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What is the new Digital Services Law?

Digital Services Law

After two years, we can say that Europe will become the first free digital market in the world, with predictable and clear rules for all those who participate in it. The European Parliament plenary has approved the new Digital Services Act with 539 votes in favor and the Digital Markets Act with 588 votes in favor. Do you want to know more about the Digital Services Act? Read our article and find out all about it.

What is the origin of the new digital regulation in the EU?

It has been a year since Facebook changed the name of its parent company to Meta in the midst of a reputation crisis caused, among other scandals, by accusations related to monopolistic practices.

These controversies, along with other issues, gave rise to a debate on the impact that technological transformation has had on the rights and freedoms of citizens. They also unleashed a barrage of questions about who owns the information on the Internet, for whom it is created, and which companies handle it.

As a consequence, in 2020, the European Commission pushed forward the measures for a European Digital Strategy that will determine the way to carry out a reform in the digital and IT economy in the EU.

In view of this, on October 4, the EU Council definitively validated the law that will regulate all large digital platforms and that will condition the modus operandi of big tech companies such as Google, Amazon, Meta or Apple.

The Commission’s command is clear: it will work to put technology at the service of people; it will promote a fair economy, with the same rules for all operators; and it will maintain an open, sustainable and democratic society in the Community territory.

The institution understood that the online world was not regulated and that the digital transformation processes were being led by companies, such as those mentioned above, coming from the United States. In view of this, the new regulation and its content will be applicable up to 15 months later, so that companies have time to adapt.

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What is the Digital Services Law?

The new Digital Services Act, DSA, is concerned with regulating the liability of intermediaries in the digital world, starting with search engine access providers.

This focuses on large online platforms, i.e. those with more than 45 million recipients. It will add certain unique obligations and prohibitions requiring them to analyze, assess, identify and mitigate significant systematic risks arising from the operation and use of their services in the Union.

By risks we mean the dissemination of illegal content online or the protection of the fundamental rights of the individual. Therefore, thanks to the Digital Services Act, the publication of this type of content is curbed and, therefore, content moderation is improved, making the platforms responsible for their algorithms.

The DSA updates the Electronic Commerce Directive 2000/31/EC, which has been in force for more than twenty years. Thus, while contributing to the proper functioning of the internal market for intermediary services, it creates a secure, reliable and predictable online environment that protects fundamental rights.

In this regard, the penalties in the event of non-compliance with the obligations imposed will be very high. Fines of up to 6% of worldwide turnover and, in exceptional cases, the company may even be banned from operating in the EU itself.

The Digital Services Law and the Digital Markets Law, two laws that go hand in hand

The Digital Markets Act regulation, or DMA for short, is also part of this new EU digital regulation strategy. It deals mainly with those platforms that represent a major gateway to the digital world, being called gatekeepers or super intermediaries.

For the standard, some of them are so large that their mere presence in the market makes competition impossible. For this reason, the DMA has been created: to address the economic imbalances generated by unfair commercial practices and their negative consequences. For example, the reduced catalog of platforms available in the market.

This regulation will apply primarily to all large platforms that meet the following thresholds:

  • An annual EU turnover of more than EUR 7.5 billion or a market capitalization of at least EUR 75 billion.
  • Serve more than 45 million end users per month in the EU and 10,000 business users per year.

The WFD regulation establishes a series of obligations and prohibitions for the so-called gatekeepers, such as:

  • The promotion of a more favorable classification of its own products and services.
  • The impossibility to use users’ personal data for the benefit of the platform.
  • Interoperability obligations and more.

In the event of non-compliance, the company will be imposed one of the highest penalties ever seen. A first conviction can amount to 10% of annual turnover and up to 20% in the event of a repeat offence.

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To whom will the new Digital Services Law apply?

The Digital Services Act will apply to providers of intermediary services that are provided to recipients who are established or resident in the EU. However, this law will apply with a different degree of obligations to data hosting services, online search engines, marketplaces and social networks.

Specifically, it will adhere to this classification:

Digital Services Law
  • Brokerage services

They make network infrastructures available to users. Internet access providers and domain name registrars, among others, belong to this category.

  • Data hosting services

They are those that store the information offered by the recipients of the service they request. This category includes cloud computing or web hosting services.

  • Online platforms

We are talking about social networks or marketplaces.

  • Search engines.
  • Large online platforms and search engines.

It is important to mention that “interpersonal communications services” will be outside the scope of the DSA. For example, emails and private messaging services.

What does the DSA propose?

The DSA and the DMA seek to ensure healthy and fair competition in the digital market through increased public oversight of large platforms and to make digital content more transparent and compliant with current laws. 

To achieve this, it establishes an asymmetric regulation, correctly proportioned according to the size of the companies.

Thus, the obligations of the different agents correspond to their respective role, size and impact within the online ecosystem. It is clear that platforms such as Amazon, Meta or Google will be affected by this new law.

In addition, with the regulation imposed by the Digital Services Law. Online platforms will become more transparent and more accountable to customers. For example, on how their content is recommended.

In this way, new security measures can be put in place and advertising will not be targeted based on the personal data of minors and adults, or sensitive information such as sexual orientation, religion, ethnicity and more.

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The European Union has become more interested in the security of citizens in the new digital era with the launch of this new law. With it, it seeks to ensure greater transparency and a fight against illegal content.

Do you want to know more about the Digital Services Law and the Digital Markets Law? In TAS Consultancy we are committed to keep you updated about the current business news in Spain and the European Union and how to adapt to it as best as possible. Subscribe to our blog and stay informed!

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