Understanding the EU’s New Digital Services Act

In December 2020, the European Commission introduced the EU Digital Services Act (DSA), a new European law designed to establish legal rules for digital service platforms operating in the EU, including social media platforms, online marketplaces, and search engines. Broadly, the DSA seeks to make online platforms more accountable for the content they host and to strengthen user rights and protections. More specifically, the DSA’s objectives are to effectively combat illegal activities, reinforce the fundamental rights of individuals, and improve the free movement of services within the EU.

The DSA came into force on November 16, 2022 and will be directly applicable across the EU beginning February 17, 2024, and will impact any company offering digital services to customers in the EU, regardless of where they are based. In other words, the DSA will have an extraterritorial reach similar to the General Data Protection Regulation (GDPR).

Overview
The DSA will impose stringent legal obligations on online platforms, such as:

• expecting them to take greater responsibility for the content they post on their platforms, whether in a B2B (business to business) or in a B2C (business to consumer) setting;
• adding obligations for large platforms with more than 45 million users, including granting control power to the European Commission pertaining to very large media platforms, and introduce severe penalties for noncompliance;
• requiring them to develop stringent compliance structures like “Know Your Business” and implement compliance by design measures.

For example, companies with online platforms that operate in the EU need to keep in mind that, under the DSA, they may be required to publish their total number of active users in a publicly available section of their online interface and update that figure at least once every six months.

And, for online platforms or search engines with more than 45 million users (10% of the population in Europe), which the European Commission will designate as a “very large online platform or a very large online search engine” per the DSA, such providers will have four months starting from the date of their designation to begin complying with the obligations of the DSA.

Oversight and penalties
All EU Member States will appoint a digital services coordinator (DSC) by the effective date of the law. The DSC will be the national authority responsible for ensuring coordination at the national level, as well as contributing to the effective and consistent application and enforcement of the DSA. Any company subject to the DSA that fails to comply with its provisions may face significant fines and penalties, as much as 6% of its annual worldwide revenue for the preceding financial year.

Conclusion
The DSA represents a significant step towards regulating the digital economy in the EU and ensuring that online platforms – regardless of where they are based – are accountable for the content they host. It is also a recognition of the growing influence of digital services and the need for a coordinated approach to regulation. Since this law is likely to have a significant impact on the digital economy in the EU and beyond, U.S.-based companies doing business in the EU should take steps now to prepare themselves for these upcoming and extensive legal obligations. If you have questions about the DSA or general privacy matters in the EU, please contact Stephan Grynwajc at [email protected] or 347-543-3035.

Stephan Grynwajc is admitted to the practice of law in the U.S., Canada, U.K. and in France/the European Union. He has served as a senior in-house attorney for several blue-chip technology corporations (e.g., Intel and Symantec) in France, the U.K. and the U.S., and today, focuses his practice on advising U.S.-based clients on navigating the EU, UK and Canadian legal and regulatory landscape.