There is no denying that this piece of legislation is a beast. The European Commission’s December 2020 proposal for a new Digital Services Act (‘DSA’) and Digital Markets Act (‘DMA’), marks the biggest shake-up of e-commerce rules since the eCommerce Directive in 2000. Businesses caught by the regulations will be subject to a host of new obligations and requirements (see our post here for a general overview of these) and, like the GDPR, both will have extra-EU territorial effect. This means that the DSA and DMA will apply to all non-EU businesses providing in-scope services within the EU.

Broadly speaking, the measures are designed to (1) better protect the rights of users of digital services, and (2) create a more competitive online environment in digital markets. A closer look reveals that both laws draw heavily on principles of fairness, transparency and accountability that will be familiar to those with experience of European data protection law. These principles are coupled with a focus on giving greater control to the user (not just over the use of their data, but also over a far wider remit of online engagement such as content and content moderation).

What is clear, is that the proposed legislation will impact current online advertising practices. The DSA in particular contains comprehensive rules about online advertising, including targeting advertising, whilst the DMA specifically lists advertising services in its definition of a ‘core platform service’ (providers of core platform services have the potential to qualify as ‘gatekeepers’ under the DMA). 

Looking at the provisions of the DSA in more detail, Article 24 introduces new transparency obligations for online platforms in respect of online advertising. These include displaying information about criteria used to determine the recipients of any targeted advertising. Article 30 builds on this by imposing additional transparency obligations on very large online platforms to make certain information available for advertisements displayed on their interfaces. Finally, Article 36 sets out a framework for the development of specific codes of conduct between the various actors involved in the provision of online advertising. These codes aim to facilitate the transmission of information needed to comply with the new transparency requirements.

In short, the new Digital Services Act package heralds increased regulation on the horizon for the online advertising industry that is firmly rooted in a drive for greater transparency and accountability. Given that penalties under the DSA include fines of up to 6% of annual turnover and periodic penalty payments of up to 5% of average daily turnover, this legislation should firmly be on the radar of all businesses engaging in online advertising.