Following a political agreement reached by the Council and the European Parliament in April 2022, on 5 July 2022 the European Parliament formally adopted the Digital Services Act (DSA). The DSA still needs to be adopted by the Council.
The EU DSA is, together with the Digital Markets Act (AMD), part of a set of European legislative measures proposed at the end of 2020 to regulate digital markets. The main objective of the DSA is to implement a new framework of obligations applying to all digital services (for example, those offered by Internet access providers, cloud services, messaging, marketplace, social networks, content-sharing platforms, app stores and online marketplaces) to protect users from illegal goods, content or services and protect their fundamental rights online. The DMA targets certain behaviors of platforms acting as “digital guardians” of the single market.
Although the DSA is European legislation, it applies to all intermediary service providers, regardless of their place of establishment or location, insofar as they offer services to (or target their activity towards) a significant number of recipients in the EU. The DSA is therefore relevant for UK-based providers offering services in the EU.
In a previous post we discussed how the amendments proposed by the European Parliament to the DSA in January 2022 could affect consumers. These amendments have now been incorporated into the text of the DSA adopted by the European Parliament. Below, we highlight some of the other key changes to the DSA since the original European Commission proposal:
- Voluntary surveys— Under the DSA, to be eligible for the transmission, caching and hosting liability waivers, intermediary service providers must conduct self-initiated voluntary surveys or other activities aimed at detecting, identifying and remove, or disable access to, illegal content or take steps to comply with their national laws, including the DSA. The final text of the DSA adds a condition that such own-initiative inquiries and other activities must be conducted “in good faith and with due diligence”. According to the recitals of the DSA, acting in “good faith and in a diligent manner” involves providing the necessary safeguards against the unwarranted removal of lawful content – for example by taking reasonable steps to ensure that, where automated tools are used to carry out such activities, the technology is reliable enough to limit the error rate to the “maximum possible”.
- Accommodation— under the DSA, to benefit from the hosting exemption, an online platform must clearly indicate to consumers that it is dealing with a third party, rather than with the platform itself. An addition to the text of the DSA means that a platform could now lose the benefit of the hosting exemption if it: (1) fails to clearly display the identity of the merchant as required by the DSA; (2) retains the identity or contact details of the merchant until the contract is concluded; or (3) markets the product in its own name (rather than the name of the third-party merchant supplying it).
- User-friendly, electronic single point of contact—the final text of the DSA includes a new obligation for intermediary service providers to appoint a single point of contact allowing the recipient of the service to communicate directly and quickly with them, electronically and in a user-friendly manner. The recipients of the service must be able to choose the means of communication, which must not rely solely on automated tools.
- Terms and conditions—the DSA defines specific requirements relating to the content and accessibility of the terms and conditions (TOS). The final text of the DSA includes additional requirements for providers to: (1) inform service recipients of their internal complaints handling systems and of any material changes to their terms and conditions; and (2) when the Services are used by minors, to explain their TOS in a way that minors understand. Providers designated as “very large online platforms” or “very large search engines” must also provide the T&Cs in a machine-readable format and in the official languages of all the Member States in which they offer their services.
- Advertising on online platforms—the final text of the DSA extends the transparency obligations for online platforms that display advertising on their online interfaces. These platforms are now required to use prominent markings to identify advertisements and provide users with information on how the parameters used to select them as an audience for advertising may be changed. Profiling-based advertising using special categories of sensitive personal data is also now expressly prohibited.
- Right to information—A new DSA provision now requires online platforms to notify consumers if they become aware that the platform has been used to sell an illegal product or service to consumers.
Once officially adopted by the Council (expected in September 2022), the DSA will be published in the Official Journal of the EU and will enter into force twenty days after its publication. The DSA will become directly applicable across the EU fifteen months later, or from 1 January 2024 (whichever is later). Platforms labeled as “very large online platforms” or “very large online search engines” may be impacted sooner – for these platforms, the DSA will apply four months after they have been designated as such by the European Commission.
With the DSA due to come into effect in early 2024, companies that have not yet started preparing for it should do so now. This is especially important as DSA compliance may require significant changes to current business practices that will require time for planning and deployment. Depending on the specific scope of changes required, companies may need additional resources to implement the required changes and seek legal advice to ensure compliance with ADD requirements – for example, requirements for their GC, collection and disclosure of information, display/provision of information under transparency obligations, and notice and take action/take down processes.
Businesses that fail to comply with DSA requirements face enforcement action from the new Digital Services Coordinators who will have enforcement powers in each member state, including the power to impose sanctions, such as fines. Very large online platforms and very large online search engines that violate the DSA can also be fined by the European Commission up to 6% of their total annual worldwide turnover.