September 30, 2022

The European Parliament has Voted by overwhelming margins(Opens in a new window) To adopt two bills, the Digital Services Act (DSA) and the Digital Markets Act (DMA), that would subject online platforms and “gatekeeper” tech companies to broad new requirements that could require significant changes in how US tech giants do business.

The EU legislature passed the DSA by a margin of 539 to 54, with 30 abstentions, and approved the DMA in an unbalanced vote: 588 yays, 11 ns, and 31 abstentions.

The sprawling text(Opens in a new window) (PDF) from Digital Services Law(Opens in a new window) It covers social platforms, online marketplaces, and search engines. It establishes a “notice and action” system that requires the prompt removal of illegal content as reported by users while requiring more transparency by the companies involved about its implementation. Other transparency rules cover targeted advertising and recommendation algorithms, including a requirement that platforms provide a single “recommendation system” that is not based on personal profiling.

The DSA further requires online marketplaces—referred to as “platforms that allow consumers to enter into remote contracts with merchants,” but you might think of them more succinctly as “Amazon”—to verify the identity of sellers and perform random checks on illegal goods or services being conducted. submit it.

This law adds additional compliance requirements for “very large” Internet platforms, which are defined as those that reach more than 10% of the EU population (ie 45 million or more monthly active users), such as How did banking regulators deal with the largest financial institutions(Opens in a new window) Since the 2007-2008 financial crisis. They must regularly assess and mitigate the systemic risks of their services, including “any actual or anticipated negative impacts on civil discourse and electoral processes.

In the deal, the DSA blocks all ads targeted to minors and bans “dark patterns” or misleading interfaces that attempt to trick users into making choices against their own interests.

The shorter text(Opens in a new window) (PDF) from Digital Markets Law(Opens in a new window)Meanwhile, it’s getting to the point of a legal hit targeting large enough “gatekeeper” companies that provide basic functionality such as operating systems, social networks, online messaging, web search, app stores and online advertising. It covers companies with at least 45 million monthly active users and either 7.5 billion euros in revenue at EU level over the past three years or a market cap of at least 75 billion euros.

The DMA has shielded gatekeepers from engaging in self-preferential behavior such as requiring developers to use their payment mechanisms (a profit-stuffing tactic at both Apple and Google); Lock users into their app stores; not allow the choice of browsers, search engines and personal assistants; block interoperability of messaging applications; and use data collected from users of these basic services for advertising.

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DMA promises to make the smartphone experience dramatically different in the European Union, something Apple has denounced for threatening the privacy of its users, although the DMA script allows gatekeepers to impose their own security measures on alternative app download mechanisms.

Both the DSA and DMA follow the EU’s General Data Protection Regulation model in imposing comprehensive and detailed rules on tech companies, with equally heavy fines imposed on those found guilty of violating them. The former allows fines of up to 6% of a covered company’s global income in the prior fiscal year, while the latter allows penalties of up to 10% of a gatekeeper’s global income in the prior fiscal year, with potential fines of up to 20% of global income for repeaters.

And like the General Data Protection Regulation (GDPR), these laws in the US have not yet been matched by the passing of any similar legislation, despite a similar level of concern here about the power of the biggest tech companies.

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