Let's talk about DIGITAL SERVICE ACT

…and how it will change the behavior of those who provide digital services

The European Council adopted, in September 2022, the final form of the Digital Services Act ("DSA") and the Digital Markets Act ("DMA") as a result of a previous agreement with the European Parliament.

As set forth by art. 1 of the DSA proposal, the Regulation introduces a horizontal framework applicable to all intermediary services.

What is Digital Service Act (“DSA”)? 

If until recently, the E-commerce Directive dictated the rules for the provision of digital services in the EU, lately the needs of users, but also SMEs, start-ups, and small platforms, have changed considerably.

This is how DSA appeared, which, together with DMA, focuses on safety,  fundamental rights, and fair competition in digital environments. 

If you are wondering if the DSA also applies to companies registered outside the EU, the answer is YES. The new regulations are intended for the EU single market, including those companies that are established outside the European space but offer their services in the single market.

The extended protection of European citizens - users.

Since online platforms are already an integral part of the daily life of Europeans, the new regulations are intended to create a safer online experience for them, in which they can express themselves freely, communicate and shop online through reduced exposure to illegal goods, dangerous activities, and protection of fundamental rights.

DSA will regulate all types of advertising.

As stated in Article 24 of the DSA proposal, ‘’online platforms that display advertising on their online interfaces shall ensure that the recipients of the service can identify, for each specific advertisement displayed to each individual recipient, in a clear and unambiguous manner and in real time:

(a)that the information displayed is an advertisement;

(b)the natural or legal person on whose behalf the advertisement is displayed;

(c)meaningful information about the main parameters used to determine the recipient to whom the advertisement is displayed.’’

From digital marketing to issue-based advertising and political ads, the DSA will complement existing rules such as the General Data Protection Regulation.

Two new restrictions regarding targeted advertising on online platforms:

• Targeted advertising of minors based on profiling will be prohibited;

• Profiling targeting advertising using special categories of personal data, such as sexual or religious orientation, will not be allowed.

Users will be informed if and why ads target them and who paid for them.

The stakes are also higher for large platforms, and the rules are even stricter for them. Among other things, they will provide access to the ad repositories, allowing researchers, civil society, and authorities to inspect how the ads were displayed and targeted. They will evaluate if and how they are manipulated in their advertising systems and will ensure that they do not contribute to social risks, taking measures to mitigate them.

The rules are complemented by measures in the ("DMA") Digital Markets Act, which address economic concerns related to gatekeepers' advertising models.

Dark patterns are now strictly prohibited.

Under the new regulations, online platform providers will not design, organize or operate their online interfaces in any way that deceives, manipulates, or in any other way affects users' decisions.

The focus of DSA will be on the tech giants and, in general, on extensive online platforms that reach at least 45 million European users. However, specific due diligence obligations also apply to hosting services and other online platforms such as social networks, content sharing platforms, app stores, online marketplaces, and online travel and accommodation platforms.

How does DSA affect SMEs and freelancers who provide digital services?

A beneficial impact for SMEs, start-ups, and scale-ups.

The new regulations imposed by the DSA will reduce the need to comply with 27 different regimes on the single market.

This is beneficial for SMEs, start-ups, and scale-ups, which will be able to become competitors with much more significant players in the single market. Moreover, these small businesses will be exempt from many of the burdensome rules of the DSA.

What should SMEs and freelancers who provide digital services know?

First, they will ensure that they have a fast and efficient procedure to eliminate illegal online content, including products and services, as stated in Article 8 of the DSA proposal. Users will have a wide range to report this type of content. Likewise, digital service providers will be highly attentive to fundamental rights that must be protected online through stronger guarantees that ensure a non-arbitrary and non-discriminatory environment for processing notifications and freedom of expression and data protection.

Shaping more responsible online markets is another goal targeted by DSA. Online platforms will ensure that consumers purchase safe products and services, that information is reliable, and that efforts to prevent the appearance of illegal content are made diligently.

The platforms (except the online platforms that qualify as micro or small enterprises within the meaning of the Annex to Recommendation 2003/361/EC) will be obliged to:

• establish complaint and compensation mechanisms;

• establishes mechanisms for the extrajudicial settlement of disputes;

• cooperate with reliable flaggers;

• take measures against abusive notifications;

• handle complaints;

• verify the credentials of third-party providers;

• provide transparency to users of online advertising.

What are the penalties for online platforms and search engines that do not comply with DSA requirements?

Large platforms and search engines (with more than 45 million users) can be fined up to 6% of their worldwide turnover.

Also, each member state will adopt the sanctions per the requirements established in the DSA Regulation in the national legislation.

However, the mechanism does not only aim at fines. It is good to know that immediate measures can also be taken, where necessary, to address severe damages, and the platforms can offer commitments on how they will fix them.

In the last instance, the temporary suspension of the service can be reached for cases that refuse to comply with essential obligations.

When does the DSA come into force?

For small rigs, the DSA will apply directly fifteen months after entry into force (i.e., 20 days after publication in the Official Journal) or from 1 January 2024, whichever is later.

For large online platforms and large online search engines, the new rules will apply earlier, respectively, at an interval of 4 months from the moment of their designation by the European Commission.

The content of this article was developed by Legally Remote and has a strictly informative and general purpose, the information contained does not constitute legal advice.

If you need legal assistance for your business at the beginning of the journey, schedule a consultation call. Together with my team, I help you get rid of the stress and give you time to deal with the important things for your business.