DSA - high fines for popular Social Media app?

THE CONSTITUTION OF THE INTERNET - THE EU DIGITAL SERVICES ACT

On February 17, 2024, the Digital Services Act ("DSA"), also known as the Internet Constitution, came into force - a landmark set of EU rules designed to make the online environment safer, fairer and more transparent. The DSA is an EU regulation, so it applies directly within the European Union, without the need for implementation into national law.

The DSA has already been applied in part since November 16, 2022. The regulations, which took effect a few days ago, impose new obligations on businesses providing intermediate services, i.e. hosting and access to online trading platforms.

The DSA's main goal is to combat disinformation and illegal and harmful activities on the Internet. The regulation is intended to enhance the protection of consumers and their fundamental rights.

To this end, the DSA provides, among other things:

a) an easy way for users to report illegal content, goods or services,

b) stronger protection for those harassed and bullied online,

c) transparent advertising,

d) prohibition of certain types of profiled advertising (e.g., advertising using sensitive data or data of minors),

e) easy-to-use, free complaint mechanisms in case an online platform removes user content,

f) restriction on the use of "dark patterns" by platforms.

What are dark patterns and why are they harmful?

A dark pattern is a way of designing a website that causes the user to take actions that he or she did not plan. The easiest way to explain it is with an example.

A customer is interested in buying a certain product online. The search engine shows 5 vendors with a similar price, while there is another vendor, much cheaper than the competition. The customer goes to this vendor's site, but it turns out that the selected product is unavailable.

The dark pattern in this case is that the vendor deliberately lists a lower price to entice the customer to go to his site. Even though the product selected by the customer is unavailable, the chance of the customer taking advantage of the vendor's offer and purchasing a product he was initially not interested in at all is higher.

Such design is designed to manipulate the user, hence the use of such practices is extremely harmful to the consumer.

The DSA applies to all intermediaries and online platforms providing services in the EEA, regardless of whether they are based in the territory. 

Only entrepreneurs with micro or small business status (i.e. with up to 50 employees and an annual turnover of less than €10 million) have been exempted from a significant portion of the obligations provided for online platform providers.

Penalties for DSA violations are very severe, amounting to as much as 6% of the annual worldwide revenue or turnover of intermediary service providers in the previous fiscal year.

After only a few days of the DSA being in effect, the first prosecution has been initiated against popular Social Media app for suspected violations of transparency and obligations to protect minors. If the service is found guilty of violating DSA rules, it faces penalties of 6% of global turnover!

To avoid the risk of such high penalties for violating the DSA, it is therefore worth considering an audit of the compliance of the provision of indirect services with the new regulations.

If you would like detailed information on the new legislation and our proposed services in this regard, please feel free to contact our legal department.