The European Council has given its final approval to a landmark bill that aims to protect consumers and businesses from illegal products and misleading advertising online.
The Digital Services Act (DSA) is the first piece of EU-wide legislation for e-commerce since 2000 when the E-Commerce Directive was adopted.
The DSA defines clear responsibilities and accountability for providers of intermediary services, such as social media, online marketplaces, very large online platforms (VLOPs) and very large online search engines (VLOSEs).
In a press statement, the Council said the rules are designed “asymmetrically” so that larger intermediary services with significant societal impact (VLOPs and VLOSEs) are subject to stricter rules.
Under the DSA, online marketplaces will face “special obligations” designed to combat the online sale of illegal products and services.
The DSA also aims to improve protection for minors online, by prohibiting platforms from using targeted advertising based on the use of minors’ personal data, as defined in EU law.
Similarly, the DSA will impose limits on the presentation of certain advertising and on the use of sensitive personal data, such as information about a person’s gender, race or religion, for targeted advertising.
In what is believed to be a first by a major regulator, the DSA will also target so-called “dark patterns” in online commerce, whereby users are deliberately misled by confusing interfaces.
However, it is not the first time dark patterns have been cited by regulators. In April, the US Consumer Financial Protection Bureau brought a case against credit agency TransUnion after claiming it was “employing deceitful digital dark patterns”.
The term dark pattern was coined by Harry Brignull, a British user experience designer who defined it as follows: “A dark pattern is a type of user interface that appears to have been carefully crafted to trick users into doing things that are not in their interest and is usually at their expense.”
Examples of dark patterns include hidden costs, such as when a customer is shown one price early on during a purchase, but is then shown a higher price later in the checkout process.
Forced continuity, another dark pattern, is when a customer or potential customer is obliged to input card details simply to browse a certain product or service.
Other dark patterns involve stimulating fear, such as warning of negative consequences if a subscription is cancelled, or locking users into a so-called “roach motel”, where their subscription is easy to enter but difficult to cancel.
“The Digital Services Act is one of the EU’s most ground-breaking horizontal regulations, and I am convinced it has the potential to become the ‘gold standard’ for other regulators in the world,” said Jozef Síkela, minister for industry and trade in the Czech Republic.
“By setting new standards for a safer and more accountable online environment, the DSA marks the beginning of a new relationship between online platforms and users and regulators in the EU and beyond.”
Growing e-commerce
In 2020, the EU estimated that 73 percent of its 447m citizens shop online, generating €757bn in sales.
There is, however, a large range in e-commerce usage between member states, highlighting its growth potential in certain markets. In Germany, for example, 88 percent of consumers shop online compared with 59 percent in Italy.
Looking to the future, the EU expects not only the size of its e-commerce market to grow, but also the complexity of it.
For example, the number of consumers who take part in cross-border e-commerce is estimated to have increased by 13.5 percent in 2021, according to the Council.
The DSA was therefore seen as a necessary step to update the E-Commerce Directive, which is now more than 20 years old.
The Council said that the DSA will combine with the Digital Markets Act (DMA) to produce a framework that is adapted to a digital landscape of e-commerce and social media giants, while introducing measures to protect users and support innovation.
After being introduced by the European Commission in December 2020, one year later in November 2021, member states unanimously agreed on the Council’s position on the DSA.
In April 2022, the Council and the European Parliament reached a provisional agreement on the DSA, which was endorsed by EU member states’ representatives in June 2022.
The provisional agreement on the DMA was reached by the Council and the European Parliament in March this year and signed by the Council and the European Parliament in September.
The DMA will now be published in the Official Journal of the European Union this month, and the legislative act will be adopted.
After being signed by the president of the European Parliament and the president of the Council, the DMA is expected to come into force 15 months later.