EU Digital Act Limits Algo-Driven Marketing

Advertisers will not be allowed to target children using profiling or people using sexual orientation or religious beliefs.

Search engines, social media platforms, online messaging providers and cloud hosting services have until January 1, 2024 (or until 15 months after the EU’s recently passed Digital Services Act (DSA) enters into force, whichever is later), to be in compliance with new limits on use of algorithms in marketing.

“[It’s] nothing short of a paradigm shift in tech regulation,” Ben Scott, a former tech policy adviser to Hillary Clinton, told the Associated Press. “It’s the first major attempt to set rules and standards for algorithmic systems in digital media markets.”

Among its new rules, the legislation bans advertising targeting minors using profiling as well as targeted advertising that uses “special categories of personal data, such as sexual orientation or religious beliefs.” The DSA also implements rules to trace sellers on online marketplaces and improve transparency regarding algorithms that recommend content or products to users.

The very large online platforms also must take risk-based actions and have independent audits of their risk management platforms to mitigate risks against “disinformation, election manipulation, cyber violence against women, or harms to minors online,” according to a supplementary EU publication.

The DSA regulates digital services that act as intermediaries connecting consumers with goods, services and content, especially those intermediaries the EU deems “very large online platforms” (VLOPs)—those that reach 45 million users within the EU.

Under the legislation, each member state will establish an independent authority to supervise and/or coordinate with specialist sector authorities. These entities will impose penalties and fines established by their respective member states as well as mandate immediate actions—except as concerns the VLOPs. Those will be penalized directly by the EC—and the fines can reach 6% of global turnover. If an online intermediary refuses to comply with its obligations in a way that puts user safety at risk, the EU may seek suspension of the intermediary’s services via the courts.