Online retailers within the European Union receive guidelines on how to regulate their platform operations
The European Union's General Court has upheld the classification of online fashion retailer Zalando as a "Very Large Online Platform" (VLOP) under the Digital Services Act (DSA). This decision comes after Zalando challenged the General Court's approach in calculating its active recipients, intending to appeal.
The DSA defines an online platform as a service that allows users to access and purchase products from multiple providers on the same interface, counting all users active on the platform, including those viewing products, as "active users." In the Zalando case, the court upheld the classification because Zalando's platform integrates both third-party sellers and its own retail offerings on the same interface.
The focus of the case is on Zalando's partner program, not its direct retail service. Zalando argued that it only disseminates information from third-party sellers in its partner program, and part of its service should fall outside the scope of how an online platform is defined under the DSA. However, the court sided with the Commission's approach, stating that being exposed to information provided by third-party sellers is sufficient to qualify as an active recipient.
The General Court assessed the wording in the EU E-Commerce Directive from 2000 and EU case law in the context of Zalando's case. The court also clarified that a provider exercising some control over what third-party content is uploaded to its platform can still be considered an intermediary under the DSA.
It's important to note that sales figures are deemed to have no relevance in the calculation process of active recipients. An 'active recipient' of an online platform is defined as a person who has been engaged with the platform by being exposed to the information hosted and disseminated.
VLOPs are subject to the strictest requirements under the DSA, including an obligation to identify and address systemic risks associated with their services. Zalando argues that its highly curated business model does not present a 'systemic risk' of disseminating harmful or illegal content from third parties, as presumed for VLOPs.
Pinsent Masons has published a guide to help businesses determine whether their services fall into any of the categories of in-scope services under the DSA. The guide offers insights into the nuances of the DSA's definition of online platforms and the implications for businesses operating in the EU.
In 2023, the European Commission designated Zalando as a VLOP for the purposes of the DSA. Despite the court's ruling, Zalando has indicated its intention to appeal, challenging the General Court's approach in calculating its active recipients.
As the EU's General Court continues to consider how 'online platforms' are defined under the DSA, this case serves as a significant precedent for future rulings and the regulatory landscape of digital services in the EU.
