The European Union’s Digital Services Act has a significant impact on digital service providers in the EU. These online marketplaces, social media platforms, search engines, and other digital service providers have new content moderation and reporting requirements to adhere to. But what about businesses based outside the EU?
The Digital Services Act (DSA) is a set of regulations introduced by the European Union (EU) to regulate digital service providers and level-set the entire digital space. It aims to create a fair and transparent online environment for both consumers and businesses within the EU by addressing three main issues: illegal content, harmful and counterfeit products, and unfair market practices.
Understanding the DSA is crucial for any business that operates within the EU or has customers or sellers from the EU. However, what if your business is based outside the EU but has customers/sellers within the EU? Do you still need to comply with the DSA?
In this article, we will discuss the implications of the DSA for non-EU marketplaces and why they should care about these regulations—even as much as their European counterparts.
What we cover
What is the DSA?
The DSA was proposed by the European Commission in December 2020 and will be fully implemented on February 17, 2024. It consists of rules and regulations that govern digital services across the EU, including online marketplaces, social media platforms, search engines, and online intermediaries.
The main goal of the DSA is to improve transparency and accountability for digital services, ensuring that all users are treated fairly and their rights are respected. It also aims to prevent illegal or harmful content from spreading on online platforms.
The three main issues the DSA seeks to address are:
Illegal content
One of the key provisions of the DSA is the responsibility that digital service providers have in removing illegal content from their platforms within a reasonable time frame. This includes hate speech, terrorist content, child sexual abuse material, and intellectual property infringement.
Harmful and counterfeit products
The DSA also requires online marketplaces to take measures to prevent the sale of harmful and counterfeit products on their platform. These measures include implementing a notice-and-action procedure for users to report such products, as well as ensuring product safety and compliance with EU regulations.
Unfair market practices
The DSA also aims to regulate unfair market practices, such as the use of algorithms that promote illegal or harmful content, bias in ranking and recommender systems, and opaque advertising practices.
Does the DSA apply to non-EU marketplaces?
The short answer is yes.
The DSA applies to any digital service provider that operates within the EU or has customers/sellers from the EU, regardless of where the business is based. This means that even if your marketplace is located outside the EU, but you have EU customers/sellers, you are still required to comply with the DSA.
If EU customers/sellers aren’t a part of your services and you don’t plan on moving into the EU market, then the DSA doesn’t apply to your business. However, with many of the world’s leading economies making up the EU, this would be a rare exception for many companies.
The European Commission specifies that the DSA’s provisions “apply in the EU single market, without discrimination, including to those online intermediaries established outside of the European Union that offer their services in the single market.”
The scope of the DSA is broad and applies to:
- Intermediary services offering network infrastructure such as internet service providers, domain name registrars, and online search engines
- Hosting services such as cloud and web hosting service providers
- Online platforms, such as marketplaces, app stores, and social media platforms
Why should non-EU marketplaces care?
Non-EU marketplaces may think that the DSA does not concern them since they are not physically located within the EU. However, failure to comply with the DSA can result in significant penalties and fines, even for businesses based outside the EU.
The penalties for non-compliance range from fines of up to 6% of the global turnover of a service provider to potential suspension or even closure of the platform in question. This means that even if your business operates solely outside the EU, you could still face significant consequences for not complying with the DSA if you have EU-based users/sellers/customers.
Moreover, by complying with the DSA, non-EU marketplaces can demonstrate their commitment to transparency, fairness, and consumer protection. This can help build trust with EU customers and make your marketplace more attractive to potential sellers.
What do non-EU marketplaces need to do?
If your business falls within the scope of the DSA, there are several obligations that you need to comply with, including:
- Publishing annual reports detailing any content moderation your business engaged in during the relevant period
- Specifying in your platform’s terms and conditions any restrictions that may be imposed on users of the service as it relates to the information the user provides
- Appointing a point of contact (or where situated outside of the EU but offering services within the EU, appoint a legal representative) to enable them to communicate with Member State authorities, the European Commission, and the to-be-established European Board for Digital Services
- Appointing a single point of contact to enable users to communicate with them and provide necessary contact information
There are also additional obligations for VLOPs (very large online platforms) and VLOSEs (very large online search engines), such as:
- Identification and assessment of systemic risks stemming from the design or functioning of their service, including algorithmic systems, and provision of reasonable, proportionate, and effective mitigation measures against the identified risks
- Maintenance of a repository detailing information on advertisements presented on online interfaces
- Development of a new crisis response mechanism, allowing the Commission to compel certain conduct from VLOPs and VLOSEs in extraordinary circumstances
- External and independent auditing, enhanced transparency, and public accountability
- Provision to users of the choice not to have recommendations based on profiling
- The sharing of data with authorities and researchers to enable them to understand how online risks evolve
Creating profiles for all sellers
One of the key obligations under the DSA is to ensure that all sellers on your marketplace have a profile that displays their contact information, including name, address, email, and phone number. This requirement applies to both EU and non-EU sellers.
Creating profiles for all sellers can help ensure transparency and accountability in your marketplace, making it easier for users to report any issues or violations. It also helps protect consumers by providing them with the necessary information to make informed purchasing decisions.
EU sellers vs. non-EU sellers
On a basic level, there is no distinction between EU and non-EU sellers under the DSA. Both are subject to the same obligations and regulations. However, depending on where your marketplace is located and where your customers/sellers are from, you may need to comply with additional laws and regulations.
In conclusion, non-EU marketplaces should care about complying with the DSA as it not only helps them avoid penalties but also demonstrates their commitment to transparency, fairness, and consumer protection.
KYC as easy as 1.2.3.
At Trolley, we understand the importance of complying with the DSA for both EU and non-EU marketplaces. With global payout capabilities a well-loved feature of the platform, it made sense for us to offer DSA compliance solutions. That’s why our platform is designed to help you meet your obligations under the DSA easily and effectively.
We automate DSA seller compliance for growing marketplaces, with built-in KYC & KYB —so you can operate in Europe with full confidence, regardless of whether or not your business is located in the EU.
With automated seller onboarding and data collection, plus business and ID verification, Trolley’s DSA compliance toolkit allows you to meet the challenges of the EU’s Digital Services Act and reduce your overall risk.
We also have other resources available to help you understand how to get compliant, including a full timeline of the DSA’s implementation and a guide to the DSA for marketplaces.
US-based marketplaces may benefit from our guide to the INFORM Consumers Act, legislation mandating the collection, verification, and disclosure of specific information about marketplace sellers.
Contact us today to learn more about our services and how we can help your marketplace thrive, or read more about our DSA compliance solutions.
