Zalando’s legal case to spark EU Commission online platform headache

German fashion website Zalando is the first online platform to challenge its designation under the EU’s platform rules, the Digital Services Act (DSA), but a hearing in the General Court in Luxembourg taking place on Thursday could raise questions on how the European Commission calculates user numbers. 

In August 2023, the DSA started applying to the first batch of 19 platforms that are considered a Very Large Online Platform (VLOP). The Commission designated the likes of Facebook, TikTok and LinkedIn as passing the threshold of 45 million active users per month.

Zalando challenged that decision in July 2023, however, claiming that it differed from the others. The platform, founded in 2008 in Berlin, contests “the unequal treatment resulting from the absence of a clear and consistent methodology to assess whether a company is a VLOP,” according to a statement published at the time. 

Under the DSA, the Commission can adopt secondary legislation through a delegated act which would specify the methodology for calculating the number of average monthly active recipients, but so far it hasn't done this.

This means that the numbers can be different from company to company. In the case of Zalando, the company provided the Commission with two different types of users, depending on the business model. 

Hybrid business model

Zalando said in its DSA transparency report that it operates a “hybrid business model” with a retail business and a partner business. It claims its retail business, which represents 61% of its business, where the content online is Zalando’s own content, does not fall within the scope of the DSA. Its actual user numbers are therefore a lot lower, the report claimed.   

The Commission said in its designation decision that it's impossible to know whether a particular recipient of Zalando is “exposed to products stemming from Zalando SE’s proprietary retail business or from third-party traders using its intermediation service, as both types of products are indistinctly displayed on Zalando’s online interface.”

Zalando also claims that while the DSA was introduced to prevent ‘systemic risk’ arising from disseminating harmful or illegal content from third parties, this content doesn't apply to its platform.

Its most recent transparency report – which applies to Zalando's content moderation efforts from April 2024 to September 2024 – showed that it received 731 notices regarding content. “Upon further screening, only 111 of these notices required the removal of content from our platform. We received 0 orders from authorities,” the report said.

If the court sides with Zalando, this could mean a breakthrough for other platforms with similar business models, as well as those that also appealed their designation including e-commerce player Amazon, and porn websites Pornhub, Stripchat and Xvideos. 

A decision in the Zalando case is expected at a later time.

Since the entry into force of the DSA the Commission has designated six other VLOPs, and launched several investigations into Meta’s Facebook and Instagram, TikTok, X, Temu and AliExpress on suspicion of a possible breach of the rules. None of these probes have been wrapped up yet.