The DIGITAL SERVICES ACT and how to COMPLY with it

How can you create lucrative products/services and remain in compliance with these requirements? Regulatory Compliance has always been important. Now, it must be top of mind.

Oct 30, 2023

I applaud the European Union for taking bold steps to regulate technology and the Internet. Their tech/internet-related laws are used as templates by other countries because they cover the major issues even in the evolving world of technology.

Their recent promulgation, the Digital Services Act (DSA) came into effect on 25 August 2023, applicable to very large online platforms (VLOPs) and very large online search engines (VLOSEs), and enforced by the European Commission.

The DSA package came with two laws; the Digital Markets Act (DMA) and the Digital Services Act (DSA). The DSA is for the regulation of illegal content and the protection of users’ fundamental rights in the online digital space; while the DMA addresses the importance of user consent before personal data is transmitted (that is, to keep user data from different services separate, unless they get specific consent from users.), processed for targeted advertisements, and anti-competitive behavior amongst the VLOP and VLOSEs. It requires companies considered “gatekeepers” — in effect, big digital platforms that provide core services such as search, app stores, or email and messaging—to interoperate with other platforms, and forbids them from giving their own apps and services priority over those of others.

Presently, only 17 VLOPs (very large online platforms); Alibaba AliExpress, Amazon Store, Apple AppStore, Booking.com, Facebook, Google Play, Google Maps, Google Shopping, Instagram, LinkedIn, Pinterest, Snapchat, TikTok, Twitter, Wikipedia, YouTube, Zalando, and 2 VLOSEs (very large online search engines); Bing and Google Search are obligated to comply with the DSA. This is because currently, these companies have an average of forty-five million monthly active recipients of their services (MARs). Although they are not the only companies that the DSA/DMA regulates, others are called in-scope companies and by February 17, 2024, they will become bound and regulated thereby.

By 4 months after notification of the designated decisions, the designated platforms and search engines need to adapt their systems, resources, and processes for compliance, set up an independent system of compliance, and carry out, and report to the Commission, their first annual risk assessment.

These in-scope companies are internet intermediaries that offer;

Network infrastructure, such as internet access providers or domain name registrars
Hosting services, such as cloud and web hosting services
Online platforms for online marketplaces, social networks, content-sharing platforms, app stores, and online travel and accommodation platforms, including services that host content provided by users and disseminate it as its main purpose.
Online search engines

These companies are obliged to assess and mitigate systemic risks related to the dissemination of illegal content, negative effects on fundamental rights, electoral processes, gender-based violence, or mental health, and provide robust content moderation tools that improve user empowerment, heighten minors’ protection, eliminate disinformation, and foster transparency/accountability.

If you are an in-scope company with the application deadline looming (17-Feb-2024), here’s how to prepare yourself;

Determine whether you provide internet intermediary services, and if so, your role as such especially if your products/services have a range of functionalities and content sources, even if you’re not considered a VLOP or VLOSE.
For online platforms, this categorization will impact how your MARs is calculated, the likelihood of being designated a VLOP/VLOSE, and the substantive obligations under DSA that apply. Service providers also in the scope of the DMA will need to consider how their services are categorized under both the DSA and DMA in parallel.

Prepare to be DSA-compliant before the deadline
Plan and future-proof your business to ensure all future endeavors and products/services thrive regardless of new regulations.
Understand the practical burden of compliance and implement systems that encourage easy implementation.
Make proactive changes to products or build new functionalities.
Build new internal processes to assess DSA compliance, respond to takedown requests, or manage account suspensions.
Prepare for proactive and reactive disclosures to the relevant regulatory authority, law enforcement, users, and the public.
Build a compliance function and put in place dedicated personnel.
Embed new design principles driven by DSA compliance.

Beyond the EU, internet intermediaries will be considered in-scope companies if they have significant members of EU recipients, target their activities towards the EU, or if other facts result in a “substantial connection” with the EU.

On the flip side, companies that do not comply with DSA/DMA requirements will be subject to at least six percent of their global turnover and up to twenty percent (20%) for repeat defaulters.

In the future, key factors that in-scope companies should consider include;

Platforms and search engines close to hitting 45m MARs (monthly active recipients of their service) in the EU will need to future-proof their products and compliance efforts against the likelihood of future designation as a VLOP or VLOSE, with all the obligations that follow. This means that service providers will need to assess not just their existing user base, product categorization, and functionality but also where they plan to be in the future.
How future product design and development will affect service categorization under the DSA and understand what additional compliance obligations may kick in as products evolve and new products are launched.
How the enforcement landscape will likely evolve. Who is likely to be designated as the local regulator? How active is that local regulator likely to be, and what are its own priorities? How quick have local regulators been to enforce other emerging laws, for example, in the data privacy or consumer space? Will regulators become more sophisticated as more information is made available to them, and how will that shape the regulators’ view of your products?

The EU is already seeing some companies push back on the DSA. In July, Amazon filed a petition that asks the EU to reevaluate its classification as a very large online platform, claiming that it’s getting “unfairly singled out.” German retailer Zalando also filed a lawsuit against the EU Commission, similarly claiming that it doesn’t meet the definition of a very large online platform. Others raise concerns that fellow VLOP and VLOSEs such as eBay, Airbnb, Netflix, and even PornHub are omitted from this initial list, but are in the hope that they are categorized under the in-scope companies whose obligations would take effect in Feb 2024.

Regardless, this Act poses good things for users of these very large online platforms and online search engines because the protection of their fundamental rights (and minors) is paramount, and the flow of disinformation or illegal content is being monitored to ensure elimination.

What are your thoughts on the DSA/DMA and other EU efforts to regulate the online digital space?

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The DIGITAL SERVICES ACT and how to COMPLY with it

How can you create lucrative products/services and remain in compliance with these requirements? Regulatory Compliance has always been important. Now, it must be top of mind.

If you are an in-scope company with the application deadline looming (17-Feb-2024), here’s how to prepare yourself;

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