The European market currently follows a “notice and takedown” copyright system, in much the same way that the US does. In the US, the Digital Millennium Copyright Act gives platforms and content providers a certain amount of immunity (known as “safe harbor”) for hosting content that might infringe on copyright, provided they act immediately to remove it if infringement is brought to their attention. The proposed EU law would replace notice and takedown with a requirement to remove any infringement before it ever goes online.
One risk of this approach is that service providers will remove content that doesn’t infringe because they are afraid of contravening the law. So, for example, they might block a “meme” that uses a copyrighted image to make fun of something, even though that kind of use is typically allowed under “fair use” rules (known as “fair dealing” in the UK and a number of other countries). The signatories of the letter also argue that the cost of this new filtering approach will hit smaller internet services harder, since larger platforms like Google and Facebook will have more than enough resources to comply.
The filtering/censorship risk isn’t the only downside of the proposed law. It also includes a “link tax,” which would give copyright holders to ability to charge online platforms or providers for using even short snippets of text from a work such as a news article. Germany and several other countries have been working on variations of this idea as a way of charging Google and Facebook for taking their content, but critics of the law say its real impact could be a crippling of the internet’s inherent power to link to original source material.
It's been interesting to see how precipitously traffic from EU nations has dropped to this bog post just in the last few weeks.