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Enforcement in the Digital Single Market

Posted: Apr 20, 2017 by Instinctif Partners

Paved with Good Intentions: Enforcement and the Road to a European Digital Single Market – the German NetzDG at a glance

 “Europe must embrace the digital revolution and open up digital opportunities for people and businesses. How? By using the power of the EU's Single Market[1]

The sixteen initiatives of the Digital Single Market (DSM) Strategy were intended to resolve fragmentation and establish Europe as a competitive, thriving hub for innovation. Ahead of the mid-term review of the DSM on 10 May, the Commission has made a number of proposals in an attempt to realise this aim. However, while all eyes are focused on the Commission’s legislative agenda, it is easy to forget that the European DSM does not happen in a vacuum – national agendas are also trying to make progress in this area, and in some cases specific Member State initiatives are already threatening to fragment any progress made at EU level.

The German government recently notified a new law to the Commission – the Netzwerkdurchsetzungsgesetz (NetzDG), or the Network Enforcement Law. Although the law touches on a specific issue plaguing the online ecosystem, it serves as an excellent example of how one national initiative can completely contradict existing EU law and undermine EU policy objectives, while also serving as a harsh reminder of the consequences that could arise from poor EU law enforcement.

In theory: Enforcement in the DSM

In theory, the necessary mechanisms are in place to ensure the correct enforcement of EU law in the DSM – pending additional improvements under the Single Market Strategy. Currently Member States are required to notify changes to existing national law on information society services under Directive 2015/1535, in order to provide the Commission and Member States with an opportunity to flag any inconsistencies with the EU acquis. Aiming to improve and complement this process, the Commission proposed a Directive early this year as part of the Single Market Strategy, laying down a notification procedure for authorisation schemes and requirements related to services.

But the road to a European Digital Single Market is paved with good intentions. Although national initiatives are typically notified to the Commission in good time, in accordance with the above procedure, how often does the Commission follow up when potential conflicts with EU law arise?

Every year the Commission issues a report, “Monitoring the Application of EU Law”, which reviews the number of complaints filed and the number of infringement proceedings launched over the past twelve months. According to the latest Annual Report, in 2015 the Commission received the highest level of infringement complaints on record in the area of communications networks, content and technology, totalling 78 new complaints covering a variety of files, from copyright, to electronic communications, to audio-visual matters, to e-commerce…Of the 18 infringement cases brought that year, the report indicates that only one case focused on an instance of non-conformity of national law. The report does not disclose the outcomes of the other 60 complaints filed that year.

In practice: The case of the German NetzDG

So does the enforcement process actually work in practice? And how essential is enforcement in the larger scheme of the DSM Legislative juggernaut? Using the above process, in March the German government notified the NetzDG to the Commission. The NetzDG is a specific initiative that states that social media companies must clearly explain their rules and complaint procedures, and follow up on every individual complaint. Social media companies must then delete manifestly illegal content (and all subsequent copies of that infringing content) within 24 hours of the upload and have seven days to process more nuanced cases - with the caveat that companies must report the outcome of their decision back to the individual who initially filed the complaint. Failure to comply with the law comes with a fine of up of up to €50 million.

The law is a reaction to the growing presence of online hate speech and fake news, which has raised concerns at both national and EU level. However, at EU level social networks already operate under a system of notice and action. This is based on the limited liability regime in Articles 12-15 of the e-Commerce Directive, whereby an online intermediary - in this case a social network - is only obliged to remove infringing content that has been uploaded by a user only when they have actual knowledge of the content in question. Article 15 of the e-Commerce Directive then specifically states that Member States will not impose a general obligation to monitor the information nor an obligation “actively to seek facts or circumstances indicating illegal activity” on online intermediaries. The flexibility of this regime has allowed online intermediaries to innovate, without assuming liability for the misuse of their services by their users. When it comes to online innovation, the Commission has stated on a number of occasions that the limited liability regime is crucial to the future of Europe’s DSM Strategy and that it does not wish to reopen the e-Commerce Directive[2]. More fundamentally, when it comes to online hate speech and the prevalence of fake news, the Commission has to balance any EU action with the freedom of expression protected in Article 11 of the EU Charter.

Both of these concerns were reflected in the Commission’s decision to take a non-legislative approach to issue of online hate speech. On 31 May 2016 the Commission signed a Code of Conduct on countering illegal hate speech online with facebook, Microsoft, Twitter and YouTube, whereby the “IT Companies” agree to put in place “clear and effective processes to review notifications regarding illegal hate speech on their services so they can remove or disable access to such content”. The signatories to the Code of Conduct have also agreed to assess the public commitments therein on a regular basis, to ensure its continued efficacy in an ever-changing online ecosystem.

Taking the above into account, Germany’s NetzDG can be read as a complete departure from existing EU law and a developing EU-wide approach to digital innovation. Firstly, the NetzDG is in direct contradiction to Article 15 of the e-Commerce Directive - stating that a Member State cannot impose a general monitoring obligation on an online intermediary. It is difficult to envisage how a social network will ensure that infringing content (and all copies of that infringing content) is deleted within the 24-hour window without implementing some form of general monitoring system. Secondly, the NetzDG raises questions as to its compatibility with EU fundamental rights, as it essentially makes a commercial entity the judge and juror in situations with far-reaching consequences for the freedom of expression. Finally, from a policy standpoint, the Commission has chosen to rely on existing EU legislation and a soft-law approach to these issues until further information on the extent of the problem is at hand. In proposing the Digital Single Market Strategy, the Commission’s intention was to harness the opportunities of digital innovation and create a level playing field for businesses in the EU. In taking such a radical approach to new and unexplored issues, the NetzDG directly contradicts the EU law on which the DSM Strategy must rely to succeed, and moves away from the ethos of a European level playing field by creating more stringent obligations for social networks in Germany compared with the rest of the EU.

Although Germany notified the law to the Commission on 27 March in its draft stages, the law has since been amended by the German cabinet and no longer matches what was originally notified – meaning that while stakeholders, Member States and the EU executive have another two months to voice any concerns, they cannot comment on the draft bill in its current state. The NetzDG is proceeding through the legislative process in Germany without delay, having been approved by the German cabinet on 5 April. Four contributions have since been uploaded in response to the notification on the TRIS platform. It now remains to be seen whether the Commission will acknowledge the legal concerns raised by the NetzDG, let alone fulfil its enforcement obligations in defence of the DSM Strategy. Should the Commission fail to act, the NetzDG could feasibly destroy the dream of an EU level playing field for innovative businesses and shove Europe into a splintered regulatory mess - all before the dream of a DSM is ever realised. 

 

 

[1] Press release, “A Digital Single Market for Europe: Commission sets out 16 initiatives to make it happen” (2015), <http://europa.eu/rapid/press-release_IP-15-4919_en.htm>  

[2] See for example the above press release, “A Digital Single Market for Europe: Commission sets out 16 initiatives to make it happen” (2015), <http://europa.eu/rapid/press-release_IP-15-4919_en.htm