The Digital Services Act: A Game Changer for Digital Companies in the EU

The European Union’s landmark legislation, the Digital Services Act (DSA), has set the stage for a significant shift in the digital landscape. This comprehensive law aims to hold digital companies accountable for illegal and problematic content on their platforms. While larger platforms have already been subject to its regulations since August, the DSA will now come into full effect for all companies, with some exemptions for smaller firms. In this article, we will closely analyze the key elements of the DSA and its potential impact on the digital industry.

A Crackdown on Illegal Content

One of the core obligations of the DSA is that all platforms must swiftly remove or disable access to any illegal content as soon as they become aware of it. This includes content that poses a threat to people’s lives or overall safety. To ensure transparency and accountability, companies must publish an annual report detailing their actions regarding content moderation, including response times after receiving notifications of illegal content. Dispute resolution processes should also be reported to give users insight into the decision-making procedures.

User Suspension and Identity Verification

The DSA introduces measures to tackle the issue of recurring illegal content sharing by users. Platforms are required to suspend users who frequently engage in activities such as hate speech or spreading fake ads. Additionally, online shopping sites must verify the identities of their users and block repeat fraudsters.

The DSA imposes stricter regulations on targeted advertising, particularly concerning vulnerable groups such as children. Advertising aimed at individuals aged 17 and under is prohibited under this law. Furthermore, the EU emphasizes the importance of transparency in data usage, banning targeted advertising based on sensitive data like ethnicity, religion, or sexual orientation.

Unlike large corporations, small companies are not subjected to the DSA’s more burdensome obligations. Small companies are defined as those with fewer than 50 staff members and an annual turnover below 10 million euros. While this distinction aims to alleviate the compliance burden on smaller businesses, it also raises questions about potential disparities and the level playing field within the digital industry.

The EU has listed 22 platforms as “very large,” including major players such as Apple, Amazon, Facebook, Google, Instagram, Microsoft, Snapchat, TikTok, and Zalando. Additionally, three major adult websites have been included in this category. Several platforms, including Amazon and Zalando, have already embarked on legal challenges to contest their designations. Challenges on the fees for enforcement have been initiated by Meta and TikTok.

Under the DSA, “very large” platforms must conduct risk assessments relating to the spread of illegal content and potential privacy infringements. They are also required to establish internal structures to mitigate these risks effectively, including enhancing content moderation capabilities. Regulators will have access to platform data to evaluate compliance, and this data will also be available to approved researchers. Annual audits conducted by independent organizations will ensure compliance, with the costs borne by the platform.

The DSA aims to provide users with a channel to voice their concerns and complaints. Individuals will be able to lodge complaints with their national authority, claiming violations of the DSA by digital platforms. Online shopping sites may also be held liable for damages caused by non-compliant or dangerous products purchased by users. Violations of the DSA can result in fines of up to six percent of a company’s global turnover, with the EU having the authority to ban persistently non-compliant platforms from operating in Europe. “Very large” platforms can be subject to sanctions directly from the European Commission, while smaller companies fall under the jurisdiction of the competent authorities of member states.

To ensure effective enforcement, the DSA mandates that member states assign competent authorities responsible for investigating and sanctioning violations by smaller companies. These authorities must collaborate with each other and the European Commission to enforce the regulation, starting from February. However, when a digital platform provider operates in one member state, that country is responsible for the enforcement, except for “very large” platforms that fall under the European Commission’s supervision.

The Digital Services Act represents a milestone in the EU’s efforts to regulate digital platforms and protect users’ interests. By imposing stricter obligations, promoting transparency, and introducing significant penalties for non-compliance, the DSA aims to reshape the digital landscape and enhance user trust. However, challenges lie ahead, particularly in ensuring consistent implementation and leveling the playing field among different-sized companies. The true impact of the DSA will become clearer in the coming months as companies strive to adapt and comply with the new regulations.