JUSTIN OKARA
Partner

The European Commission's Digital Services Package, which consists of the Digital Markets Act (DMA) and the Digital Services Act (DSA), is set to take full effect in early 2024. These two pieces of legislation aim to regulate the internet and protect fundamental freedoms, primarily targeting tech giants with a firm grip on our digital space.

The DMA is an antitrust regulation that has placed a target on the backs of the most influential tech companies (or "gatekeepers" as touted by the European Commission), intending to level the playing field for other platforms and ensure that all businesses have a fair chance to compete. It outlines seven unequivocal restrictions imposed on gatekeepers, including:

• Self-preferencing their products or services.

• Limiting payment possibilities to the gatekeeper's payment methods.

• Sharing personal data across different services.

• Pre-loading particular software applications.

• Using certain bundling practices that tend to control the downstream market.

• Limiting the interoperability of data and content from rival platforms and

• Technical restrictions that hamper businesses and consumers from using their platforms or services.

On the other hand, the DSA targets online intermediaries such as online marketplaces, social networks, mobile app stores, content-sharing platforms, and online travel and accommodation platforms. It aims to have more transparent platforms and marketplaces that carry the same fundamental rules of the "offline" world into the digital space: "What is illegal offline should also be seen and dealt with online."

The DSA sets out to regulate all online platforms regarding content moderation and consumer protection. Platforms are mandated to remove illegal and harmful content, such as defamatory, hateful, or manipulative content. Barring content moderation, the DSA restricts "dark patterns" and marketing profiling that tends to use sensitive data or target children. Consequently, platforms must adhere to various transparency requirements, such as providing child-friendly terms and conditions, annual reports and mandatory disclosure of recommendation and curation algorithms.

However, the European Commission has designated platforms with at least 45 million users (10% of Europe's population) - Very Large Online Platforms (VLOPs) and Very Large Online Search Engines (VLOSEs) - with significantly more obligations than the smaller platforms and hosting services. Designated VLOPs and VLOSEs such as Amazon, Facebook, TikTok, Apple App Store, Snapchat, Google Search, Bing, and others must conduct risk assessments of their services, with a particular focus on risks associated with fundamental rights such as freedom of expression and media freedom, electoral processes, public health, and the mental and physical wellbeing of users. To boot, VLOPs and VLOSEs must establish internal compliance functions, share their data with regulators to assess compliance, allow vetted researchers to access platform data to identify and understand systemic risks and provide users with an opt-out option from their recommender algorithms.

Therefore, the European Commission is seen as an anti-hero to Big Tech companies as it is the first significant regulator to take action against the tech giants through legislation. The US is seen as notably lax with enforcing antitrust and privacy issues - although the tide might be changing. At the same time, Europe has been aggressive in lodging and winning various lawsuits against tech giants and dishing out huge fines.

Big Tech companies have long operated in a largely unregulated environment, and they have taken advantage of this lack of regulation to engage in seemingly anti-competitive behaviour and exploit users' data. They have only taken voluntary steps to address these issues in the past, as there was no legal obligation. Therefore, regulators believe that if the industry continues its self-regulation path, they may transplant their market dominance into the next generation of technology, thereby impeding innovation by other players. Consequently, the fines for non-compliance with the DSA and DMA are significant, at 6% and 10% of the company's annual global revenue, respectively - this has made Big Tech companies take notice of the European Commission's regulatory efforts.

However, this isn't the first swing at Big Tech by the Commission. In 2018, it introduced the General Data Protection Regulation (GDPR), which gives users more control over their personal data and simplifies the regulatory environment. Comparably, the Digital Services Package gives the users unparalleled control over how the companies use their data, primarily through the interoperability requirements and targeted adverts restrictions. While also spurring some accountability through independent audits, mandatory reporting, and algorithm transparency.

Although the Digital Services Package is European legislation, it will likely have a global trickle-down effect due to the Brussels effect. A phenomenon whereby companies voluntarily transplant European standards to their worldwide operations to avoid the costs and hassle of complying with multiple regulatory regimes. Voluntary adoption of European standards in various sectors, such as environmental protection, food safety, privacy, and data protection, is evidence of the Brussels effect, and the GDPR and ePrivacy Directive are prime examples of this or even Apple (finally) adopting the USB-C port to the iPhone. Therefore, online platforms may opt to update their algorithms and processes worldwide rather than run different platforms and services in other markets, benefitting all online users.

This landmark legislation has the potential to bring about many benefits, thanks to the annual external audits and mandatory access to platform data for vetted researchers and regulators. The mandated access will allow what was previously secret information to be made public, such as the information shared by Frances Haugen on Instagram's impact on young girls. Besides, some companies have already taken steps to comply with the DSA rules. For example, TikTok is rolling out a design change allowing European users to turn off the personalised algorithm, prioritising popular content from the user's region and displaying feeds chronologically when deactivated. Meta's Facebook and Instagram users will also have a similar design change to their Stories and Reels, as they will only show posts from users they follow in chronological order.

The most significant change the DSA will bring is how platforms moderate online speech. The DSA introduces new procedural safeguards for users when their content is removed or demoted. The intention behind this is to address the spread of disinformation by manipulated algorithms and provide users with ways to flag illegal content, create more transparency as to the censorship of their content, and allow avenues of appeal to the platform's editorial decision. Conversely, platforms may over-censor content, endangering free speech and expression.

Furthermore, the DMA can bring more benefits to users in general, such as the ability to use different messaging apps interoperable and the potential for more diverse mobile app stores. Meta has already shown interest in the interoperability function by making WhatsApp interoperable with third-party messaging apps. The DMA requires gatekeeper companies' messaging apps to be interoperable by March 2024. As much as that will improve competition and ease of communication, there are still concerns about how that will work, especially on the end-to-end encryption of messages. Secondly, users will be able to venture out of Apple and Google's walled app stores as gatekeepers must provide users with alternative methods of downloading apps to their devices. Google already allows sideloading on Android, but it has made it difficult by requiring apps to use its in-app billing and licensing system. Nevertheless, as much as this will give users more options on how they get their apps, they are likely to stick with the familiar app stores due to the peace of mind they offer, particularly on the security aspect.

The European Commission is positioning itself as the anti-hero of Big Tech with the landmark Digital Services Package, a significant step forward in internet regulation. Many people believe that Big Tech has too much power, and this legislation could be a step towards bringing more democracy and accountability to the tech industry. If the EU successfully implements and enforces these regulations, it could have a global impact by holding tech companies accountable and prohibiting unfair practices.

• The European Commission's Digital Services Package, comprising the Digital Markets Act (DMA) and Digital Services Act (DSA), represents a groundbreaking regulatory framework targeting major tech companies' dominance and practices, set to take full effect in early 2024.
   

• The legislation introduces strict rules around content moderation, user privacy, market competition, and platform transparency, with substantial fines of up to 6-10% of global annual revenue for non-compliance, forcing Big Tech companies to take notice.
   

• While European in origin, these regulations could have a global impact through the "Brussels effect," as companies may choose to adopt EU standards worldwide rather than maintain different systems for different markets, potentially benefiting users globally.

Technology Regulation & Competition Law

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