Cybercrimes are ever-increasing. According to the FBI’s crime records, about 33 million accounts were breached in 2023 alone, costing the world economy a whopping $8 trillion. This cost is expected to increase to $10.5 trillion by 2025, impacting more people and businesses.
To reign in this cybercrime, governments are imposing many regulations and safety precautions. The EU is leading this crackdown on cybercrime with many regulations, including the Digital Services Act.
Read on as we dissect the Digital Services Act and what it entails for businesses.
Introduction to the Digital Services Act
The Digital Services Act (DSA) was enacted to create a safe and accountable digital environment. Its fundamental role is to regulate online intermediaries and platforms to prevent illegal activities and the dissemination of wrong or harmful content. As per this Act, online intermediaries include marketplaces, social media networks, app stores, content-sharing platforms, and travel and accommodation platforms. The DSA is part of a broader regulatory framework that includes the Digital Markets Act (DMA), which addresses the challenges digital services pose.
A key goal of DSA is to protect the fundamental rights of users who use digital platforms and channels. It sets clear goals and roles for each entity on a digital platform. Such clarity helps businesses to grow and innovate while protecting users.
Key Provisions of the Digital Services Act
The DSA includes many provisions to address the challenges of the digital environment. Some key elements are:
Due Diligence Obligations
The Act requires online platforms to prevent the dissemination of illegal content. This includes the obligation to remove illegal content promptly and to implement mechanisms for users to report such content.
Transparency Requirements
Platforms must provide clear information about their content moderation policies, including how they detect, remove, and prevent the spread of illegal content. This transparency extends to advertising practices, requiring platforms to disclose when content is sponsored.
Accountability for Algorithms
The DSA requires platforms to provide transparency about the algorithms they use for content curation and recommendation. Users must be informed about how these algorithms work and be given the option to opt out of personalized recommendations.
Risk Management
Large platforms are subject to additional obligations, including conducting risk assessments to identify and mitigate systemic risks associated with their services. These risks could include the dissemination of illegal content, threats to public health, and the manipulation of public discourse.
Independent Audits
Very Large Online Platforms (VLOPs) must undergo independent audits to assess their compliance with the DSA’s obligations. These audits ensure that platforms adhere to the highest standards of transparency and accountability.
Crisis Protocols
The DSA introduces crisis protocols that enable rapid response during emergencies, such as pandemics or large-scale disinformation campaigns. These protocols enable businesses to take swift and coordinated action to mitigate the impact of such events.
Now that you know the important elements of the DSA, let’s move on to see what they mean for businesses.
Implications for Businesses
The DSA has serious implications for businesses operating within the EU or providing services to EU citizens. Know these implications to ensure compliance and avoid potential penalties.
Increased Compliance Costs
One of the immediate impacts of the DSA is the increased cost of compliance. Businesses, particularly those operating large online platforms, have to invest in new technologies and processes to meet the DSA’s requirements. This includes the development of robust content moderation systems, transparency tools, and mechanisms for user reporting and redress.
For smaller businesses, these costs could be particularly burdensome. The DSA recognizes this challenge and provides some exemptions for small and medium-sized enterprises (SMEs). However, even SMEs will require reallocating resources to compliance efforts.
More Accountability and Liability
The DSA imposes greater accountability on online platforms, which translates into increased liability for businesses. Companies must regularly check if their platforms are free from illegal content. Also, they are responsible for ensuring that their algorithms do not contribute to the spread of harmful material. Failure to comply with these obligations could result in substantial fines and reputational damage.
Greater Transparency
Businesses must also be more transparent about their operations, particularly regarding content moderation and advertising practices. It’s important that businesses see this need for transparency as not only a regulatory requirement but also a potential competitive advantage, as consumers increasingly demand greater transparency from the companies they interact with.
Impact on Business Models
The DSA can impact the business models of many online platforms. For example, the requirement to provide transparency about algorithms may lead to changes in how platforms curate and recommend content. This could affect user engagement and, consequently, advertising revenue. Furthermore, the DSA’s emphasis on protecting users from illegal content may force platforms to rethink their content moderation strategies. This could result in a more conservative approach to content curation, potentially limiting the diversity of content available on these platforms.
Cross-Border Implications
Given the global nature of the Internet, businesses outside the EU that offer services to EU citizens will also need to comply with the DSA’s provisions. This requirement could collide with other regulatory frameworks for businesses that operate across multiple jurisdictions.
Thus, these are some aspects that businesses must watch out for as a part of their DSA compliance.
Preparing for the Digital Services Act
A thorough understanding of the provisions and detailed preparation are key to preparing for DSA compliance. Start with a comprehensive assessment of your current operations to identify areas that could require changes to comply with the DSA’s requirements. This assessment should cover all aspects of the business, from content moderation and algorithmic transparency to risk management and crisis protocols.
Once potential compliance gaps are identified, develop a plan to address them. This may involve investing in new technologies, revising content moderation policies, or establishing new procedures for transparency and accountability. Also, consider appointing a dedicated compliance officer or team to oversee DSA compliance efforts.
In addition to internal preparations, engage with external stakeholders, including regulators, industry associations, and civil society organizations to stay informed about the latest developments related to the DSA.
Finally, be proactive in communicating your compliance efforts to users. Transparency and accountability are central to the DSA, and companies that demonstrate a commitment to these principles are likely to gain a competitive advantage in the marketplace.
Key Takeaways
The Digital Services Act revolves around the regulation of online platforms, with far-reaching implications for businesses. While the DSA presents challenges, it also offers opportunities for companies to strengthen their compliance practices, enhance transparency, and build trust with users. For businesses, the key to navigating the DSA is preparation and proactive engagement. Understanding the DSA’s requirements and taking steps to align with them can help avoid potential penalties and position companies as leaders in the digital economy.
In a world where cybercrime and online risks continue to grow, the DSA is a crucial tool for creating a safer and more accountable online environment. Businesses that embrace the DSA’s principles will be better equipped to thrive in this evolving regulatory landscape.