Who: The European Commission
Where: European Union
When: 15 December 2020
Law stated as at: 1 March 2021
The European Commission released its proposal for the Digital Services Act (DSA) at the end of 2020. While the e-Commerce Directive remains the cornerstone of digital regulation, much has changed since its adoption 20 years ago. The DSA builds on the e-Commerce Directive to address new challenges. It overhauls, clarifies and updates many aspects of the eCommerce Directive, with the aim of making the online world safe and reliable.
As part of this, transparency is a crucial principle and advertising services are under the spotlight. The proposed DSA expressly sets out concerns in relation to insufficient transparency given to advertisers and publishers using online advertising services, which it acknowledges is partially due to “the sheer complexity of modern day programmatic advertising”. In particular, the DSA states that there is a lack of information for advertisers and publishers about the effect of an advertisement. In addition, it is concerned that advertising services may become increasingly opaque as new legislation is introduced and third party cookies are removed.
Therefore, to further enhance the fairness and transparency of online advertising services caught by the DSA, it proposes significant new transparency obligations relating to providing:
- performance measuring tools to allow advertisers and publishers to have better control over ad inventory;
- information for advertisers and publishers in relation to the amounts paid for advertising; and
- better algorithmic transparency, including providing meaningful information to users about who has paid for an ad and why the ad is being targeted to a user.
The DSA will require the approval of both the European Parliament and EU countries through the European Council. The Commission is looking for the DSA to be implemented as fast as possible, but the proposed new rules could still take up to two years to become law. The final rules are not expected until 2023 at the earliest. Once adopted, the new rules will be directly applicable across the EU.
Why this matters:
The DSA is likely to be heavily negotiated with the EU Parliament, EU countries and affected service providers. Nonetheless, the Commission’s aim to increase transparency online continues and is unlikely to disappear. As such, advertisers, publishers and advertising service providers need to be prepared for these new rules. For advertisers, there will be a need to carefully consider how to target advertising if transparency tools become available to users that reveal their target markets and key terms. For advertising service providers and publishers, the further transparency tools are likely to require significant work to ensure that the information provided is sufficiently transparent while balancing commercially sensitive information.