The Digital Services Act (DSA), the European Union’s new rules to regulate online content, will begin to take effect today. This law targets “very large online platforms” in order to curb “harmful” and illegal information online, while also creating new responsibilities for algorithmic and advertising transparency. Platforms such as Facebook, Instagram, Snapchat, Twitter, and Wikipedia are, according to the EU, large enough to warrant strict regulations under the DSA. Noncompliance comes at a hefty cost: Companies in violation of the Act are subject to fines of up to 6% of their annual turnover.
Although the DSA—along with the competition-focused Digital Markets Act (DMA)—are set to transform how technology companies operate in Europe, the spillover effects will certainly be felt here at home. The House Committee on Oversight and Accountability found that the DMA designates U.S. companies as “gatekeepers” in order to improve market conditions for foreign businesses at the expense of American companies:
The EU’s Digital Markets Act aims to increase competition in the European tech market space but does so by targeting American online platforms under the designation as ‘gatekeepers.’ The EU’s goal is to make European tech more competitive versus their American counterparts by subjecting the gatekeepers to greater scrutiny and burdens than their competitors. Specifically, the gatekeepers will be forced to provide third-party access to hardware, software, and operating systems, as well as require gatekeepers to share intellectual property.
The European laws subject American technology companies to extensive foreign oversight, beyond the requirements imposed on others. In a recent letter, Senator Ted Cruz addressed how the DSA and DMA will stifle domestic businesses and America’s technological competitiveness:
[The DSA] forces heightened requirements — like mandatory participation in external audits and data sharing with government authorities — on so-called ‘very large online platforms’… U.S. companies own sixteen of the nineteen online platforms subject to the DSA’s heightened requirements… Again, non-U.S. companies are largely off the hook. Taken together, the DMA and DSA objectively discriminate against U.S. companies by imposing enormous regulatory compliance costs and penalties on them, while handing companies from other countries—especially China—a competitive edge.
As the DSA and DMA come into effect, policymakers should consider how these laws will affect America’s technological growth and innovation. Such protectionist rules are poised to have an outsized impact on American technologies and businesses while depriving users of increased information, access, and community.