In an era dominated by technology and digital advancements, the European Union has taken a significant step forward in shaping the future of online services with the introduction of the EU Digital Services Act (the “DSA“) and the Digital Markets Act (the “DMA“). The landmark digital rules, adopted on 5 July 2022, from a crucial part of the new EU legal framework for the regulation of digital services and will create a safer, fairer and more transparent online environment.
The introduction of the DSA, along with the Digital Markets Act (the “DMA“), aim to establish a level-playing field between online platforms and their users, creating a safe and trusted environment which ensures fair competition and safeguarding the interests of consumers and businesses alike.
DMA: Regulating the best and the biggest
The purpose of the DMA is to boost growth, innovation and competitiveness in the market by ensuring a level playing field for all digital companies, regardless of their size. The goal is to lay down clear rules for big platforms – a list of “dos” and “don’ts” – which aim to stop parties from imposing unfair conditions on businesses and consumers. Such practices may include (i) ranking services and products offered by the gatekeeper itself higher than similar services or products offered by third parties on the gatekeeper’s platform or (ii) not giving users the possibility of uninstalling any preinstalled software or app.
DSA: Promoting a safer digital space
The Digital Services Act applies to any service provided for remuneration, from a distance, by electronic means and at the individual request of a recipient of services (‘information society service’), that constitutes a service offered to recipients that have their place of establishment or are located in the EU, irrespective of where the provider of the service is located. This gives a clear extra-territorial effect, as it would include any inline intermediary established outside the EU that offers its services in the EU.
The Digital Services Act aims to expressly address the issue of dominant online platforms, known as gatekeepers, and establish a set of obligations for them to follow. These obligations will help promote fairness and contestability in the digital market, preventing any abuse of market power by these gatekeepers, whilst simultaneously fostering and promoting safer online environments. Taking into account the difference between such providers, the DSA provides a tiered regulatory compliance system, imposing separate obligations on intermediary service providers, hosting providers, online platforms etc.
The DSA shall give people more control over what they see online, as users and consumers will have better information about why specific content is showing up on their screens or why specific recommendations are reaching them. The DSA in this sense, introduces transparency and accountability measures, requiring online platforms to provide clear information about their terms and conditions, content moderation practices, and advertising algorithms.
Under the new set of rules imposed by the DSA, online platforms must implement ways to prevent and remove posts containing illegal goods, services, or content whilst simultaneously giving users the means to report this type of content. Moreover, the DSA sets out rules to ensure that e-commerce is safer for all users and that sellers follow the highest standards set in the EU, while consumers will have better information on the real sellers of products that they buy online.
The DSA expressly prohibits targeted advertising based on a person’s ethnicity, religion, gender or sexual preferences, or political beliefs and puts restrictions on targeting ads to children. It also requires online platforms to provide more transparency on how their algorithms work, which would require the said platforms to review and update their procedures and terms and conditions as well as their contractual relationships vis-à-vis the users.
The DSA carves out additional rules for what it considers “very large online platforms,” forcing them to give users the right to opt out of recommendation systems and profiling, share key data with researchers and authorities, cooperate with crisis response requirements, and perform external and independent auditing.
By introducing the EU Digital Services Act, the European Commission is taking a proactive approach to regulate the digital market and ensure a fair and competitive environment for all players involved. The introduction of the Digital Services Act is part of the EU’s broader efforts to regulate platform businesses and address the power imbalances that exist in the digital realm.
Enforcing the new rules
The Digital Services Act came into force on 16 November 2022 and will be directly applicable across the EU by 17 February 2024. However, very large platforms and very large online search engines will have to comply with their obligations under the Digital Services Act earlier – maximum four months after the European Commission designated them. The Commission designated the first set of very large platforms on 25 April 2023, which include, amongst others, Alibaba Ali Express, Amazon Store, Apple App Store, Facebook, Instagram, TikTok, Linkedin and Youtube.
The Digital Markets Act entered into force on 1 November 2022 and its rules started to apply on 2 May 2023. The European Commission has designated six gatekeepers which provide a total of 22 core platform services on 6 September 2023, including Alphabet, Amazon, Apple, ByteDance, Meta, Microsoft. The six gatekeepers will have six months to ensure full compliance with the DMA obligations for each of their designated core platform services (by March 2024).
Although the attention now is drawn towards the major players in the industry, it is important for all providers and online platforms to review their operations and structures to ensure that they take all necessary actions to comply with their potential new obligations.
The DSA imposes the obligation on all Member States to designate one or more competent authorities that will undertake the supervision of providers of intermediary services and the due enforcement of the DSA. Users would be allowed to lodge a complaint against providers and/or seek, in accordance with Union and national law, compensation from providers in respect of any damage(s) or loss suffered due to an infringement by the provider of its obligations under the DSA.
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