General Members News

Zalando sues EU Commission over online content rules, seen as first challenge

BRUSSELS, June 27 (Reuters) – Zalando (ZALG.DE), Europe’s biggest online fashion retailer, has made the first legal challenge to new EU content rules, suing the European Commission for putting it in the same category as Alphabet’s (GOOGL.O) Google and Meta Platforms (META.O).

Under the Digital Services Act (DSA) which came into force last year, Zalando was labelled a very large online platform (VLOP) because it has more than 45 million users.

EU industry chief Thierry Breton in April labelled 19 online platforms and search engines as VLOPs, including five Alphabet subsidiaries, two Meta units, two Microsoft (MSFT.O) businesses, Twitter, Alibaba’s (9988.HK) AliExpress and Zalando.

Germany’s Zalando on Tuesday contested the labelling methodology and took its case to the Luxembourg-based Court of Justice of the European Union, Europe’s top court.

The company said the Commission had failed to take into account the hybrid nature of its business model and the fact it does not present a systemic risk of disseminating harmful or illegal content from third parties.

“The European Commission misinterpreted our user numbers and failed to acknowledge our mainly retail business model. The number of European visitors who connect with our Partners is far below the DSA’s threshold to be considered as a VLOP,” Zalando CEO Robert Gentz said in a statement.

Zalando said users of its retail business, which accounted for 64% of its gross merchandise volume last year, should not be counted as the DSA doesn’t apply to retail services.

It said the 31 million average monthly active users of two programmes where brands, retailers and brick-and-mortar stores sell directly to its customers falls below the DSA threshold of 45 million users.

Breton said the DSA also tackles the entry of illegal or unsafe products into the EU market, protects children against buying age inappropriate or unsafe goods and removes counterfeit merchandise from e-commerce platforms.

“Complying with the DSA is not a punishment – I encourage all platforms to see it as an opportunity to reinforce their brand value and reputation as a trustworthy site,” he said in a statement.

EU antitrust and tech chief Margrethe Vestager said legal challenges are part of the lawmaking process.

“I think if you want to be a legislator, you also need to accept that someone will challenge legislation,” she told Reuters.

Analysts said U.S. tech giants are likely to follow suit.

The Commission will defend its position in court, said an EU official.

“I am confident in our methodology and the fact that our approach is non-discriminatory and ensures a level playing field across the board,” the official said.

DSA violations can cost companies a fine of up to 6% of their global turnover.

Reporting by Foo Yun Chee Editing by Christina Fincher and David Evans