EXAMINING EU’S NEW DIGITAL SERVICES ACT – WILL IT TAME THE ONLINE WORLD TO BECOME ACCOUNTABLE AND TRANSPARENT?

Manoj Pandey*

The European Union last week agreed to pass a law to make the digital giants, including social media platforms, more accountable. The new law, called the Digital Services Act, follows a sister law to promote competition in online markets, the Digital Markets Act, which was agreed upon by the EU last month.

We know that the digital giants, especially the ecommerce and social media platforms, have become so powerful that they do not care for national laws and regulatory frameworks. The ecommerce platforms keep collecting user data and then use their algorithms to manipulate buying behaviour. With their deep pockets, they pervade the market to the detriment of small players and brick-and-mortar enterprises. Their dealings with/ towards sellers on their platforms are usually dark and manipulative. Social media biggies allow their platforms to spread fake news, disinformation and criminal content. This is besides their algorithms that push substandard, titillating and potentially harmful content to the youth. This all is documented to be leading to many physical and emotional issues. At social-political level, they promote crime, social tension, election manipulation, and many other ills. 

In some respects, social media has become a big monster that threatens to engulf all that is really social in the human society. We may perhaps have a separate discussion on this. Let us limit ourselves in this article to whether the proposed EU law would lead to what it promises.

Before that, let us look at the technology market in terms of numbers, with no subjectivity.

Tech giants: their form, size and expanse 

Technology giants include the providers of modern ICT products and services such as e-commerce, electronic devices, web hosting, cloud services, web search, and online media including social media. 

Many technology giants earn revenue more than the GDP of even rich nations. Even if all of them do not directly own social media, they run huge app stores, media markets and e-markets, provide cloud services, web hosting and gaming, and have enormous brand value. Some have product monopolies.

Apple, Amazon and Microsoft have earnings higher than the annual GDP of Australia. Alphabet (the company that owns Google and YouTube) is nearly as big. Similarly, Meta is bigger than Turkey and Saudi Arabia, and Tancent (Chinese game and video streaming company) is bigger than Switzerland.

In terms of market capitalization (value in stock markets), in 2005, the top companies used to be General Electric and Exxon Mobil, but 15 years later, the top is dominated by tech companies.

Social media in itself is a big segment of new age technologies, taking

varied forms ranging from blogs to social sharing of media (e.g. YouTube, Instagram, TikTok), social bookmarking (e.g. Reddit), social networking (e.g. Facebook, Twitter), and instant messaging (e.g. WhatsApp, Telegram).

Globally, 4.62 billion people used social media in the first quarter of 2022. This is 78% of the world population above 13 years of age. 

The average use of social media per day comes to about 2 hours 20 minutes. In some countries, such as the Philippines, it is reported to be more than three hours a day.

Social networking, media sharing and messaging platforms rule the social media world. Meta controls the social media universe like no one else. Its main entity, Facebook, is the biggest social media platform, with over 2.9 billion active monthly users. WhatsApp, Instagram and Facebook Messenger, all owned by Meta, are the third, fourth and seventh most popular social media entities. YouTube, owned by Google/ Alphabet, happens to be the second most important social media platform. 

Other popular social media platforms include WeChat, Douvin, QQ, TikTok, Sina Weibo (all under Chinese control), Snapchat, Telegram, Pinterest, Twitter, Reddit and Quora. 

What does the Digital Services Act promise to do, and how?

The promise of the proposed law is great in terms of transparency, accountability, public oversight, and competition.

In the words of European Commission President, Ursula von der Leyen, “The DSA will upgrade the ground-rules for all online services in the EU. It will ensure that the online environment remains a safe space, safeguarding freedom of expression and opportunities for digital businesses. It gives practical effect to the principle that what is illegal offline, should be illegal online. The greater the size, the greater the responsibilities of online platforms.” 

The proposed Act, like its sister Act, wants to tether the biggies in the digital world. It is more stringent on platforms having more than 45 million users in the EU region (“very large online platforms”). So, about 90% of online businesses/ platforms operating in the EU are exempt from its harsher provisions. The tech platforms that will bear the brunt include Apple, Microsoft, Amazon, Instagram, Facebook, Google, YouTube, TikTok, Spotify and Twitter – almost all of them American.  

In specific, the digital companies will be required to follow norms relating to content moderation, advertisement and the working of their algorithms. The last one is the Achilles Heel for tech companies, as their algorithms – notorious for influencing online and purchasing behaviour of users – will be exposed if the law is implemented in letter and spirit. In addition, the law provides that the companies will have to share their key data with vetted researchers, and public data with NGOs.  

These companies will not only have to be transparent about their policies and take necessary measures for compliance, they will also need to put in place a mechanism for reporting and grievance redressal.

Many provisions of the DSA are meant to directly protect the interests of consumers, vulnerable groups and people at large. For example, there are specific provisions against targeted advertisements to children and those based on special characteristics of users. Online marketplaces will be obliged to vet third-party suppliers. Large platforms will have to give choice to the user not to receive recommendations based on her profiling. 

The proposed law provides for steep penalties for not complying with its provisions, which can be as high as 6% of the defaulting company/ platform’s annual turnover.

The proposed law has been widely appreciated for its comprehensiveness and provisions. International watchdog organizations and activists have welcomed it and have expressed the hope that it would lead to a better online space. It is felt that since social media is a major online activity that directly impacts people, the provisions on checking misinformation and illegal content, and greater transparency  will make social media a better place for online socialization. 

It is also felt that the DSA will become a gold standard that would be implemented by non-EU nations. It is also expected that countries would improve upon their existing digital/ online laws on the lines of the DSA.

The proposed law binds the member nations to give the regulatory authorities (Digital Services Coordinators) adequate financial, technical and human resources. It also expects member nations to give the regulator independence in its functioning. This would give them teeth sharp enough to bite, and also freedom from governmental interference. Learning from earlier regulations, the proposed law has provision for centralised coordination, guidance and assistance at EU level.

However, the proposed law is being criticized, and for varied reasons.

The foremost critics are those who favour the wild spirit of capitalism and enterprise. Their argument is that regulatory overreach can stifle enterprise, and it can also lead to avoidable litigation. The present self-regulation needs to be tightened a bit, but treating technology providers as criminals might become counter-productive. Moreover, as happens with harsh taxation, there will be efforts towards avoidance. Tech giants are likely to technically meet the stringent terms while ignoring the positive spirit of the regulations.

Interests of host countries of tech giants (at this time, mainly the US) will also work against regulatory frameworks of other nations. The bipartisan US Senate Committee on Finance has already called upon the Biden administration “to work with the European Union to address the discriminatory aspects of the Digital Markets Act (DMA) and Digital Services Act (DSA), which focus regulations on a handful of American companies while failing to regulate similar companies based in Europe, China, Russia and elsewhere, giving those companies a competitive advantage and running afoul of bedrock principles of international trade.”

There are others who do not have faith in the ability of the EU – or even the US – to enforce regulations beyond a point. The present regulatory regime is found to be totally inadequate, though EU has already strict regulations towards protection of privacy and copyright and online activities.

Many find the laws detailed but with ample opportunities for companies to get away unpunished. It is felt that the existing rules that exempt online intermediaries (platforms) from liability of their content will continue to protect them, thus giving them enough cover.

At present, a large number of countries have enacted laws to govern online activity, and the intermediary protection is built into all of them. The intermediary (e.g. a social networking platform such as Facebook or Twitter) is taken as a transmitter of others’ content and a medium for free expression. It is, therefore, free from the liability arising out of the illegality of the content. At the same time, when illegality of any piece of content (e.g. copyright infringement, breaking a country’s laws) is brought to its notice, it must take action on the content. This makes the process subjective and prone to misuse.

This arrangement does not satisfy either the votaries of free expression or those wanting moderation of online content, especially that on social media. However, this is a compromise that does not put too much burden on big platforms with millions of transactions on a single day while puts some sort of oversight on online content.

Those in favour of the DSA affirm that the new law has adequate provisions to address such weaknesses. The DSA, they point out, is an improvement upon the existing regulations in favour of transparency and accountability.

There are others who feel that this Act promotes online censorship, and is likely to stifle freedom of expression in the name of preserving values and serving the public good. Those in authority already use their IT Acts to suppress dissent, and this might even increase after they implement the provisions of the DSA.  

Many suspect that the money power of these tech giants (that results in enormous legal, lobbying and promotional resources in their hands) will not allow impactful action against them. 

For company managements, their responsibility and accountability end with serving the interest of their shareholders or owners. They must earn dollars by hook or by crook, just taking care that they are on the right side of a country’s laws (in practice, being on the side of the authorities is all that they need to do).

The extent of financial muscle power that the technology giants can wield can be seen from the fact that during the two-year period in which these laws were drafter in the European Commission, tech giants intensely lobbied to tame its provisions. It is reported that the lobbying bills were in the range of 27 million Euros (nearly Rs. 218 crore) a year!

In recent years, major ecommerce and social media giants have got away with brandishing their US lineage for avoiding other nations’ laws, showing technical inability to comply with local laws, paying lip service to parliaments while continuing with their games, and so on. 

All things considered, it seems that the DSA will make the online service providers, especially ecommerce and social media platforms, a bit more compliant to authorities. On commercial side, experience shows that when national governments tighten their screws, these giants choose the route of buying out local businesses. On social-political side, when they cannot resist control, they tend to become pliable to the [undesirable] pressure from authorities. On social media, that might translate into less of harmful content but more control on political dissent.

It is some time yet before the Digital Services Act unfolds. It will come into force in parts, probably in the second half of next year.

Further reading

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*Manoj Pandey is a former civil servant. He does not like to call himself a rationalist, but insists on scrutiny of apparent myths as well as what are supposed to be immutable scientific facts. He maintains a personal blog, Th_ink

Disclaimer: The views expressed in this article are the personal opinion of the author and do not reflect the views of raagdelhi.com which does not assume any responsibility for the same.

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