The Digital Services Act – a saviour of the small business?

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Imagine a law being approved that affects all of us, a law that will possibly change the Internet as we know and have known it completely – but very few people know about it. This is exactly what happened recently. On April 23, after two years of negotiations, the European Parliament settled on a deal for the Digital Services Act (DSA), one of many acts from the Digital Services Package, aiming at creating a safer and more transparent virtual environment. Margrethe Verstager, the European Commissioner for Competition, states that the main goal is that "what is illegal offline should also be seen and dealt with as illegal online".

In order to illustrate the new law adopted on a local level and to show the challenges ahead for those affected, the Lëtzebuerger Journal listened to the views of affected people and an expert: Anne Diderich, the owner of the local bookshop Diderich, Stephanie Medeiros, the owner of a hair salon based on Instagram and Marc Lemmer, a Data Protection Commissioner from the National Commission for Data Protection (CNPD). The aim is to explore the effects of social media on small businesses and how this may be affected by the changes in data protection.

Over the COVID-19 pandemic, the librairie Diderich in Esch-sur-Alzette went through an experience many independent businesses were familiar with at that time: fewer people walking through the store, less business, and a lot more reliance on their online presence. During those last two years, a lot of businesses were greatly helped by having their social media sites and websites running well, and Diderich was no exception.

The store established in 1945 by Anne Diderich’s grandmother that has been kept in the family for three generations is very keen on keeping an active social media platform and homepage, to stay competitive and up to date with other businesses. But despite that, they remain firm on valuing personal business over online commerce. As stated by the owners, "the website is used to showcase what we have in store" for them, the main goal is to "attract customers into their store"; since they "put great emphasis on human contact". Personal in-store sales are still the go-to way to do business. The family-owned business pushes to show young people that bookstores are still great places to be. They "want to get rid of the stigma that a bookstore is a quiet, boring place", they even introduced a café as part of their store, providing an experience that an online store simply cannot reproduce.

Social Media as a business platform

Stephanie Medeiros, a self-taught Brazilian hair stylist that specialises in curly hair, created the Instagram page Curly Stephanie in 2019. When she came to Luxembourg nine years ago, she "noticed that there were no hair salons that could help with my curly hair, so I decided to teach herself how to do it", which is when she decided to create her own business. Her hair salon exists solely through Instagram, where the page has already amassed about 2,067 followers. During the interview conducted by the Lëtzebuerger Journal, Stephanie reveals that she started her business on the social media application in hopes of gaining more visibility than through a regular website.

On the contrary to Diderich, Stephanie’s business strongly relies on its online presence in order to survive, since appointments are made via messages through the app. When starting her business, the hair stylist was aware that the app’s algorithm would recommend her page to accounts interested in similar services than the ones she offers. Therefore, she decided to give her page a precise look and purpose. At first, she attracted customers by posting "attractive pictures", in this case before and after pictures of her clients, which would explain the point of her page without using any words. Stephanie states that "I followed other pages that were related to hairstyling and hair products to help me gain visibility and to reach my target audience". Stephanie’s tactics have proven to be successful, since most of her clients find her page through Instagram’s recommendation system which has given her page a lot of visibility.

Unlike Stephanie, who expands through her digital presence, Librairie Diderich’s reluctance to rely on their digital side is precisely because of how difficult it is for an independent business to assert itself on the major online platforms. Competitors like Amazon are said to hold a huge monopoly over the book business nowadays. The current owner of the store, Anne Diderich, and her husband Mr Boisserie, "choose to focus on physical visits to their store since there are already many online retailers". Furthermore, they stated that "it is difficult to build an online presence among online retail giants that monopolise the online market". That is the kind of situation the EU is now looking to intervene in.

The Digital Services Acts Package

The digital world today is dominated by technology giants that anyone can name in their sleep. Amazon, Google, Facebook and co. are just some of the largest names that shape the online landscape. The Internet, in the form we know it today, has not been around for long yet, so laws and regulations have been a tricky thing to define for the web. There is still a lot of uncertainty on the Internet, and what should and should not be allowed, also because online platforms cross national and continental borders. The most recent set of laws we have on digital commerce, prior to the Digital Services Act, have been the e-commerce directives of the EU, which range back all the way to 2000. But the Internet today is radically different from that of 2000, and so the Digital Services Acts package, comprising the Digital Services Act and the Digital Market Act, is a much-needed legislation in a digital sphere that has been untouched for decades.

The EU has been trying to find ways to regulate the power of online platforms to prey on their users’ data before. If you have ever visited a website and had to accept a cookie consent form (cookies are small files stored on a user's computer. They are designed to hold data specific to a particular client and website), you will be familiar with one result of the EU’s General Data Protection Regulation (GDPR), which tries to protect people from being tracked across different websites (via third-party cookies) without their knowledge and against their consent. In December 2020, the EU proposed something even more radical to shape the online sphere.

Anne Diderich did not know about the acts prior to our interview, although her husband had heard about it, but only vaguely. After researching and learning about it, “we still believe the acts will have little influence on our business currently, since our store relies on physical rather than virtual presence". They are not planning to expand their business, unlike some competitors, which they believe could profit from the regulation, and from the better opportunity in the online marketplace. For Diderich, while the expense has not been worth it so far, they stated the opportunity of a more equal market will make investment into the online market more worth considering than before: in a market where the digital platform is no longer able to influence who gets to succeed and who does not.

Like Diderich, when asked about the future of her business, specifically in relation to the DSA, Stephanie states that she is not too concerned about the popularity of her page. She did not know about the DSA beforehand either but does not believe that it will affect her business, since she has a large and stable client base and therefore no longer relies on the recommendation system in order to gain visibility. When asked if she would keep the tracking of her online data on or not, Stephanie lets us know that she "would keep it on since it helped my business" and knows that it could also be of help to other businesses that are getting started on the social media application.

What does the future look like?

We asked Marc Lemmer, Data Protection Commissioner at CNPD, what the new acts might mean for their commission, for the businesses, and for us as consumers. As the CNPD, their duty is to act as the national authority on all matters concerning data protection (digital and otherwise), guided by the EU directives and regulations, and national legislation. Their department experienced a lot of change since 2017–2018 with the advent of the GDPR, having to invest more resources and employ more staff to enforce the EU’s more rigorous and consistent standard of rules.

Marc Lemmer stresses that the one highest principle of the GDPR is also "very important for the DSA and the DMA", that being the principle of accountability. Under the GDPR, anyone collecting data is held accountable that they are collecting and using data responsibly in good faith, and this responsibility can be questioned by the CNPD. In the DSA, the same spirit applies: "The digital service providers need to be accountable; they can do many things, but they have to prove that they’re doing it right".

In response to the specific concerns about the data tracking of users in social media, one thing the DSA aims toward is the transparency of the algorithms. All major platforms use automated machine learning algorithms to tailor a unique user experience, but what is key about the changes is that the data that flows into these algorithms becomes apparent. "It’s not about the tracking of data, it’s the tracking of the individual" that is the main concern. In most cases, digital platforms should not be able to profile you as a user and have access to your sensitive data. Most of this is already covered by the GDPR, but that also helps with the concrete implementation of the Digital Service Act Package, as they can build on the GDPR.

This will cause many changes to the way online business works, including ways that may affect businesses like Stephanie’s, or like Diderich. The acts prove "an opportunity for European enterprises to innovate in the digital economy", to make forward progress in a digital world where the EU is lacking. For Diderich, it may mean that the process that determines the amount of traffic their website gets via search engines will change. Or that companies can change the kinds of resources necessary to affect their position online. This is currently its own market with services like Wix, that host websites and deal with all the cookies and data technicalities for their customers.

For Stephanie and other social media businesses, the way the algorithms will change will have an impact. It remains to be seen if it is a positive one for the long term. The algorithms that process users’ personal data for targeted advertising will change and will be built in a way that gives control to the users to grant consent or not, meaning more users may opt out of providing their data, and that algorithms will advertise differently in the future.

This article is part of the practical workshop "Working in the Media" at the University of Luxembourg. The students Laura Grün and Max Ernzen are the authors of the publication and gained a global insight into the daily work of journalists. Melody Hansen, editor-in-chief, and Sarah Raparoli, deputy editor-in-chief, supervised them as they worked on their first journalistic article.