The EU Attempts To Tame Big Tech

On August 25, 2023, new legislation aimed at protecting users from data-hungry platforms went into effect in the EU. The Data Services Act (DSA) has “intermediaries and platforms” in its crosshairs and is attempting to create a safer digital space. Online marketplaces, social networks, content-sharing platforms, app stores, and online travel and accommodation platforms are all subject to DSA rules.

That’s a wide swath of the internet and there is, predictably, plenty of confusion around what the DSA covers — and the potential penalties for crossing the line. This article will explore the details of the DSA and help publishers understand if and how it impacts them.

What is the DSA?

The DSA is the follow-up to the Digital Markets Act (DMA), and according to the European Commission, there are two main goals of this complementary legislation:

Creating “a safer digital space in which the fundamental rights of all users of digital services are protected”
Establishing “a level playing field to foster innovation, growth, and competitiveness, both in the European Single Market and globally”

Those are lofty goals that may seem a little nebulous. But the EU Commission goes on to explain: “A core concern is the trade and exchange of illegal goods, services and content online. Online services are also being misused by manipulative algorithmic systems to amplify the spread of disinformation, and for other harmful purposes.”

Not only will platforms like Google, Facebook, and Amazon be held accountable for any illegal goods, services, or content posted on their sites — forcing them to implement strategies to prevent and remove anything that violates this — but it takes things one step further. As The Verge reports, “the DSA bans targeted advertising based on a person’s sexual orientation, religion, ethnicity, 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.”

What are the penalties for violating the DSA?

Legislation is only as powerful as a government’s ability and willingness to enforce it. In this case, online platforms failing to comply with the DSA’s rules could be issued fines of up to 6% of their global turnover. Furthermore, the Digital Services Coordinator and the EU Commission will have the power to “require immediate actions where necessary to address very serious harms.”

If a platform repeatedly fails or refuses to comply, the EU could enforce a temporary suspension.

Which companies are impacted by the DSA?

The new legislation applies to very large online platforms or search engines, which, according to the EU Commission, are those with over 45 million monthly users in the EU. Companies must provide user data every six months and can fall on or off that list accordingly. As of right now, the list includes:

Alibaba AliExpress
Amazon Store
Apple App Store
Booking.com
Facebook
Google Play
Google Maps
Google Shopping
Instagram
LinkedIn
Pinterest
Snapchat
TikTok
Twitter
Wikipedia
YouTube
Zalando
Bing
Google Search

The list is dominated largely by American companies. Many of tech’s biggest players originated in Silicon Valley, but the U.S. has largely abdicated its authority in the digital realm by failing to lead when it comes to regulating changing technology. Writing for the Wilson Center, William Schwartz, suggests “the US should consider a more interventionist tech strategy to represent American interests in an industry that is increasingly regulated by the EU.”

Schwartz also points out, “This legislation entered into force at a crucial moment in the history of Big Tech. Elon Musk’s takeover of Twitter has underscored critical questions about the complicated relationship between free speech and internet safety.” In fact, Schwartz calculates that based on 2021’s numbers, a misstep could cost Twitter/X somewhere in the neighborhood of $300 million.

Impacts beyond the EU’s borders

While the EU technically only has jurisdiction over how companies interact with its citizens, the General Data Protection Regulation (GDPR) legislation of 2016 shows us just how far-reaching the implications of EU legislation can be. Schwartz writes, “As the second largest consumer market in the world, very few firms can afford to skip the EU when marketing their product. Instead of making the costly decision to create two separate business models, firms tend to conform to the most stringent regulations – typically those of the EU. To avoid harsh penalties in European courts, Big Tech firms had to conform to EU law. The GDPR had an extensive Brussels Effect; tech firms worldwide adapted their privacy policies to conform to the law.”

That’s why, even if you live in a U.S. state without its own data-privacy regulations (like the California Consumer Privacy Act), you get pop-ups asking you to accept, reject, or review your cookie consent policy on websites.

Platform compliance with DSA

With the policy now in place, large internet intermediaries are now on the hook for conforming. Users will see a few changes on their favorite platforms:

The ability to turn off AI-recommended videos
Easier processes for flagging harmful content
Better communication about why your post was taken down
The ability to report fake products
People under 18 cannot be targeted with digital ads

Less visibly, platforms are working behind the scenes to adhere to the parts of the law that address transparency.

For instance, Google announced it’s expanding its Ads Transparency Center. Meta is expanding its Ad Library, which will soon display and archive ads targeting users in the EU. It will also include the targeting parameters used and information about who was served the ad. As of August 22, European users can view content chronologically on Facebook and Instagram — giving users the ability to opt out of personalized content recommendations. And, for those who are interested, Meta published a report on how its algorithm works in June.

It’s widely recognized that TikTok’s algorithm is a big contributor to its success, but even it’s making its algorithm optional for users in the EU. When the algorithm is disabled, The Verge reports, “users will see videos from ‘both the places where they live and around the world’ in their For You and Live feeds instead of videos based on personal interests.” They can also view content chronologically, and users under 18 will no longer see personalized ads based on their activity in the app.

Amazon pushes back

For its part, Amazon is pushing back on the legislation. In July, the company challenged the EU, saying it doesn't fit the description of a Very Large Online Platform (VLOP). Forbes reports Amazon claims “it is basically a retail operation, rather than a communication platform, and therefore isn't the type of firm the legislation is designed to address.” Germany’s Zalando — Europe's largest online fashion retailer — filed a similar suit.

At the end of September Amazon won a temporary reprieve from the EU General court in Luxembourg, allowing it to delay complying with the new law while it prepares its appeal.