7 things you need to know about the Digital Services Act (DSA)

The European Commission recently announced that Parliament and Member States have reached a “rapid political agreement” on the proposed Digital Services Act (DSA).

The DSA aims to protect internet users by setting an “unprecedented new normal” for online platforms that will see companies such as Google, Meta (Facebook) and Twitter held accountable for illegal and harmful content.

Additionally, the DSA will require online platforms to share how their algorithms work, put processes in place to quickly remove illegal assets and content, and crack down on users who spread misinformation.

What is the Digital Services Act, when does it come into force and what does it mean for platforms and the people who use them, including digital marketers?

Here’s what you need to know about DSA right now.

1. What is the Digital Services Act?

Currently, the DSA is a bill that the European Commission first introduced on December 15, 2020.

This proposal was accompanied by two associated proposals. In this first announcementthe Commission said:

“The Commission has today proposed an ambitious reform of the digital space, a comprehensive set of new rules for all digital services, including social media, online marketplaces and other online platforms operating in the European Union: the Digital Services Act and the Digital Markets Act.”

The Digital Markets Act is designed to ensure a level playing field between businesses and came into force in March.

According to the European Commission, the overall objective objectives of the DSAon the other hand, are:

  • Better protect consumers and their fundamental rights online.
  • Establish strong transparency and a clear accountability framework for online platforms.
  • Fostering innovation, growth and competitiveness within the single market.

In short, this new legislation will hold search engines, social media networks, and marketplaces accountable for controlling content on their sites.

2. When does the DSA take effect?

At the time of publication, the European Parliament and EU member states agreed to take the proposal forward.

From now on, it is submitted to the examination of two co-legislators.

According to the April 23 press release,

“Once adopted, the DSA will be directly applicable across the EU and will apply fifteen months or from 1 January 2024, whichever is later, after its entry into force.”

Online platforms and search engines classified as “very large” (those reaching 45 million or more users in the EU) will be subject to the terms of the DSA even earlier, four months after their designation.

3. Which online platforms will need to comply?

The legislation defines digital services as “a broad category of online services, ranging from simple websites to internet infrastructure services and online platforms”.

All digital services doing business in the EU are subject to the DSA, regardless of where the business is established – even small and micro businesses (although regulations are scaled to size).

Small and medium-sized digital services account for 90% of affected businesses in the EU and will be exempt from the most costly regulations.

The types of digital services subject to this legislation include:

  • online marketplaces
  • social networks
  • content sharing platforms
  • app stores
  • online travel platforms
  • hosting platforms
  • intermediary services such as internet service providers and domain registrars
  • cloud and web hosting services
  • collaborative economy platforms

The DSA also applies to “gatekeeper” platforms, defined as those with “a systemic role in the internal market that function as bottlenecks between businesses and consumers for important digital services”.

Platforms that reach 45 million or more users in the EU – those classified as “very large” – will also have to assess the risks their systems pose to public interests, fundamental rights, public health and security.

These platforms will need to demonstrate that they use appropriate risk management tools and take steps to protect the integrity of their services and prevent manipulation by malicious actors.

Google currently benefits 92.04% market share of EU search engines and will be subject to the highest level of regulation.

With his 309 million daily active users in Europe, Facebook also qualifies as “very large” for DSA purposes.

Other platforms and social networks that exceed the benchmark of 45 million EU users include:

  • Twitter
  • instagram
  • ICT Tac
  • Apple
  • Spotify
  • Microsoft
  • Amazon

Documents released to Corporate Europe Observatory (CEO) and Global Witness as a result of freedom of information requests to the European Commission and the Swedish government show there was intense lobbying by Big Tech at every stage of the DSA’s journey, from the Commission to the Council and Parliament.

“New self-reported lobbying data shows that over this period, Google, Facebook, Apple, Amazon and Microsoft all increased their EU lobbying spending,” CEO reports.

“Together, Big Tech companies spent over $27 million in just one year. All five companies increased their budgets, but by far the biggest increase was Apple, which nearly doubled its lobbying spending,” they added.

Surveillance advertising, user tracking and behavioral targeting were reportedly among the most controversial issues.

4. Ok, but what does the DSA actually do? Do?

The Commission states that the Digital Services Act:

“…create horizontal rules to ensure accountability, transparency and public oversight of how online platforms shape the information space in which our societies thrive.”

At its core, the DSA is a regulatory framework that will impose rules on how platforms:

  • moderate content,
  • pin up,
  • and use algorithmic processes.

This last point could become extremely inconvenient for major search engines, such as Google and social/advertising platforms like Meta, as they will have to explain to users how their algorithms work.

Under the DSA, digital services face steep fines – up to 6% of their annual revenue – for non-compliance.

5. What should digital service companies do?

Obligations for intermediary services such as IP addresses and domain registrars include:

  • Transparency reports
  • Conditions of service requirements with due regard to fundamental rights
  • Cooperation with national authorities
  • Contact points and, where applicable, legal representative

Hosting services are required to follow the above, as well as “notice and action and obligation to provide information to users” and report criminal offenses to authorities.

The regulation becomes more onerous for online platforms, which are required to comply with the above obligations and also include:

  • Complaints and redress mechanism and alternative dispute resolution
  • Trusted Flaggers
  • Measures against abusive reviews and counter-reviews
  • Transparency of recommender systems
  • Transparency vis-à-vis users of online advertising

In addition, regulations prohibit online platforms from targeting advertisements to children and prohibit targeting based on particular user characteristics.

There are special obligations for marketplaces, including third-party vendor credential verification and compliance by design. They are subject to random checks.

Very large online platforms – Meta, Google, et al. – must comply with all of the above and are also responsible for:

  • Risk management obligations and crisis response
  • External and independent audit, internal compliance function and public accountability
  • User’s choice not to have recommendations based on profiling
  • Sharing data with authorities and researchers
  • Codes of Conduct
  • Cooperation in response to crises

6. What about algorithms?

One of the impacts of increased public oversight of online platforms that affect more than 10% of the EU population (around 45 million people) is:

“…transparency measures for online platforms on a variety of issues, including the algorithms used for recommendations.

Another section notes that the DSA will ensure that researchers have access to key data from the largest search engines to inform their understanding of evolving online risks.

According to the official documentation, countries are the first line of defense in the DSA, with implementation falling to the Commission.

7. What does this mean for online advertising?

Access control of large online platforms has become problematic as it hinders competition and disadvantages SMEs and start-ups, reports the Commission.

Small businesses and organizations depend on large platforms for moderating communications and ranking content.

Since access control platforms such as Google and Facebook hold the keys to accessing consumer data generated by these activities, SMBs and startups find themselves in direct competition with gatekeepers who use their data to serve their own interests (such as reselling targeting to these same SMEs).

The DSA will partially level the playing field by making the inner workings of advertising and ranking algorithms more transparent.

Meanwhile, its sister legislation, the Digital Markets Act, will require access control platforms to give small businesses access to certain data.

The Commission promises that these two acts will ensure a safer and more responsible online environment for all.

Featured Image: Shutterstock/Vector Plus

A Europe fit for the digital age: new online rules for platforms, European Commission
Big Tech’s last-minute attempt to tame EU tech rules, CorporateEurope.org
The Digital Services Act: ensuring a safe and responsible online environmentEuropean Commission

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