The EU's Digital Services Act (DSA)

Philipp Rosenauer
Partner Legal, PwC Switzerland

After more than 20 years, parts of the e-Commerce Directive are to be updated through the DSA. A lot has happened since the e-Commerce Directive came into force. Online platforms have contributed significantly to innovation and cross-border trade, which also benefits consumers. However, these platforms are also being misused to disseminate false information and illegal content.

What’s the aim of the DSA?

The DSA will regulate digital service providers. This new regulation will change various players’ obligations significantly – and will affect very large online platforms (VLOPs) in particular.

The DSA aims to promote innovation, growth and competitiveness within the internal market. It also aims to create clear accountability for online platforms and a framework for greater transparency, and to provide greater protection for consumers and respect for their fundamental rights on online platforms. What’s illegal offline should also be illegal online. However, the DSA won’t specify what content is illegal, as this is specified in regulations at the EU or national level.

Who will the DSA affect?

The DSA will apply to most online intermediaries. Specific obligations will apply to hosting service providers and online platforms such as social networks, content sharing platforms, app stores, online marketplaces and online platforms for travel or accommodation. The most far-reaching obligations will apply to VLOPs – platforms that reach at least 45 million users in the EU.

What obligations will the affected companies have?

Players’ obligations under the DSA will vary depending on their size, influence and role. Specifically, this means the following:

	Online intermediaries	Providers of hosting services	Online platforms	VLOPs
Reporting on transparency	●	●	●	●
Requirements for terms of use to take fundamental rights into account	●	●	●	●
Cooperation with national authorities with respect to orders	●	●	●	●
Contact person and legal representative, if applicable	●	●	●	●
Notification and measures as well as duty to inform users		●	●	●
Reporting of offences		●	●	●
Complaints and redress procedures and out-of-court dispute resolution			●	●
Trusted flaggers			●	●
Measures against abusive notifications and responses to notifications			●	●
Specific obligations for marketplaces, e.g. verification of third-party credentials, compliance by design and sampling			●	●
Prohibition of advertising that is targeted at children or is based on particular characteristics of users			●	●
Transparency of recommendation systems			●	●
Transparency of online advertising to users			●	●
Obligations regarding risk management and crisis response				●
External and independent audit, internal compliance function and public accountability				●
Users’ right to opt out of recommendations that are based on profiling				●
Data sharing with authorities and researchers				●
Codes of conduct				●
Cooperation when responding to crises				●

Where do we go from here?

In early July 2022, the European Parliament held its final vote on the DSA and adopted it. The DSA will enter into force 20 days after it has been formally adopted and published in the Official Journal of the European Union. The DSA will apply directly throughout the EU with effect from 15 months after its entry into force or, if later, with effect from 1 January 2024. The DSA will apply earlier for VLOPs and large online search engines: four months after they have been designated as such by the Commission.

Are Swiss companies also affected?

As with the General Data Protection Regulation (GDPR), the DSA will apply to companies that are domiciled outside the EU providing they offer their services in the EU. A large proportion of Swiss companies that are active in this area will therefore be covered by the DSA. Any of these companies that do not have branches in the EU will have to appoint legal representatives. Swiss companies must prepare for the DSA entering into force, not least because they will otherwise risk severe sanctions.

Our team will be happy to advise you on taking the necessary precautions and to help you work out which obligations will apply to your company. We will also be happy to help your company to adapt or draw up instructions and codes and to implement them.

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