderation mechanisms, as well as online advertising and recommender systems.

222Importantly, the second and the third option each harmonise conditions for court and administrative orders requesting removal of content. This should facilitate the actions of the authorities and lead to better enforcement overall. In addition, option 3 further facilitates the ability of national authorities to supervise services (such as accommodation or transport services) offered through the intermediation of online platforms.

221In addition, all three options entail an important impact and capital improvement as compared to the baseline, in establishing the competence for authorities to supervise not only the incidence of illegal activities online and systematic failure to respond to notices, but also the performance of the notice and action and broader moderation systems in protecting users and avoiding over-removal of legal content. They would all allow designated authorities to request appropriate interim measures, where failures are observed, and eventually apply proportionate and dissuasive sanctions for systematic non-compliance with the due diligence obligations. Ultimately, where all other means fail and where there are severe consequences from the systematic non-compliance, implying the threat of life and security of persons, and following the decision of a court, blocking measures can be applied. The broad spectrum of measures will allow authorities to effectively supervise and enforce the rules, and would remain proportionate by applying gradually and allowing the service provider to take corrective measures to cease the infringement and, under any circumstance, make use of established appeal mechanisms. The reinforced coordination through the national Digital Coordinators in option 2, and the EU competence in option 3, would each significantly increase the coherence and capacity of authorities to supervise and calibrate the imposed measures.

220A first notable impact, already explained in section 6.2.1, is the improved ability of law enforcement and authorities to supervise and tackle online crimes.

219As the COVID-19 crisis and incidents of viral spread of illegal content have shown, crisis situations can manifest online, presenting systemic risks on platforms which reach millions and requiring coordinated interventions. The third option would also include a framework for establishing such cooperation in crisis situations through setting up crisis protocols, together with the appropriate checks and balances for both platforms and authorities.

218The third option, however, would include a much stronger accountability mechanism taking into account the disproportionate influence of very large platforms specifically, ensuring access to researchers and appropriately resourced competent authorities to relevant information allowing them to assess the platforms measures taken in co-regulatory processes to address the risks.

217The second and the third options would also tackle systemic risks posed by online platforms through the way they prioritise and accelerate the distribution of content and information. They would both correct information asymmetries and empower citizens, businesses and other organisations to have more agency in the way they interact with the environment and information intermediates by platforms. This would also put consumers in a better informed position for making choices, be it in buying goods and contracting services, or simply in consuming information online.

216The second and the third option would also stimulate online platforms to take additional measures, proportionate to their capability, adapted to the issues and illegal content they most likely host, and in full respect of fundamental rights. 12% of the service providers responding to the open public consultation reported that they used automated systems for detecting illegal content they host, and the same percentage had policies against repeat offenders on their platform. Voluntary measures for tackling illegal content have proven effectiveness at scale. At the same time, such measures continue to be prone to errors, both in under- and over- identifying content. The two options do not only provide for legal clarity for service provider to enforce their measures, but they also establish a missing due process around such processes. The two options set stronger safeguards through transparency and accountability, when private companies take such detection measures. The third option would in addition ensure a higher level of supervision of the effectiveness as well as the pitfalls and errors in the content moderation put in place by platforms, with a particular focus on very large platforms.

215All options would significantly improve the baseline, making sure that all types of illegal content, goods and services can be flagged in a harmonised manner across the Union. This would ensure a coherent horizontal framework instead of the currently inconsistent approaches relying on the private policies set by online platforms or the regulatory and self-regulatory efforts in Member States or at EU level. It would also ensure that cooperation with law enforcement, national authorities and other trusted flaggers is appropriately accelerated, improving the ability of authorities to tackle cybercrimes and other online crimes. In certain cases, this would lead to positive effects on their ability to protect the right to life and security of individuals.

214As a primary objective for the intervention, all three options contribute to an appropriate governance for ensuring online safety and the protection of consumers from illegal offerings.

213From an international trade perspective, the provisions are in line with the non-discrimination provisions in the GATS, as they follow objective and non-discriminatory criteria, regardless of the location of the headquarters or the country where the company historically originated. This is also the case in establishing whether, in option 3, service providers fall into the category of ‘very large online platforms’ as the scope is defined exclusively by the objective metric of number of users.

212The first option, more limited in the scope of measures, would still set a regulatory standard in particular on the due process and information requirements from platforms, encouraging a fundamental rights-centric approach. The second option would in addition firmly clarify the balance of rights set through the liability regime for online intermediaries, a controversial and politicised topic in some other jurisdictions, and would set a higher standard of transparency and accountability for online platforms. The third option would place the European Union in a leadership role, not least through establishing an EU-level body supporting the oversight of the largest, most impactful platforms, and establishing an important capability for auditing and investigating such platforms in a flexible manner, in anticipation of emerging risks.

211The intervention would inherently set a European Union standard in the governance of issues emerging on online platforms, both in relation to measures to mitigate risks and ensure online safety, and the protection of fundamental rights in the evolving online space. Most international fora, including the G7 and the G20, but also international organisations such as the UN, the OECD and the Council of Europe have flagged such concerns, and other jurisdictions have taken measures or are currently discussing taking measures – including amongst others the US, Australia, Canada, India, New Zealand. Action in this field by the European Union will lead to enhanced cooperation and engagement with third countries in this context.

210All options would require a legal representative in the Union and extend the scope of the due diligence obligations to service providers established outside the EU thereby ensuring EU users’ rights are protected in the global online space. This is not expected to have a significant effect on legitimate platforms from third countries targeting the single market, with further proportionality incorporated by excluding very small, incidental providers. For most platforms, it is likely that legal representatives are already established as part of other legal requirements under EU legislation (e.g. General Data Protection Regulation (‘GDPR’), which would absorb to a large extent this cost. In addition, compliance with EU rules could be a commercially beneficial trust signal for such providers.

209All three options are expected to have an impact in diminishing illegal trade into the Union, both in relation to direct sellers and sellers intermediated by online platforms.

Direct costs: no direct costs entailed by the measures, but no net reduction of costs expected, as volumes of illegal activities consistently higher than law enforcement capacities

One-off: 2 mil per annum over the first two years for technical development. Maintenance and additional development over the next 3 years of approx. EUR 500.000 in total

Codes of conduct and co-regulatory framework: investment at EU level of 0.5-2 FTEs per initiative – absorbed in costs in section 3 below

208For the third option, an additional cost would be born at EU level, creating further 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.

207For the second option, a digital coordinator would need to be appointed in each Member State, interfacing with the other EU authorities and assuming a coordination role among the competent authorities in their country. While the coordinator would require some costs, the efficiency gains are expected to outweigh them in every Member State: efficiency gains for the individual authorities through mutualisation of resources, better information flows, and straight-forward processes for interacting with their counterparts across the single market, as well as with service providers.

206With the first option, national authorities would follow a clear, streamlined process for cross-border issues, with clear resolution and response. Member States where a large number of services are established are likely to need some reinforcements of capabilities. These will be attenuated, however, through the creation and use of a clearing house system for cooperation across authorities, including technical costs for the development and maintenance (by the Commission), as well as running costs for the Member States’ appointed authorities to engage in the cooperation, either to issue or to respond to requests. Information flows and data collected through the clearing house should significantly improve the ability of Member States to supervise the systemic compliance of services with the requirements.

205Compared to the baseline, each of the three options should significantly cut the costs brought by the inefficiencies and duplication in the existing set-up for the cooperation of authorities (see driver 2.3.6). With regard to law enforcement, a smoother, more reliable cooperation with digital services, not least in processing requests, would improve the effectiveness and efficiency of their actions. Net cost reductions, however, may not be expected, since the volume of illegal activities online is far larger than the capacity of law enforcement authorities to investigate these offences.

204The supervision and enforcement of the rules would be key in ensuring the success of the intervention. An appropriate level of technical capability within public authorities, robustly built over time, will ensure a correction of information asymmetries between authorities and digital services and the relevance of the public intervention in a sustainable model of online governance. From this perspective, any additional measures to mutualise resources and expertise, and establish sound IT infrastructures for cooperation can have a net positive effect in assisting all Member States in the medium- to long-term.

203Option 3 specifically includes targeted obligations for very large platforms. These are not expected to be SMEs under any circumstance, as both the number of employees and the global turnover of such platforms is significantly higher than those of a medium-sized enterprise. However, thresholds for ‘very large platforms’ would be set proportionately to their reach in terms of number of users in the Union, but would not exempt SMEs by virtue of the risks and societal harms such services could cause.

202Under all options, the additional transparency obligations are expected to be proportionate to the risks and capacity of each service provider and should be absorbed in the operations and design of the systems. However, these costs could be in themselves disproportionate for a small or micro-enterprise and the risks such companies pose, and the impacts they may have do not justify such limitations on the companies.

201Should the volume of notices increase exponentially, this would likely correspond to a generalised exploitation of the service for illegal activities. The costs for processing the notices could become prohibitive, but, conversely, a non-responsive service would likely bear legal consequences even under the baseline scenario, and would lose its legitimate users. A notice-and-action system can be a powerful support for legitimate businesses who intend to address illegal activities carried out by their users.

200Costs of the notice and action system are proportionate to the risks posed by each service: an average micro-enterprise receiving a volume of 50 notices per annum, out of which 5% would make the object of a counter-notice procedure, should sustain a cost of approximately EUR 15 000 per annum. The introduction of standard, minimum requirements for notices, procedures and conditions, as well as reporting templates, should further decrease the expected costs for small companies, supporting them in tackling illegal content and increasing in turn the legal certainty.

199With regard to SMEs offering platform services, since they do not reach a scale in their user base equivalent to that of very large online platforms, the illegal activities conducted by their users would not reach a similar impact. There are exceptions to this. First, the user base of successful online platforms typically scales very fast; second, even the smaller services can be instrumental to the spread of certain crimes online. On some occasions, microenterprises can be aggressively targeted by perpetrators, not only leading to societal harm, but also corrupting the legitimate value proposition of the digital service. Consequently, SMEs cannot be fully exempted from the minimum requirements for establishing and maintaining a notice and action mechanism under each of the options.

198For a micro-enterprise, the costs of the legal fragmentation seem prohibitive today: the modelled costs when providing services cross-border are higher than the maximum annual turnover of a micro-enterprise when offering services in several Member States. The harmonised rules under all options would cut duplication costs for SMEs as well as costs from legal risks with regards to the harmonised provisions for each option.

Up to 220.000 EUR for building APIs to give access to data and quality controls for data completeness, accuracy and integrity, and for system security and availability.

Risk mitigation measures are variable costs and can range from virtually no costs, to significant amounts, in particular when the platforms’ systems are themselves causing and exacerbating severe negative impacts. The duration and level of expenditure for such measures will also vary in time. Similarly, participation in Codes of conduct and crisis protocols requires attendance of regular meetings, as a direct cost, but the streamlined targeted measures can vary.

Data collection and availability as regards information on the functioning and targeting criteria, when applicable, by and large absorbed into GDPR compliance, with minor additional costs for up-front information publication

Estimated between EUR 50.000 to EUR 550.000 per annum, depending on the FTE necessary to complete the tasks. These costs can be partially or fully absorbed, for most companies, in existing requirements for legal representatives.

For some online intermediary services not established in the EU and with a significant user base in the EU:

Highly dependent on the volume of notices received, where personnel costs are the most notable expenditures. Estimates range from a one-off maximum cost of EUR 15.000 for establishing a notice-and-action technical system and light maintenance, to EUR 1 million for a volume of 200 notices received per day, and EUR million for 3000 notices received per day. While there are some economies of scale with the increase of the number of notices, these are limited. These are indicative costs and, for most companies, they do not represent an additional cost compared to current operations, but require a process adaptation in the receipt and processing of notices and streamline costs stemming from fragmented obligations currently applicable.

196In addition, the third option includes a series of potentially significant costs which are limited to very large online platforms. First, the enhanced transparency and reporting obligations for content moderation, recommender systems and online advertising would bring technical and maintenance costs which would be absorbed in the services’ operations. A fixed cost for the organisation of risk assessments and annual audits would also be incurred by very large platforms. Risk mitigation measures will, however, vary to a large extent depending on the initial design of the systems, and the severity of risks. Overall the additional costs for such service providers range from EUR 300.000 to EUR 3.500.000 per annum for the additional obligations, excluding potential variable costs for risk mitigation measures.

195In option 2, costs related to information requirements would equally be reduced rather than increased, compared to the baseline, by streamlining and harmonising the requirements, thereby preventing further legal fragmentation and possible compliance requirements with very divergent national systems.

194In addition to these costs, for the second option, services would also incur some technical design, maintenance and reporting costs, for the additional information and transparency obligations presented in paragraph 156. However, these are expected to be marginal and absorbed into the general operations and design costs of online platforms and ad intermediaries, respectively. As these measures are intimately related to the type of service offered and design choices of the service itself (e.g. development and use of recommender systems, ad intermediation, marketplaces intermediating services and sale of goods), micro-enterprises would not be exempted from scope.

193For out of court alternative dispute resolution systems, there is a level of uncertainty, as no reliable data or precedent allows to estimate what volumes of complaints would be escalated. The existence of alternative dispute resolution mechanisms in all Member States would however facilitate access to such mechanisms and likely append negligible costs compared to the current system.

192Direct costs for the main due diligence obligations are common across all three options and depend to a large extent on the number of notices and counter-notices received by a platform and cases escalated to an out of court alternative dispute resolution system. Estimates are considered based on an initial scale of notices received, but can vary to a large extent.

191At company level, in a simple model quantifying only the harmonising rules common to all three options, the legal intervention would already close the Single Market gap with a cost reduction of around EUR 400.000 per annum for a medium enterprise assumed present in three Member States. Compared to projected scenarios where the legal fragmentation would become more acute, the intervention would lead to savings of EUR 4 million for the same scale of company present in 10 Member States and EUR 11 million for an extreme scenario of fragmented rules in each of the 27 Member States of the Union. The cost savings are most impactful for micro- and small- enterprises, where the current fragmentation is prohibitive for offering services in more than two Member States.

190All three options incur costs for online intermediaries. However, these costs represent a significant reduction compared to those incurred under the present and evolving fragmented and uncertain corpus of rules.

189Option 3 would produce better results than option 2, in applying asymmetric obligations to the largest online platforms where a large share of the economic loss occurs. A risk management approach would address in a targeted manner areas of abuse and systemic failures. It would in addition afford enhanced transparency on key processes related to the prioritisation of information which reaches consumers through online advertising and recommender systems. This would build further resilience into the system, giving more choice and agency to users and stimulating an innovative and competitive environment online. The macroeconomic impacts of Option 3 are estimated at a 0.6% increase of GDP (EUR 81.7 billion). An alternative model following a different methodology estimates a EUR 76 billion increase in EU GDP over the 2020-2030 period for a package of measures broadly equivalent to Option 3.

188Options 2 and 3 would reach better results by removing disincentives for platforms established in the Union to take appropriate voluntary measures, in both ensuring a higher scale of illegal activities and information online, and in safeguarding users’ rights. The macroeconomic impacts of Option 2 are estimated at a 0.4 increase of GDP (EUR 61.8 billion).

187The macroeconomic expected impact of Option 1, once fully implemented, amounts to an increase of 0.3% of GDP benchmarked against 2019 values – i.e. a total of EUR 38.6 billion.

186Overall, the three options will lead to better conditions for the underlying digital services will result in more choice for both businesses and consumers. This will cascade into increase in e-commerce, in particular cross-border, including positive impacts on the creative industry, manufacturing, information service and software, etc. Consequently, all three options will have a positive effect on the competitiveness of legitimate business users of online platforms, manufacturers or brand owners, by reducing the availability of illegal offerings such as illegal products or services (and, of course, reducing harms on consumers, as per 6.2.1 below). In addition, the legally guaranteed availability of the internal and external complaint and redress mechanisms would afford other better protections against erroneous removal and limit losses for legitimate businesses and entrepreneurs.

185Further, all three options would preserve the equilibrium set through the conditional liability exemption for online intermediaries, ensuring that online platforms are not disproportionately incentivised to adopt a risk-averse strategy and impose too restrictive measures against their business users (and citizens using their services). This is particularly sensitive in the recovery phase of the COVID-19 crisis, where sectors such as tourism, accommodation, food and transport require predictability and a reinforcement of their online presence.

184The second and third options would bring stronger improvements to the cooperation mechanisms across Member States and harmonise a wider spectrum of provisions, including transparency requirements in online advertising. They would thus affect a wider spectrum of digital services and limit current and emerging costs of legal fragmentation, compared to the first option and the baseline scenario.

183The first option would primarily affect online intermediaries established in Europe by cutting the costs of the evolving legal fragmentation and allowing services to repurpose resources in growing their business and, potentially, investing in innovative solutions. It would in addition create a true regulatory level playing field between European Union-based companies and those targeting the single market without being established in the EU.

182With the additional legal certainty, all three options are expected to have a positive impact on competitiveness, innovation and investment in digital services, in particular European Union start-ups and scale-ups proposing platform business models but also, to varying extents, on sectors underpinned and amplified by digital commerce. The legal certainty provided by the intervention would likely encourage investments in European Union companies.

181With regard to effects on competition, all three options are proportionate and do not impose dissuasive requirements for service providers. By harmonising the legal requirements across Member States, they all establish a level playing field for emerging services across the single market. The third option would establish asymmetric obligations on very large online platforms with a systemic impact in Europe, making sure that smaller, emerging competitors are not affected by disproportionate obligations, while ensuring that certain systemic policy concerns are adequately addressed by very large online platforms. The asymmetric obligations would lead to higher costs for approximately 20 of the largest platforms in the EU and the world, both in terms of users reached and turnover. These enhanced obligations are necessary to secure online safety and fight against illegal activities efficiently. They would also lead to significant improvements of the service itself, not least in enduring a safer environment for their users and the respect of their fundamental rights; in turn, this will likely benefit the platform itself when compliant with the requirements. However, smaller companies could also take similar measures on a voluntary basis, and would be invited to be part of the co-regulatory framework (e.g. on content moderation and crisis management, on advertising transparency).

180In a model reflecting only the concerns related to legal fragmentation, addressed in all three options, the legal harmonisation of obligations across the single market should lead to an increase of cross-border digital trade of 1 to 1.8%. This is estimated to be the equivalent of an increase in turnover generated cross-border of EUR 8.6 billion and up to EUR 15.5 billion.

179In addition, the third option would couple the cooperation mechanism with an EU level body, allowing for fully coordinated actions and addressing in a consistent and more efficient way issues common to several Member States. Both sub-options address this and provide for different mechanisms for ensuring an EU level enforcement or rules when very large platforms are concerned, ensuring maximum consistency across the single market.

178The second and the third option would in addition further establish trust across Member States through an agile cooperation mechanism for cross-border concerns. This would add legal predictability for intermediary services active in several Member States. Importantly, it would also facilitate the effective enforcement of rules throughout the single market, where the Member State of establishment is most generally easily able to coerce a service provider, if need be, but other Member States would equally have an effective channel for making sure that the particular challenges of their state are appropriately addressed.

177The first option would in particular support the access to the single market for European Union platform service providers and their ability to scale-up by reducing costs related to the legal fragmentation rapidly escalating across Member States (as per section 6.1.2 below). It would also improve legal clarity and predictability by increasing transparency about content moderation measures and business users of online platforms through harmonized rules, as well as improve the cooperation between Member States in addressing cross-border issues.

176All options considered would have an overall positive effect on the functioning of the single market, but there are notable differences between options. They all follow and build on the cornerstone of the single market for all digital services set in the E-Commerce Directive, and reinforce to varying extents the cooperation of national authorities in supervising the new obligations considered in each option.

175The policy options were evaluated against the following economic and societal impacts, with a particular focus on impacts on fundamental rights.

-Assigning the competences to an existing body. Following an initial screening of the competences, capabilities and mission of the BEREC Office, ENISA, the Cybersecurity Competence Centre, EDPB, EDPS, Europol, no appropriate synergies were identified.

-An expert group including Digital Services Coordinators, managed by the Commission: this would at most ensure a limited, and less structured information sharing among national authorities.

173Laying down prescriptive rules on content which could potentially be harmful to certain audiences, but which is not, in itself, illegal. The Impact Assessment focuses on illegal information and activities and on processes, tools and behaviours which might create or increase harms (i.e. recommender systems and other design choices for accelerating and selecting information flows). It is understood that content which is not illegal cannot be subject to the same removal obligations as illegal content.

172Change to the prohibition on general monitoring obligations: the provision is core to the balance of fundamental rights in the online world. It ensures that Member States do not impose general obligations which could disproportionately limit users’ freedom of expression and freedom to receive information, or could disproportionately burden service providers excessively, and thus unduly interfere with their freedom to conduct a business. It also limits online surveillance and has positive implications in the protection of personal data and privacy. Allowing such a disproportionate burden would likely lead to numerous erroneous removals and breaches of personal data, resulting in extensive litigation. Options for changes to general monitoring obligations were considered, and then discarded for non-compliance with the balance of rights described here.

171Changes to the single market principle set in the E-Commerce Directive and the requirement for the country of establishment to supervise services would inherently undermine the development of digital services in Europe, allowing only the very large players to scale across the single market. The single market principle is also the optimum model for ensuring that rules can effectively be enforced against services. The evaluation of the E-Commerce Directive and all other available evidence shows that that the single market principle has been instrumental for the development of digital services in Europe. This principle increased legal certainty and reduced compliance costs significantly, which is crucial for smaller services in particular.

170Fundamental changes to the approach on the liability regime for online intermediaries: Annex 9 presents a series of considerations for different theoretical models of liability for intermediaries. The liability exemption of online intermediaries is a cornerstone for the fair balance of rights in the online world. Any other model placing more legal risks on intermediaries would potentially lead to severe repercussions for citizens’ freedom of expression online and traders’ ability to conduct their businesses online and reach consumers. They would also be prohibitive for any new business, reinforcing the stronghold of very large players, able to sustain and, to a certain extent, externalize costs. Conversely, options significantly decreasing the standard for hosting services to quality for the liability exemption would severely affect the safety and trust in the online environment.

169Continuing to only regulate on a sector-specific approach, as done e.g. for content infringing copyright, terrorist content, explosive precursors, audiovisual content: Such approaches are important in addressing targeted issues in specific sectors or in regards to specific content. They are however limited in their ability to address the systemic, horizontal problems identified in the single market for digital services and would not address comprehensively the risks and due process challenges raised by today’s online governance. Ultimately, this option was discarded for four main reasons: (i) the E-Commerce Directive is horizontal in nature and its revision requires a horizontal approach; (ii) the identified risks and problems are systemic and lead to cross-sectoral societal concerns; (iii) sector-specific legislation can lead to inconsistencies and uncertainties; and (iv) only horizontal rules ensure that all types of services and all categories of illegal content are covered.

168The options selection followed a funnelling methodology, exploring the widest spectrum of approaches. Several types of options were discarded earlier in this process, as explained below. In several cases, the assessment of the impacts on fundamental rights led to the discarding of these options because they did not ensure a fair balance in mitigating the risks.

Especially in the context of addressing the spread of disinformation online, regulatory oversight and auditing competence over platforms’ actions and risk assessments was considered as crucial (76% of all stakeholders responding to the relevant question in the public consultation. Academic institutions as well as civil society organizations showed concerns about the lack of adequate financial and human resources in competent authorities tasked with supervision of digital services. Many groups of stakeholders, especially civil society organizations defending digital rights, identified the need for interdisciplinary skills in a new oversight entity, particularly in-depth technical skills, including data processing and auditing capacities, which would allow for the reliable and thorough assessment of algorithmic abuses. The majority of academia and civil society organizations defending fundamental rights consulted, emphasized the need for strong, proportionate and foreseeable enforcement to hold platforms to their promises and are in favour of a supervised regulator or authority, to reconcile opposing needs and potentially sanction repeated failures.

An effective EU oversight is considered essential for the compliance with the due diligence obligations by most stakeholder groups, especially telecommunications operators. Many stakeholder groups, but especially business associations and companies, considered, that the degree of oversight should vary depending on the services’ obligations and related risks. The majority of stakeholders groups favoured a unified oversight entity to enforce rules on digital service providers (66% of the respondents to the relevant question in the public consultation. Authorities called for a coordination and technical assistance at EU-level for supervising and enforcing rules on online platforms as regards the intermediation of third-party goods, services and content.

Start-ups, telecommunication operators and several other stakeholders, notably new types of services in the internet stack, such as cloud services, CDN and DNS services, as well as other technical infrastructure providers, called for clarifications in the liability regime of intermediaries, without challenging its basic principles. Small companies in particular deplored the lack of legal predictability with regard to voluntary measures they might take. They also called for due diligence obligations on hosting service providers, and proportionate and targeted measures.

Academic institutions pointed to persistent difficulties when conducting research, and explained the difficulty of observing emerging issues and phenomena online, blaming an inconsistent access to relevant data. Some pointed to the need for a generally disclosed ad archive, as well as an independent auditing of ad systems. According to start-ups and SMEs, limiting some obligations to large players would ensure that the legal obligations are targeted to where problems actually occur. Start-ups especially stressed the point that a ‘one-size-fits-all’ approach would be most beneficial for very large platforms, but could have detrimental effects on medium-sized or smaller platforms and businesses at the core of the European digital ecosystem. They stress that their growth and evolution should not be hindered by disproportionate rules that impede on the successful development of competing alternative services and business models. Online intermediaries acknowledged the possibility of more transparency, but warned against possible implications of far-reaching measures in terms of compromising commercially-sensitive information, violations of privacy or data disclosure laws, and abuse from actors that could game their systems. Some online intermediaries considered that a transparency obligation could be best achieved by establishing a requirement for regular reporting.

Whilst there is a general call, especially among citizens, for establishing as much transparency as possible, most stakeholder groups, especially business organisations and start-ups stated that not all types of legal obligations should be put on all types of platforms. Press publishers, for example, state that due diligence obligations should only concern very large online platforms, and should not cover hosting services such as comments sections on newspapers’ websites. A majority of stakeholder groups, including business associations, academic institutions and the general public, recognized that not all platforms should be required by law to cooperate with national authorities, but that platforms at particular risk of exposure to illegal activities by their users should maintain a system for assessing the risk of exposure to illegal content or goods and be required to systematically respond to requests from law enforcement in accordance with clear procedures as well as employ appropriately trained and resourced content moderation teams. 72% of respondents to the relevant question in the public consultation consider both, independent system audits and risk assessments as essential, especially when it comes to countering the spread of disinformation, as well as reporting and data access to researchers and regulators. How algorithmic systems shape online content is an area of concern among a wide category of stakeholders. Several stakeholders, amongst them citizens, civil rights organizations, academic institutions as well as media companies and telecommunication operators pointed out the need for algorithmic accountability and transparency audits on very large platforms, especially with regards to how content is prioritized and targeted. Users should receive more information and have more control over the content they interact with and digital rights associations think they should be able to opt out of micro-targeting and algorithmically curated content.

-Sub-option 3.B: the EU Board is established as an EU body with legal personality, supported by a secretariat and, in addition to the powers under sub-option 3.A, it can also adopt binding decisions.

-Sub-option 3.A: the EU Board is established as an ad hoc independent advisory group, advising Digital Services Coordinators and the Commission on supervisory and enforcement issues, including those related to very large platforms (inherently present across Member States).

166For the supervision of the obligations, next to the Digital Clearing House and the national Digital Coordinators, an EU Board, including the participation of the national Digital Services Coordinators, enhances the governance system, particularly necessary for ensuring the supervised risk management approach for very large platforms. This system ensures in particular that systemic problems brought by those platforms with an EU-wide impact are appropriately addressed through EU supervision, with sufficient expertise and appropriate competencies, which is based on the clarified powers of the host Member State and rules for cooperation with the other Member States. It ensures appropriate assistance from other Member States and the Commission to the Member States in charge of supervising very large platforms. Building on the enhanced data access obligations for very large platforms, this includes in particular the technical assistance for complex investigations related to algorithmic systems or language-specific issues. This system also provides for fast information channels for all Member States where the effects of platforms’ content moderation decisions are felt. Further, it provides for an escalation system where the Commission can supervise and take direct enforcement measures against very large platforms. Sanctions applied would be proportionate to the severity of the systemic non-compliance.

165Similar to option 2, option 3 harmonises certain conditions for cross-border court or administrative orders to impose measures for the removal of illegal content, goods or services by intermediaries. Additionally, it includes obligations to notify of suspicions of criminal offences, where an intermediary service becomes aware of any information. Furthermore, it also includes conditions for cross-border orders for competent authorities to access data necessary for supervising underlying services intermediated by online platforms.

164Option 3 includes, apart from the removal of disincentives to voluntary actions, as per Option 2, further clarifications of the liability regime for online intermediaries to ensure legal certainty and innovation. It addresses the fragmentation stemming from the different national approaches to the liability exemptions and preserves the principle of conditional liability exemption. To afford more legal clarity in grey areas of interpretation concerning online platforms, it also specifies the conditions under which such services are truly intermediaries.

-a renewed co-regulatory framework with participation in adaptive and responsive codes of conduct to mitigate emerging risks coupled with an obligation to ensure reporting on outcomes and participation in crisis management protocols, responding to extraordinary situations where risks manifest online.

-user-facing transparency of content recommender systems, enabling users to understand why, and influence how information is being presented to them;

-obligations to maintain a risk management system, including annual risk assessments for determining how the design of their service, including their algorithmic processes, as well as the use (and misuse) of their service contribute or amplify the most prominent societal risks posed by online platforms. An obligation to take proportionate and reasonable measures to mitigate the detected risks follows, and the risk management system is regularly submitted to an independent audit;

163The additional set of enhanced obligations on very large online platforms reaching a significant number of Europeans are designed proportionately to the systemic impacts and risks these large platforms represent for society and the business environment, as well as to their capacities. Their due diligence obligations are obligations of means, without an expectation of no-fault results. These enhanced obligations are necessary to secure compliance with the rules ensuring the safety of citizens and the prevention of deceptive and fraudulent commercial practices online. This includes:

162Very large platforms represent the highest societal and economic risks because of their significant reach among citizens and traders in the EU. Therefore, the definition of very large platforms in this option is based on the number of users, as a direct and objective proxy for their reach and potential impact. The threshold is set at 45 million monthly users from the EU, the equivalent of 10% of the EU population. Available data shows that the largest online platforms captured by this threshold correspond to the services considered by stakeholders and academics to represent the highest societal and economic risks, and typically have a pan-European presence. Also, the providers of these online platforms generally have a high turnover and/or market capitalisation value. The platforms’ reporting obligations and the Digital Services Coordinators’ enquiring powers will ensure that the data on the number of users is available to enforce the enhanced obligations. As explained in more details in Annex 4, other alternative and cumulative criteria have also been assessed and discarded for the purposes of the definition of very large online platforms.

161The third option retains all the components of Option 2, but includes an asymmetric regime, targeting those very large platforms where the biggest audiences are reached – and, potentially, the most severe harms are caused.

Member States stated that while the cooperation between authorities and larger service providers has provided for some good results, a more formal regulatory framework and an update to the current legislation is desired. Many Member States pointed to the risks related to the inability to provide effective surveillance and enforcement on the global digital services environment. Member States also warned that the digital single market should not be overregulated. Medium-sized and smaller companies, as well as business associations, flagged the fragmented state of the digital single market as a burden in providing digital services, especially when expanding to one or more Member States. Mentioned were especially the requirement to have a legal representative or establishment in more than one Member State, and the different procedures and points of contact for obligations to cooperate with authorities. When asked what governance arrangements would lead to an effective system for supervising and enforcing rules on online platforms in the EU in particular as regards the intermediation of third party goods, services and content, 81% of stakeholders called for a cooperation mechanism within Member States across different competent authorities responsible for systematic supervision on online platforms and sectorial issues. 80% of respondents stated that a cooperation mechanism would need to have swift procedures and assistance across national competent authorities across Member States. National authorities are also in favor of a reinforced cooperation mechanisms, but some call for assessing the effectiveness of a European agency. Some civil society organisations emphasized that robust and effective enforcement mechanisms for regulatory oversight are absolutely necessary, in particular to foster coordination between national authorities and to address issues with lack of transparency and inconsistencies within procedures.

Online intermediaries generally considered that any new measure should avoid being overly prescriptive as regards the use of specific tools or technologies in the context of content moderation. In this context, stakeholders, especially civil society and digital rights associations, warned against monitoring requirements and the use of automated tools for tackling illegal or harmful content, goods and services due to significant risks to citizens’ fundamental rights, right to privacy, and freedom of expression. 82% of all stakeholders that answered to the relevant question in the public consultation, support high accuracy and diligent control mechanisms, including human oversight when automated tools are deployed for detecting content or accounts. Start-ups, scale-ups and smaller platforms pointed out that automated tools are also very costly to develop and maintain, and see this as a significant barrier to market entry.

Some intermediaries, academic institutions, and civil society organizations stated that the current liability regime creates disincentives to act, and called for clarification to stimulate voluntarily preventative measures to detect illegal content. Especially the absence of incentives are seen as counter-productive in the fight against illegal activities online. Start-ups strongly supported the removal of disincentives for voluntary measures and stressed that this would be a very important safeguard for smaller online platforms and would incentivize businesses to take voluntary actions. Start-ups converge on the opinion that illegal content should be tackled by all online platforms regardless of their capacity, whereas harmful content should not fall under this regime. They are proponents of making all platforms introduce clear terms and conditions, and to develop best practices. Consumer organisations strongly called for a special liability regime for online market places to make them directly or jointly liable in case they exercise a predominant influence over third parties or in case the platform fails to properly inform consumers or fails to remove illegal goods or misleading information (assessed in Annex 9).

In addition to the broad convergence around the core due diligence obligations also presented in option 1, a variety of stakeholder groups voiced concerns around online advertising, more specifically the lack of user empowerment, especially as regards deceptive advertisements, and lack of meaningful oversight and enforcement. Users demanded that reporting deceptive advertisements should be facilitated, both, when the advertisement is encountered online, and after the fraud was discovered by the user. The most frequent issues pointed to as necessary relate to more transparency regarding the identity of the advertiser, how the advertisements are personalized and targeted, and to the actions taken by ad intermediaries to minimize the diffusion of illegal ads and activities. Implementing features that explain why certain advertisements are shown to users were considered a good practice to build upon and to empower users.

160Regarding the supervision of digital services, this option would complement the first option’s Digital Clearing House by requiring Member States to designate a supervisory authority as a central Digital Coordinator. The Digital Coordinator would be tasked with facilitating coherence of the supervision and enforcement across different authorities in the relevant Member State, not least as regards capabilities and supervision of the additional obligations related to algorithmic systems in recommender and advertising systems, as well as with ensuring the cooperation interface for smoother cross-border assistance through the Digital Clearing House.

159Concerning the liability of intermediaries, option 2 would adapt the existing legal framework to remove disincentives for services, in particular online platforms, to take voluntary measures to address illegal activities: the intervention would clarify that such measures do not, in themselves, remove intermediaries from the scope of the liability exemptions.

158In this option as well, self-regulatory measures through codes of conduct would continue to be encouraged and supported by the Commission and, further measures could be launched, as necessary.

157This option harmonises certain conditions for cross-border court or administrative orders to impose measures for the removal of illegal content, goods or services by intermediaries.

156In addition, this option would impose on online platforms further transparency obligations towards their users, specifically regarding advertising systems – modernised transparency obligations covering all types of advertising (all ads placed on online platforms, not just commercial communications, but also e.g. issues-based or political advertising). Such measures would include enhanced information to users distinguishing the ad from ‘organic’ content, information about who has placed the ad and information on why they are seeing the ad (depending on the type of advertising – e.g. targeted, contextual - and, if applicable, targeting information).

Regarding supervision, 85% of respondents who replied to the relevant question in the OPC on the DSA package (2020), think that online platforms cannot be trusted to sufficiently guarantee democratic integrity, pluralism, non-discrimination, tolerance, justice, solidarity and gender equality. A large majority of stakeholder groups called for improved cooperation between authorities in different Member States and highlighted the importance of data sharing with law enforcement authorities, in particular for rogue traders. Member States flagged the challenges of consumer protection authorities regarding the effective enforcement to tackle illegal or shady business practices, and point to a low level of awareness among the enforcement bodies and a lack of harmonization of EU law. Some Member States further called for the current cooperation system to be revised and strengthened in order to avoid a fragmentation of the European digital market. They stated, that the emerging patchwork of EU and national legislation makes it even more challenging for enforcers to oversee the European market. Online intermediaries emphasized the importance of coordination between national authorities and between all actors involved in the ecosystem.

As regards the nuances between the different stakeholder groups regarding due diligence obligations, the general public, online intermediaries and civil society organisations especially advocated for a harmonisation of notice and action procedures across the EU, and businesses called for the establishment of minimum information requirements for a notice to be actionable. Civil society organizations and the general public stressed the importance of human moderators. Furthermore, most contributions of media and audiovisual associations argued for the need of clear policies against ‘repeat infringers’, and also for the regulation of the notion of ‘trusted flaggers’. The majority of retail associations highlighted the need for platforms to inform consumers who have previously bought an illegal or dangerous product that they have been exposed to illegal goods. Concerning online marketplaces, many stakeholder groups flagged the need to verify the sellers in order to provide transparency to consumers, and to increase the efficiency of enforcement. Especially rights holders and brands stated that they are incurring considerable costs by having to identify fake listings, and for reporting the sale of counterfeit goods or other illicit products to platforms.

There is a strong call for action throughout all categories of stakeholder groups and a consensus that certain responsibilities (i.e. legal obligations) should be imposed on online platforms. For instance, a large majority of stakeholders that answered to the public consultation want all platforms to be transparent about their content policies, support notice and action mechanisms for reporting illegal activities, and request professional users to identify themselves clearly (90%, 85% and 86% respectively).

154The scope of the due diligence obligations would be extended to all services targeting the European Union, regardless of their place of establishment. For supervising and enforcing the due diligence obligations, a requirement for a legal representative in the Union would be imposed on services with a significant number of users in one or several Member States.

153Concerning the supervision of digital services, this option would build on the cooperation mechanisms established in the E-Commerce Directive and further develop a ‘Digital Clearing House’ to facilitate the exchange of information among Member States and channel requests regarding failures of a given service provider to comply with the applicable requirements. This would cover both information from the country of establishment on sanctions imposed, and requests from authorities in other Member States. Member States can designate one or several authorities competent for supervising the new obligations.

152Self-regulatory measures through codes of conduct would continue to be encouraged and supported by the Commission and, further measures could be launched, as necessary.

-Fundamental rights standards in terms of service – This includes the obligation to clearly state in their terms of service any restrictions they may apply in the use of their service, and to enforce these restrictions with due account to fundamental rights.

-Transparency obligations – Regular transparency reporting on the measures taken against illegal activities and their outcomes, including removal rates, complaints, and reinstatement of content, transparency of the use and functioning of automated tools for content moderation, if applicable.

-Know Your Business Customer (‘KYBC’) – Online platforms that facilitate transactions between traders and consumers have an obligation to collect identification information from traders to dissuade rogue traders from reaching consumers.

-Notice and Action – Obligation to establish and maintain an easy to use mechanism for notifying any illegal content, goods or services offered through online platforms as well as other hosting services in accordance with harmonised standards. This is coupled with an obligation to inform users if their content is removed, including when the removal follows an assessment against the terms of service of the company, as well as specific actions around repeat offenders. The information obligations are coupled with an obligation to put in place an accessible and effective complaint and redress mechanism supported by the platform and the availability of an external out of court dispute mechanisms.

151The first policy option establishes a set of due diligence obligations for tackling illegal activities online, essentially building upon the Recommendation of 2018 and the E-Commerce Directive. The measures apply to any type of illegal activity, as defined in EU and national law. The core elements of the due diligence obligations include the following:

Clarifications for new types of services in the Internet stack not clearly fitting in the categories of the E-commerce Directive

Enhanced responsibilities for very large online platforms to mitigate systemic risks: e.g. reporting and data access to researchers and regulators, independent systems audits, appointment of a compliance officer, accountability of executive boards, participation in co-regulatory efforts to mitigate emerging risks and report on outcomes

Due diligence obligations, including notice and action, know your business customer, transparency of content moderation, cooperation with authorities, clear terms and conditions including respect for fundamental rights, as well as transparency towards users on advertising

Due diligence obligations, including notice & action, know your business customer, transparency of content moderation, cooperation with authorities, clear terms and conditions including respect for fundamental rights, as well as transparency towards users on advertising

Due diligence obligations for a fit and proper operation, including notice & action, know your business customer, transparency of content moderation, cooperation with authorities, clear terms and conditions including respect for fundamental rights

3.Asymmetric measures with stronger obligations for very large online platforms, further clarifications of the liability regime for online intermediaries and an adapted EU governance system to supervise the new obligations on very large online platforms.

2.Fully harmonised measures to incentivise actions from service providers, to enhance transparency and address a wider set of emerging risks by empowering users. Enforcement and cooperation mechanism enhanced with the appointment of a central coordinator in each Member State.

1.Limited measures against illegal activities, laying down the procedural obligations for online intermediaries and in particular online platforms, to tackle illegal activities, in order to protect users’ fundamental rights and ensure transparency. It would also enhance the cooperation mechanisms for authorities to resolve cross-border issues related to the supervision of the rules.

149In addition to the baseline, three packages of options are retained for assessment. They each include a different package of harmonising measures for the due diligence obligations to service providers and a regulatory supervision system appro