Tech Regulations Rework: EU's Digital Services Act and Digital Markets Act Overhaul for Tech Businesses
The European Union has taken a significant step towards regulating the digital landscape with the introduction of two groundbreaking acts: the Digital Services Act (DSA) and the Digital Markets Act (DMA). Released in October 2023, these acts are set to reshape the online marketplaces and advertising industries within the EU, establishing a unified framework for internet governance.
The Digital Services Act: A New Era for Online Marketplaces and Advertisers
The DSA significantly affects online marketplaces and advertisers by imposing stringent transparency, fairness, and safety requirements on digital platforms operating in the EU. Some key measures of the DSA include:
- Trader traceability: Online marketplaces must collect reliable information about sellers to increase accountability and combat illegal goods or services.
- Transparency in advertising: The DSA requires clear disclosure about sponsored content and transparency in how ads are targeted and delivered, particularly regarding algorithmic processes.
- Risk management and data access: Very large platforms must assess systemic risks and provide researchers with access to platform data under strict conditions to study and mitigate online harms.
- User rights protection: Platforms must ensure users can easily report illegal content and receive timely responses, improving the overall trust in online marketplaces and advertising environments.
The DSA's scope is extraterritorial, applying to any provider offering intermediary digital services to EU users regardless of where the provider is based. Its impact goes beyond compliance—it reshapes online advertising practices by increasing transparency and fairness, helping to prevent manipulative or unfair commercial practices.
The Digital Markets Act: Ensuring Fair Competition
The DMA establishes specific obligations and prohibits certain practices for designated gatekeepers to ensure fair competition. Gatekeepers that provide certain core platform services, including online intermediation services, online search engines, social networking services, and more, are subject to the DMA.
The DMA grants the European Commission additional powers to conduct investigations on digital markets and intervene to address structural competition problems and risks to the internal market. The DMA specifically targets large online platforms that meet certain criteria and have significant market power, known as "gatekeepers."
The DMA establishes a system of ex-ante regulation, meaning that gatekeepers will have specific obligations even before potential breaches occur, and introduces stronger enforcement tools and penalties for non-compliance. Gatekeepers are required to provide access to certain data and functionalities to third-party businesses to promote competition and innovation, treat businesses fairly and not discriminate against them, provide clear terms and conditions, and face remedies and sanctions for non-compliance.
Implementation and Impact
Once adopted, EU member states will be required to transpose the provisions of the DSA into their national legislation. The DSA package will become fully applicable to all entities beginning from 17 February 2024. The DMA will have a similar timeline for implementation.
The DSA and the DMA are designed to collaboratively establish a unified framework for internet governance within the EU. They aim to give better protection to online users' rights, harmonize rules for digital services, increase transparency and accountability, increase cooperation and enforcement, and enhance market supervision.
Cases like the EU Commission’s action against Facebook Marketplace highlight enforcement trends under the broader digital regulatory framework—addressing abuses of dominant position and unfair conditions imposed on competing advertisers and sellers within platforms.
In summary, the DSA and DMA will establish a comprehensive regulatory environment that favors consumer protection, market fairness, and platform accountability in online marketplaces and advertising, influencing platform operations throughout and beyond Europe.
- The Digital Services Act (DSA) significantly impacts online marketplaces and advertisers by imposing transparency, fairness, and safety requirements, such as trader traceability, transparent advertising processes, and user rights protection.
- The Digital Markets Act (DMA) establishes specific obligations for designated gatekeepers to ensure fair competition by granting the European Commission powers to investigate digital markets, promote access to data and functionalities for third-party businesses, and address non-compliance with harsher penalties.
