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April 6, 2022

Europe’s Digital Services Act is set to cost Big Tech millions

A levy on tech companies is being proposed to cover the cost of Europe's Digital Services Act.

By Afiq Fitri

Big Tech companies will reportedly face a fee of up to 0.1% of annual net incomes to cover the costs of monitoring their compliance with the European Commission’s new Digital Services Act (DSA). The DSA is expected to be approved by the European Parliament later this month and will cover issues related to content moderation, data sharing and competition rules on the biggest online platforms.

European Commission executive vice-president Margrethe Vestager believes the DSA will create a safer online space for European citizens. (Photo by Dursun Aydemir/Anadolu Agency via Getty Images)

The fee, detailed in EU documents seen by Reuters, would not exceed 0.1% of each company’s annual net income. Based on these figures, Alphabet, Google’s parent company, could potentially face fees of up to $76m annually, while Meta, the company behind Facebook, could pay up to $39m, according to an analysis of each company’s annual financial reports for 2021. 

The Commission is reportedly seeking extra funds to help the bloc recover from the impact of the pandemic and to pay for external experts to enforce the rules of the DSA.

According to the EU document, the annual supervisory fee would be proportionate to the size of each company’s service and the number of its total users in the region. As of March 2022, Google has more than 92% of search engine market share in Europe. Online platforms that would be impacted by the DSA are those with 45 million average monthly active users in the EU. 

What is the Digital Services Act?

Much like the UK's Online Safety Bill, the Digital Services Act aims to create a safer online environment by cracking down on illegal content including child abuse images, racist and xenophobic material, and the trade in illegal goods. Though it will not hold platforms such as social media apps responsible for other people's content if they don't know it is illegal, they will be obligated to swiftly remove this content once it has been flagged, as well as being more transparent about how their content-serving algorithms work.

"Our guiding objectives remain crucial: making internet safer for our citizens, protecting them from illegal content - including unsafe or non-authorised products - while securing their freedom of expression online," said the European commissioner for competition, in a speech about the DSA in January.

Many of the bills provisions only apply to platforms with more than 45m users in the EU, meaning Big Tech companies like Meta, TikTok and Twitter will fall within its scope. Not-for-profit platforms s such as Wikipedia are exempt from the DSA and thus the annual supervisory fee.

"We want the implementation of the DSA to be a success, and support supervisory fees that are proportionate, backed by a detailed methodology, and commensurate with industry standards," an Alphabet spokesperson told Reuters.

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