What is the DSA?
The Digital Services Act (DSA) is a new law in the European Union (EU) that aims to create a safer online environment by defining clear responsibilities for all online intermediaries and platforms. In short, the DSA will hold search engines, social media networks, and marketplaces accountable for policing content on their sites.
The DSA revises the 20-year-old eCommerce Directive which acted as the foundational legal framework for online services in the EU until now. While the eCommerce Directive exempted intermediaries from liability for the content they host if they meet certain conditions, the online environment today is drastically different from 20 years ago. New digital businesses that play an increasingly important role in our daily lives have emerged. Therefore, the European Commission concluded that redefining responsibilities for all online actors was necessary.
The DSA seeks to tackle current challenges of the digital ecosystem such as illegal products, hate speech, or disinformation, as well as transparent data reporting and oversight. To achieve these goals, the DSA will impose rules to regulate how platforms moderate content, advertise online, and use algorithmic processes. For example, online platforms must clearly explain how their recommendation system works, like why a user is being shown cat photos or other types of (potentially more controversial) content. The largest online platforms will also need to assess the risks their systems pose to the public interest or fundamental rights, such as disinformation, cyber violence against women, or harms to minors online and take action to prevent abuses.
Additionally, the DSA maintains the fundamental principles applicable to e-commerce in the EU, including exempting platforms from being liable for any illegal content they host, as long as they take action against illegal content, they are aware of and don’t deliberately contribute to the dissemination of illegal content.
Does the DSA apply to small businesses?
The short answer is yes. The DSA applies to all online intermediaries offering services to users in the EU, irrespective of the service provider’s place of establishment. However, small and medium-sized enterprises (SMEs) will be exempt from the costliest obligations (see below).
The law proposes a gradual regime, depending on the role, size, and impact of different online players in the online ecosystem. As such, the DSA distinguishes between online intermediaries, hosting services, online platforms, very large online platforms, and marketplaces:
Intermediary services encompass most information society services. They consist of the mere transmission of user information in a communication network, including the automatic, intermediate, and temporary storage of that information.
Hosting services are services that store information provided by and at the request of a user of the service.
Online platforms are hosting services which, at the user’s request, store and disseminate information to the public. A special category in the DSA includes marketplaces, which are online platforms that allow consumers to conclude distance contracts with traders.
Very large online platforms (VLOPs) and search engines (VLSEs) are online platforms which reach 45 million or more monthly users in the EU. The European Commission must designate VLOPs and VLSEs as such before they become subject to the Commission’s direct supervision and more stringent requirements.
Will small developers have to comply with the DSA obligations?
While the DSA will make it easier for small app developers and tech SMEs to comply with a single set of EU rules applicable to all, they will have to carefully consider certain new provisions when developing and placing apps on the market.
The DSA foresees more stringent rules for VLOPs/VLSEs and exempts micro and small enterprises from certain obligations, including transparency reporting requirements. The exemption also applies to micro and small enterprises that lost their small business status during the past 12 months.
However, the DSA also creates some disadvantages for SMEs that are not established in the EU. They will, for example, need to appoint a legal representative in the EU, which entails additional costs.
We summarise some of the most important obligations for small and micro enterprises, as well as list the full scope of obligations applicable to online intermediaries, hosting services, online platforms, marketplaces, and VLOPs/VLSEs in a document that you can find here.
What’s next?
The European Parliament and the Council of the EU have approved the final text of the DSA. We expect it to be published in the Official Journal of the European Union and enter into force 20 days after its publication, as early as October 2022.
The DSA will directly apply in all EU Member States 15 months after entry into force or from 1 January 2024, whichever comes later. However, VLOPs and VLSEs will have to comply with the rules earlier than other intermediaries. More precisely, they need to follow the new law four months after the European Commission has designated them as gatekeepers.