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What is the Digital Services Act?

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If you operate your business online, it is important that you are aware of your legal obligations. The Digital Services Act (‘the Act’) came into force in November 2022. The Act is a European Union law that applies to various digital service providers in its aim to tackle illegal content online. Whilst the Act is EU law, it will also apply to certain UK businesses that offer services to individuals in the EU. This article will set out some essential information about the Digital Services Act and its implications for digital businesses.  

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What is the Digital Services Act?

The Act prescribes rules on how online intermediary services, online platforms and search engines should foster a safer online environment for users. Intermediary services are service providers who act as intermediaries by connecting consumers with goods, services, and content. 

What Businesses Does the Digitial Services Act Apply To? 

Several types of digital businesses will likely be caught by the Digital Services Act. For example, social networks, search engines, online marketplaces, messaging services and e-commerce shops. 

When Does the Digitial Services Act Apply? 

For the vast number of businesses, their obligations under the Act will apply from 17 February 2024. However, extensive online platforms and search engines will need to comply with rules before this time. 

What Are the Rules Under the Digitial Services Act? 

The rules your business must follow under the Act depend on the size and impact of your business. Nevertheless, some of the fundamental obligations under the Act include:

  • transparency obligations, including the need for better information to be set out in terms and conditions;
  • putting in place measures to tackle illegal content online; 
  • new obligations to protect minors using platforms;
  • putting in place effective safeguards for users and affording them more rights, such as the right to complain to platforms;
  • new bans on certain types of targeted advertising by platforms, such as advertising involving the profiling of children; and 
  • tge need for businesses outside of the EU who are caught by the Act to appoint an EU representative. 

The consequences of failing to comply with the Act are severe. Businesses can be fined up to 6% of annual global turnover in the preceding financial year for breaching the rules applicable to them.

How Can the Digital Services Act Impact Your Business?

UK businesses offering services to the EU market need to pay close attention to the Act. Its rules will apply to businesses based inside the UK that target users or have a significant number of users who are EU-based. 

The Act is complex, and certain obligations are heavily onerous, meaning UK businesses will need to dedicate significant time, budget and resources to reviewing its rules and complying with them. 

However, there are specific steps that UK businesses should consider taking to work towards complying with the Act. Namely, UK digital businesses should consider:

  • whether they need to comply with the Act and its rules; 
  • reviewing the rules under the Act applicable to them; and
  • reviewing internal practices, policies and procedures and updating them as necessary to comply with the Act.

The Act is new and complex, and failing to comply with it comes with significant risks. Therefore, businesses should invest in legal advice to ensure that they fully understand their obligations. It may be that certain UK businesses will need to make vast technical changes to their online platforms and offerings to comply with the new rules.

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Key Takeaways 

The Digital Services Act is an innovative new law that will apply to UK businesses caught by its scope. Some of the obligations under the Act will be highly demanding for businesses. As this is a relatively new law, we expect further developments and guidance around its application to follow. UK digital businesses should carefully consider the Act and its scope. Compliance with the Act will require significant time and effort since the law is complicated. 

If you need help understanding the Digital Services Act and how it applies to your business, our experienced data, privacy and IT lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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