How EU's Digital Services Act is revolutionizing online platforms
How EU's Digital Services Act is revolutionizing online platforms
Turning point for the tech sector: Unpacking the impact of the Digital Services Act on Meta, Amazon, TikTok, Apple, Google
Starting next Friday, major online platforms and services are poised for significant changes. Meta will now permit users to challenge decisions impacting their content's visibility, even in cases where the content remains on Facebook or Instagram. Amazon will introduce the ability to report illegal products on its platform and disclose more seller information. TikTok is also enhancing its reporting system for illegal content, allowing users to opt-out of personalized recommendations and halting targeted ads for users aged 13-17. Additionally, Apple and Google are anticipated to implement modifications, such as algorithmic recommendation shifts in their App Store and YouTube.
However, these changes come with substantial limitations, mainly applying to residents of the European Union (EU). These adjustments align with the initial stage of the Digital Services Act (DSA), which expands regulations on online platforms within the EU. The DSA mandates measures like monitoring illegal content, curbing certain advertising practices, and sharing information with authorities. While confined to the EU, this legislation's influence could be widespread.
The EU Parliament approved the DSA in July of last year, implementing it in phases. In February, the first phase mandated large online platforms and search engines to disclose their user numbers. Subsequently, a list of 19 Very Large Online Platforms (VLOPs) and Very Large Online Search Engines (VLOSEs) was unveiled in April. These platforms, with over 45 million active EU users, spearhead DSA adherence. Currently applicable to these entities, the law will be extended to all companies starting February 17th, 2024.
Notable entities among the 19 VLOPs and VLOSEs include AliExpress, Amazon, Apple's App Store, Facebook, Google Maps, Google Play, Google Search, Booking.com, Instagram, LinkedIn, Pinterest, Snapchat, TikTok, X (formerly Twitter), Wikipedia, and Microsoft's Bing. This comprehensive list encompasses the majority of users' online activities.
Imposed upon all platforms—both large and small from February—obligations include acting against illegal content upon receiving reports, establishing a digital link with authorities, and publishing annual reports on content moderation, removal, and user appeals. It also mandates the reporting of illegal activities and enabling user reporting. Transparency in enforcement and the algorithmic recommendation system, suspension of accounts repeatedly sharing illegal or defamatory content, prohibiting deceptive UI design, and bolstering privacy and safety for minors will be enforced.
The 19 major platforms face heightened obligations, including annual systematic risk management reports (encompassing illegal content dissemination, infringement on rights, and negative impacts on health, minors, gender-based violence, physical well-being, electoral processes, and public security) and creating an emergency response mechanism during crises.
The upcoming Digital Markets Act (DMA), anticipated in September, will expand regulations beyond online platforms and search engines to encompass browsers, virtual assistants, operating systems, cloud computing services, and digital advertising services. DMA will affect services with over €7.5 billion ($8.1 billion) in annual turnover and more than 45 million active EU users. By March 2024, it will restrict personal data use, exclusivity over end-user offerings, favoring advertisers listed on platforms, and more. Future requirements include installing third-party apps on company operating systems, prohibiting preferential treatment of in-house products, and ensuring data portability.
To meet these obligations, Google is crafting an Android selection screen, enabling users to pick preferred browsers. Apple is working on a feature allowing app installation on iPhones from sources outside the App Store.
The EU imposes substantial disincentives to enforce compliance, with fines reaching 6% of global annual revenue for online content-related violations and 20% for repeated digital competition law breaches. The law grants the EU authority to dismantle companies. While enforcement remains a challenge, the EU has assembled a 230-person team and established a data analysis center in Spain for preparation.
Experts foresee these regulations resonating beyond the EU due to the region's influence on global regulatory trends. The General Data Protection Regulation (GDPR) of 2018 served as a template for other nations, and similar emulation is plausible. Although not obligatory, companies might implement these changes outside the EU, especially considering the likelihood of EU-inspired regulation elsewhere.
The legal changes could rebalance authority between states, regulators, and tech giants. "Tech giants are losing their monopoly over shaping services and interpreting rules," says Professor Martin Hosking, a law professor at the London School of Economics. Tech analyst Brian Wiser compares these regulatory efforts to those imposed on the banking system during the Great Depression, foreseeing a transition from minimal regulation to comprehensive oversight.
This strategic approach aligns with the EU's learning from the GDPR. The new regulations target tech giants and their nearly three decades of largely unchecked influence. These restrictions and requirements extend beyond smaller platforms. The EU's goal is a fairer, more open tech ecosystem that promotes competition.
The impact on Israeli tech giants might be limited. While global changes may influence Israel's tech landscape, the potential for local adoption of similar regulations remains low under the current government. Israel's privacy regulation, outdated for almost 45 years, hasn't aligned with GDPR principles even with past administrations. The absence of regulations akin to the DSA and DMA could make Israel a playground for tech giants to experiment with actions regulated in Europe.
