Amazon appeals its EU designation as a VLOP
What are the implications of Amazon’s recent legal challenge against its designation as a “Very Large Online Platform” (VLOP) by the European Commission under the new Digital Services Act (DSA)?
The question
What are the implications of Amazon’s recent legal challenge against its designation as a “Very Large Online Platform” (VLOP) by the European Commission under the new Digital Services Act (DSA)?
The key takeaway
Following Amazon’s challenge regarding its designation, the EU’s General Court is set to issue a decision as to whether Amazon is a VLOP and to what extent it is required to comply with certain onerous obligations under the DSA. This decision will be of key interest to other businesses designated as VLOPs currently and in the future.
The background
The EU has recently passed the Digital Markets Act (DMA) and the DSA which together create a single set of rules applicable to digital services across the EU. See our ongoing coverage on the DSA and DMA in previous editions of Snapshots.
The DSA imposes far-reaching responsibilities on “very large online platforms”, which it classifies as those with more than 45m active users per month. 19 platforms have so far been designated as VLOPs, including the Apple app store, Booking.com and Wikipedia. Rules that apply specifically to VLOPs include auditing, monitoring and data sharing with authorities to reduce systemic risk in the EU.
The development
On 5 July 2023 Amazon filed an appeal at the EU’s General Court against its ruling as a VLOP. In its legal challenge, Amazon said that the VLOP rules, aimed at safer content and dissemination of information, are more appropriate for social media and search engines than for retailers. Amazon also asserts that it has been unfairly singled out, highlighting the fact that it is not the largest online retailer in any EU state but that none of its rivals have been designated as VLOPs.
Amazon’s challenge follows a similar challenge by German online retailer Zalando, which is also pursuing legal action against its classification as a VLOP. Like Amazon, Zalando pointed out that the nature of its retail business means it does not pose a risk in terms of spreading harmful or illegal content from third parties. Zalando also alleged inconsistencies with the methodology used to calculate user numbers, which it argues have been significantly overestimated.
Most recently, the General Court agreed to suspend the obligation on Amazon to provide information on ads in a repository, which would otherwise have gone into effect on 25 August 2023. Amazon is still waiting for a final decision from the court as to whether it will remain designated as a VLOP.
Why is this important?
It remains to be seen whether Amazon’s push-back on its classification as a VLOP will be successful. Or alternatively if the court adopts a more flexible approach to applying the DSA with certain obligations being waived but others upheld. If the classification is successfully resisted entirely, Amazon will still be subject to the wider DSA rules. This (and Zalando’s) appeal will be an interesting test of the new rules for businesses that provide digital services.
Any practical tips?
All providers of online platforms and search engines have already been subject to certain obligations (eg reporting number of active users) since the DSA came into force in November 2022. VLOPs and Very Large Online Search Engines (VLOSEs) will separately need to comply with their own specific obligations within four months of their designation by the European Commission. The remaining provisions in the DSA will then come into force in February 2024, by which time all businesses within scope of the DSA must implement necessary measures to meet the requirements applying to their business. Any business that considers it falls within the DSA’s reach should prepare for compliance by this date. Separately, designated VLOPs and VLOSEs might well wish to track Amazon’s appeal through the courts, as any final decision may be helpful in clarifying the application of the DSA to their business operations.
Autumn 2023