Zalando and the Digital Services Act

Navigating the internet can be tricky. As online users, we face many challenges: from exposure to misinformation and harmful content to illegal or potentially dangerous products. This is why the European Commission decided to provide a common set of rules for intermediaries – meaning platforms hosting content from third parties, like posts on social media or product information from sellers on marketplaces. The European Commission aims to foster a safe and trustworthy online environment for consumers in the European Union. The bill is called the Digital Services Act (DSA).

At Zalando, the EU’s goal is our goal too. And because we share the same values, we are and always have been active promoters of the DSA. We offer high-quality products from well-established brand partners so that our customers can enjoy a convenient and safe shopping experience at all times. 

The DSA also introduces a new category of companies called Very Large Online Platforms (VLOPs), for which specific rules apply. The DSA defines VLOPs as platforms that have at least 45 million "active recipients of the service", and it’s assumed that due to this extended audience, these platforms pose particular risks in the dissemination of illegal content and societal harms, including risks to fundamental rights to human dignity, protection of minors etc. To date, 19 platforms have been designated VLOPs, including Zalando; a decision with which we disagree. Hence, in June 2023, Zalando filed a legal claim against its designation as a VLOP. 

Looking at how the DSA considers VLOPs, we believe that Zalando simply doesn’t fit into this category. Let’s dive into the two main elements of what characterizes a VLOP: risk and reach.

Does Zalando pose a systemic risk in the dissemination of illegal or harmful content to EU citizens? 

The answer is simply no. Let’s look at how Zalando operates. As previously mentioned, we offer high-quality products from well-established brand partners. This means that not anyone can sell on Zalando: we have strict protocols and policies in place that all brand partners have to comply with and adhere to. Bottom line: at Zalando, nothing goes online unchecked. In fact, customers only see content produced or screened by Zalando before it’s uploaded by us. 

According to already existing legislation and previous EU case law, this means that Zalando already bears accountability and responsibility. This clearly contradicts the arguments used by the European Commission, since it considers as third-party information any information “provided by” a third party (e.g. product descriptions, photos) regardless of any prior review or who uploads the information. This is a paradox. 

Thanks to our highly curated business model, we have close to zero risk of illegal content, and we can prove it. The DSA requires all VLOPs to publish their content moderation efforts in a so-called Transparency Report. As stated in Zalando’s first report, between August 25, 2023, and September 30, 2023, we reported 414 notices, which are reports made by users regarding content that relates to products sold by our partners. This represents a mere 0.023% of our assortment of 1.8 million items. Remarkably, upon further screening, only two of the 414 notices required the removal of content from our platform. These numbers heavily contrast with the ones reported by other VLOPs, where thousands or even millions of pieces of content had to be removed. 

Does Zalando reach the 45 million threshold of ‘active recipients of a service’?

The DSA does not provide a clear calculation methodology to properly and reliably count the number of ‘active recipients of a service’, which is necessary to consistently determine whether a platform exceeds the threshold to be considered a VLOP.  Therefore, platforms have reported numbers based on different calculation methodologies: some reported visitors, others logged-in customers, etc. Since there is no harmonized guideline on how to calculate this threshold, how can the European Commission guarantee the principle of ‘equal treatment’ towards the services in question?

Even if we overlook this significant issue, Zalando does not reach the 45M threshold. We run a hybrid business which consists of a retail business, where Zalando sells its own products to our customers, and a partner business, where partners sell their products to customers via Zalando. And here’s the catch: the DSA doesn’t apply to our retail business, so this part of our business - which represents more than 60% of our sales - shouldn’t have been taken into account. But what about the partner business? On average per month, 27M customers are directly exposed to partners’ products, which is well below the 45M threshold established by the DSA. 

The European Commission argues that since first and third-party content cannot be differentiated well enough on Zalando by its customers, the DSA should apply to our entire business. But if that is true, previous European Court of Justice (ECJ) case law and the already existing legislation must apply, meaning that all content on Zalando should be considered first-party content anyway. And that would mean that the DSA should not apply to Zalando in the first place.

We’re proud to be a European digital company, founded and headquartered in Europe, embracing European values and promoting technological progress and innovations. But to us, being a responsible player also means pointing out where a regulatory framework has been applied incorrectly. This is not only about Zalando. We truly fear that this puts the level playing field at risk, which is so very important to many other European companies. Fair competition is of the essence to create a strong, thriving and competitive European tech ecosystem.