What is the Digital Services Act?
The Digital Services Act (DSA) is one of two regulations proposed by the European Commission in 2020 to provide a fairer, safer, and more open playing field in digital spaces across the EU.
It sets out new standards for online accountability when it comes to illegal and harmful content. It also imposes rules around how platforms moderate content, advertise, and use algorithmic processes. In essence, it’s making the internal processes of online platforms more transparent while allowing for more informed business decisions.
The DSA is only one piece of the EU’s digital strategy puzzle known as “A Europe fit for the Digital Age.” In addition, this strategy includes a series of legislations under the Digital Marketing Act and the Data Governance Act.
Together, they provide clearer and more standardized rules relating to consumer protection in the online environment and regulate how digital businesses comply with these rules. They also provide enhanced opportunities for digital businesses on a more level playing field.
The DSA comes in the wake of increased cyberbullying, hate speech, illegal content, and other harms committed online. It places responsibility firmly on digital service providers, big and small, to moderate content across the EU market. Companies must consider content removal and be proactive and transparent in moderation.
What Does the DSA Regulate?
The DSA regulates how platforms moderate content, how they remove illegal content – such as counterfeited and hazardous products – quickly, and how they crack down on users who spread misinformation. It also regulates how platforms advertise and how they use algorithms for recommendation systems.
The latter may have considerable implications for so-called “gatekeeper” companies. Gatekeepers are large online platforms that act as a major gateway between businesses and consumers. Among the platforms that fall into the gatekeeper category are Google, Amazon, Facebook, Apple and Microsoft.
Under the DSA, they will be forced to show how their algorithms work in the EU.
Who Does the DSA Impact?
The DSA defines digital services as a large category of online services, from simple websites to internet infrastructure services and online platforms. This means the legislation applies to all platforms operating within the EU, big and small, and regardless of where the business was established.
Some of the types of digital services subject to the DSA legislation include:
- Online marketplaces
- Social networks
- Content-sharing platforms
- App stores
- Online travel platforms
- Accommodation platforms
- Intermediary services, such as internet providers and domain registrars
- Cloud and web hosting services
- Collaborative economy platforms
How Does the DSA Impact Small Companies?
The legislation applies to all companies operating in the EU, big and small. It’s worth noting, however, that the level of obligations and type of enforcement is tailored to the role, size and impact of the online service provider on the online ecosystem.
According to the European Commission, there are more than 10,000 platforms operating in the EU, and 90% of these are small and medium enterprises. The commission recognizes that navigating the new rules of the DSA, along with the 27 different sets of national rules, can not only be an intimidating task for small businesses but also cost prohibitive.
This is why the DSA aims to ensure small online platforms are not disproportionately affected, but that they remain accountable.
What Do Companies Need to Consider When Preparing for the DSA?
There are a number of factors to keep in mind when preparing for DSA regulations to come into effect, including:
The DSA states once a platform has been notified by “trusted flaggers” that illegal content exists, it must remove this content in a timely manner. There’s no specific timeline for content removal, but the DSA stipulates companies need to be prepared for quick removal. This means platforms need to have the right processes in place to comply.
In addition, platforms must inform consumers that content is being removed, while providing precise details on why it is being removed. Consumers can contest the removal of content via dispute resolution mechanisms in their own country.
As long as swift action is taken to remove content highlighted by trusted flaggers – as well as any illegal content platforms detect themselves – the DSA states platforms will not be liable for any unlawful behavior or illegal content posted by users.
This is to remove disincentives for companies to take voluntary measures to protect their users from illegal content, goods or services. It also aims to encourage platforms to be proactive when notified of flagged content, and to invest in robust content moderation practices.
Transparency and due diligence
Increased transparency is a theme that runs throughout the DSA. This relates to how to report illegal content, why content is being removed, how algorithms are used in recommending content, how advertising is targeted and much more.
When it comes to due diligence, providers of hosting services need to be aware of the requirement to report certain illegal behaviors. Online marketplaces have to do the same regarding the sale of illegal goods.
How Will the DSA Be Enforced?
The DSA applies across every member state of the EU. Enforcement is split between national regulators and the European Commission. The commission is primarily involved in enforcing obligations for large platforms and gatekeepers.
Fines for not adhering to DSA regulations reach up to 6% of the global turnover of a service provider.
When Does the DSA Come into Effect?
The DSA entered into force on November 16, 2022. The legislation applies fully to all relevant entities 15 months after entering into force: from February 17, 2024.
There are additional deadlines prior to this, however.
For example, online platforms have been asked to report the number of end users they have by February 17, 2023. The European Commission will use this information to determine which ones should be designated very large online platforms / search engines.
DSA obligations for very large online platforms and very large online search engines will apply four months after they have formally received this designation from the commission.
The Final Word on the DSA
First: it’s never too early to start preparing for the DSA.
Second: don’t despair!
The adoption of the DSA does not mean you have to go back to the drawing board – it’s designed to work with other in-place regulations around the digital space. Any previous efforts platforms have made to adjust to current data protection regulations or cybersecurity standards will not be in vain.