Much has changed on the world wide web since the year 2000. Back then, most of the world was connecting to the internet with a 56K modem, Google Beta was released just a year prior, and hotmail.com email accounts were all the rage.
It’s hard to imagine that, until now, the European Union’s rules on digital services derive from a framework created more than 20 years ago in the form of the e-Commerce Directive (ECD) of 2000. Until only recently, the ECD outlined online rules to regulate e-commerce and digital services across the EU.
This all changed on October 27, 2022, with the Digital Services ACT (DSA) being signed into law. As one of the most significant updates to the EU’s legal framework for online regulations, the DSA seeks to hold online services such as e-commerce marketplaces, hosting services, and social media platforms more accountable with a series of responsibilities aimed at creating a safer online environment for all users.
While the DSA’s biggest impact will be on “big tech” giants, anyone who operates a business online, whether it produces content, sells products, or offers services, should have its passing on their radar.
Here’s what businesses operating in the e-commerce space should know about the recent landmark legislation.
Cracking Down on “Disinformation” with Digital Services Act (DSA)
One of the primary objectives of the DSA is to influence big tech players such as Google, TikTok, Facebook, and Twitter to crack down on “fake news.” On Instagram, for example, posts can often be marked as “false information” as part of that platform’s effort to “reduce the spread of false information.”
Users can expect the DSA to enforce similar features on other platforms for users in the EU. So, how does this impact e-commerce businesses? Well, the DSA’s efforts to force platforms to crack down with stricter content moderation rules and procedures will extend to targeted ads.
E-commerce brands running social media campaigns may find it more difficult to run targeted ads aimed at children or tailored to people’s ethnic backgrounds or sexual orientations. The DSA will place restrictions on targeted advertising based on specific categories along with the use of “dark patterns” on the interface of online platforms.
Taking Aim at Big Tech: VLOPs and VLOSEs
Within the DSA’s framework are two sets of rules for Very Large Online Platforms (VLOPs) and Very Large Online Search Engines (VLOSEs). According to the DSA, VLOPs and VLOSEs are defined as platforms with more than 45 million users in the EU.
These platforms will be subject to stricter rules regulating illegal content, products, and services. With a reported 151.9-million Amazon prime users in 2021, the e-commerce giant certainly qualifies as a VLOP. So do other e-commerce giants such as eBay, Alibaba, Etsy, and Shopify.
Under the DSA, VLOPs/VLOSEs can expect to face a wide range of strict measures impacting their algorithms, placing limits on tracking-based advertising. While VLOPs/VLOSEs must also offer users a system for content recommendation algorithms that are not based on profiling.
The Bottom Line
Broadly speaking, the DSA aims to create a safer environment for internet users in the EU. It seeks to enforce stricter notice and action mechanisms to moderate illegal content and misinformation, strengthen online advertising transparency, and implement transparent algorithms, which are clearly defined in an online service’s terms and conditions.
While the long-term impact of the DSA remains to be seen, brands and businesses operating in the e-commerce space are well aware of the negative impact counterfeit goods, grey markets and other illicit activities can have on a brand’s reputation.
As a trusted e-commerce brand, you have a responsibility to both your own company and the e-commerce industry as a whole to protect the vulnerable consumer and the DSA promises to hold e-commerce marketplaces more accountable for fighting such threats on their platforms.
