In a recent post by Moody’s Analytics, the firm outlined the five obligations firms have relating to the Digital Services Act.
The European Digital Services Act (DSA), which came into effect on February 17, 2024, has ushered in a new era of responsibility for digital service platforms.
This landmark regulation spans across host providers, online marketplaces, and social media networks, targeting the largest global platforms that daily serve millions and host the offerings of thousands of third-party suppliers. The scope and significance of the DSA’s reach cannot be understated, as it aims to forge a safer and more equitable online environment for users across the European Union.
Central to the DSA’s objectives is the protection of EU citizens from illegal goods, content, and services, safeguarding their fundamental rights in the digital realm. The legislation introduces six foundational pillars designed to streamline reporting mechanisms for illegal content, enhance protections against online harassment, increase advertising transparency, and enforce bans on certain targeted advertisements. This includes a prohibition on using sensitive data or the data of minors for advertising purposes, alongside establishing accessible, cost-free complaint procedures and simplifying terms and conditions for better user understanding.
The DSA’s applicability is broad, encompassing very large online platforms and marketplaces, social media sites, and search engines with user numbers exceeding 10% of the EU’s population, or roughly 45 million users. Digital service providers within the EU are now tasked with a pivotal “know your business” (KYB) obligation, necessitated by Moody’s, to ensure a secure, transparent, and trustworthy online marketplace. This KYB process is integral for the verification of third-party sellers on platforms, demanding thorough due diligence to prevent the sale of unsafe or counterfeit goods and to protect the platform’s reputation and compliance status.
The DSA delineates explicit KYB obligations, requiring platforms to obtain and authenticate crucial information from traders, including names, contact details, identification documents, and registration numbers where applicable. This due diligence facilitates a safer trading environment and deters malicious actors from exploiting digital marketplaces.
Moreover, the DSA mandates several compliance requirements for digital intermediaries. These include the prevention of system abuses, new rules for tracing sellers in online marketplaces to bolster consumer trust, a ban on manipulative “dark patterns”, and concerted efforts to combat illegal online content. Additionally, the act places special emphasis on protecting minors, with stringent rules against targeted advertising based on sensitive personal data.
In summary, the DSA aims to create a more secure online space by mandating that online platforms implement strategies to detect and remove illegal goods, services, or content. This includes enhancing transparency regarding algorithmic processes and introducing new obligations for online marketplaces to verify the identities of traders. The act underscores the responsibility of traders to provide accurate information and the necessity for online marketplace providers to vet both new and existing traders to ensure compliance. As the digital landscape evolves, the DSA stands as a testament to the EU’s commitment to fostering safer and more transparent online environments.
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