Firms face 2% turnover fines in revamped NIS Directive as EC lays out new digital regs

The EC has proposed a range of new rules to govern the digital economy that would carry huge fines for big tech firms under a new Digital Markets Act, and penalties up to 2% of global turnover for those in other sectors through a revamped NIS Directive. The Digital Markets Act proposes tougher sanctions for social media sites that publish hate speech and disinformation. But the major focus will be on competition and curbing the swagger of large internet giants such as Google, Facebook and Apple. It is aimed at digital “gatekeepers” to the EU’s single market. It will therefore only apply to core platform services that are most prone to “unfair practices”, such as search engines, social networks or online intermediation services. The directive would prohibit a number of “clearly unfair” practices, such as blocking users from uninstalling any pre-installed software or apps. The rules would require gatekeeper firms to proactively put in place measures to mitigate such unfair practices. Sanctions for non-compliance could include fines of up to 10% of worldwide turnover. Repeat offenders could be forced to change their structure, divest certain businesses or even be banned from operating. The EC has also proposed a Digital Services Act. It would apply to all digital services that connect consumers to goods, services, or content. It includes new procedures for faster removal of illegal content and comprehensive protection for users' fundamental online rights. The Digital Services Act would force “very large” online platforms to take risk-based action to prevent their systems being abused. It would introduce wide-ranging transparency measures, including moves to tackle online advertising and the use of algorithms to recommend content. In addition, the rules would deliver new powers to scrutinise how platforms work, and an “innovative’ cooperation process among public authorities to ensure effective enforcement across the single market. Under the proposals, online platforms that reach more than 10% of the EU’s population, or 45 million users, will be subject to requirements to control their own risk. They will also face a new oversight structure. This new accountability framework will comprise a board of national Digital Services Coordinators, with special powers for the Commission to supervise and sanction them directly. The European Parliament and the member states will now discuss the proposals. If adopted, the final text will be directly applicable across the European Union. Margrethe Vestager, executive vice-president for a Europe fit for the digital age, said: “The two proposals serve one purpose: to make sure that we, as users, have access to a wide choice of safe products and services online; and that businesses operating in Europe can freely and fairly compete online just as they do offline. This is one world. We should be able to do our shopping in a safe manner and trust the news we read. Because what is illegal offline is equally illegal online.” Commissioner for internal market Thierry Breton added: “Many online platforms have come to play a central role in the lives of our citizens and businesses, and even our society and democracy at large. With today's proposals, we are organising our digital space for the next decades. With harmonised rules, ex anteobligations, better oversight, speedy enforcement and deterrent sanctions, we will ensure that anyone offering and using digital services in Europe benefits from security, trust, innovation and business opportunities.” The EC also announced its new Cybersecurity Strategy this week. It includes a proposed revision to the Directive on Security of Network and Information Systems (NIS). This would usher in a fine of up to 2% of worldwide annual turnover for companies that fall under its remit and break its rules. The new directive is set to expand the scope of the current NIS directive by adding new sectors based on how critical they are to the economy and society. It would also introduce a clear size cap so that all medium and large companies in selected sectors will be covered. At the same time, the proposal leaves some flexibility for member states to identify smaller entities with a high security-risk profile. The new rules would eliminate the distinction between operators of essential services and digital service providers. Entities would instead be classified based on their importance. The proposal strengthens security requirements by imposing a risk management approach and providing a minimum list of basic security elements that have to be applied. They would introduce more precise provisions on the process for incident reporting, content of these reports and timelines. Furthermore, the Commission would require companies to address cybersecurity risks to supply chains and supplier relationships. The proposal introduces more stringent supervisory measures for national authorities and stricter enforcement requirements, and aims to harmonise the sanctions regimes across member states. The EC has also put forward a new Critical Entities Resilience Directive as part of its cybersecurity strategy. It expands both the “scope and depth” of the 2008 European Critical Infrastructure Directive. Ten sectors are now covered: energy, transport, banking, financial market infrastructures, health, drinking water, waste water, digital infrastructure, public administration and space. Under the proposed directive, member states would each adopt a national to ensure the resilience of critical entities and carry out regular risk assessments. The European Parliament and the Council will now examine and adopt the proposed NIS 2 Directive and the Critical Entities Resilience Directive. Once the proposals are agreed and adopted, member states will have 18 months to transpose them into national law. “Europe is committed to the digital transformation of our society and economy, so we need to support it with unprecedented levels of investment. The digital transformation is accelerating but can only succeed if people and businesses can trust that the connected products and services on which they rely are secure,” said Ms Vestager.

Firms face 2% turnover fines in revamped NIS Directive as EC lays out new digital regs

Want to read this article?

Read Next

Tax changes to insurance premiums proposed by UN

European bosses say half of supply chain will not comply with CSDDD

India insurers free to change wording in corporate policies

Travelers sees rate hikes continue; Q1 profit up 15%

US D&O rates stabilise, retention rates fall: Report

Tax changes to insurance premiums proposed by UN

European bosses say half of supply chain will not comply with CSDDD

India insurers free to change wording in corporate policies

Travelers sees rate hikes continue; Q1 profit up 15%

US D&O rates stabilise, retention rates fall: Report

Want to read this article?

Read Next

Tax changes to insurance premiums proposed by UN

European bosses say half of supply chain will not comply with CSDDD

India insurers free to change wording in corporate policies

Travelers sees rate hikes continue; Q1 profit up 15%

US D&O rates stabilise, retention rates fall: Report

Related Articles