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    Digital Services Act and Digital Markets Act Go into Effect in EU

    November 22, 2022

    Nearly 15 days after the entry into force of the Digital Markets Act in European Union, the European Commission (EC) announced the entry into force of the Digital Services Act too. Following the entry into force of the Digital Services Act, the EC Joint Research Center (JRC) is setting up a European Center for Algorithmic Transparency (ECAT). The new Center is expected to be fully operational in the first quarter of 2023 and aims at becoming a center of gravity for the international research in the field, acting as a knowledge hub for vetted researchers analyzing data provided under the Digital Services Act.

    The Digital Services Act calls for increased oversight of the algorithmic systems used by very large online platforms and search engines. This includes how they moderate content and propose information to their users. The new Center will support EC in assessing whether the functioning of such algorithms is in line with the risk management obligations under the Act.  Following the entry into force of the Digital Services Act, online platforms will have three months to report the number of active end users (February 17, 2023) on their websites. EC is also inviting all online platforms to notify to it the published numbers. Based on these user numbers, EC will assess whether a platform should be designated a very large online platform or search engine. Following such a designation decision by EC, the entity in question will have 4 months to comply with the obligations under the Act, including carrying out and providing to EC the first annual risk assessment exercise. The Digital Markets Act entered into force on November 01, 2022 while the Digital Services Act will enter into force on November 16, 2022. The  Digital Services Act will be directly applicable across European Union and will apply fifteen months or from January 01, 2024, whichever comes later, after entry into force. Regarding the obligations for very large online platforms and very large online search engines, the  Digital Services Act will apply from an earlier date —that is, four months after their designation.

    EC had proposed, on December 15, 2020,  the Digital Services Act, together with the proposal on the Digital Markets Act, as a comprehensive framework to ensure a safer, more fair digital space for all. Companies operating one or more of the so-called “core platform services” listed in the Digital Markets Act qualify as a gatekeeper if they meet the requirements described below. These services are online intermediation services such as app stores, online search engines, social networking services, certain messaging services, video sharing platform services, virtual assistants, web browsers, cloud computing services, operating systems, online marketplaces, and advertising services. There are three main criteria that bring a company in the scope of the Digital Markets Act:

    • A size that impacts the internal market: when the company achieves a certain annual turnover in the European Economic Area (EEA) and it provides a core platform service in at least three EU Member States;
    • The control of an important gateway for business users toward final consumers: when the company provides a core platform service to more than 45 million monthly active end users established or located in European Union and to over 10,000 yearly active business users established in the European Union
    • An entrenched and durable position: in the case the company met the second criterion during the last three years

     

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    Keywords: Europe, EU, Banking, Digital Markets Act, Digital Services Act, Artificial Intelligence, Algorithmic Auditing, Platform Businesses, Regtech, Suptech, Gatekeeper Designation, Cloud Computig Services, EC

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