By Steven Haynes
Introduction
The European Union’s Digital Services Act (DSA) is being sold as a landmark for user protection, algorithmic transparency, and online accountability. Yet behind the language of safety and fairness lies a deeper controversy: the law grants Brussels extraordinary enforcement powers that look less like regulation and more like a stealth taxation system. By tying penalties to global annual revenue, the EU is stepping far outside its natural jurisdiction — and demanding access to financial data it has no rightful claim to know.
What the DSA Demands
The DSA imposes sweeping obligations on “Very Large Online Platforms” (Google, Meta, Amazon, TikTok, Microsoft, Apple, etc.):
- Remove illegal or harmful content quickly.
- Disclose how recommendation and ad-targeting algorithms work.
- Submit to independent audits of “systemic risks” like disinformation or election interference.
- Ban targeted ads to minors and restrict profiling with sensitive data.
Failure to comply can trigger fines of up to 6% of a company’s global revenue.
Proprietary Algorithms Under Threat
Algorithms are not just tools; they are trade secrets — the crown jewels of Big Tech. Requiring companies to reveal how their ranking and targeting systems work risks exposing sensitive intellectual property protected under U.S. law.
The EU says it doesn’t want source code, only explanations. But even “logic disclosures” and regulator audits can reveal patterns competitors could exploit. To Silicon Valley, this is tantamount to forced disclosure of proprietary assets. To Brussels, it’s accountability for systems that shape public life.
Global Revenue Fines: A Dangerous Precedent
Unlike normal penalties, the DSA ties fines to worldwide turnover, not just EU earnings.
- For Meta ($120B global revenue), a 6% fine could exceed $7B — even if the alleged violation happened entirely inside Europe.
- Critics call this extraterritorial overreach. Supporters argue it’s the only way to make trillion-dollar firms care about compliance.
Here lies a central problem: the EU has no jurisdiction to demand global revenue data. It cannot tax or regulate profits outside its borders. Instead, it uses market access as leverage:
“If you want to operate in the EU, disclose your global revenue — or leave.”
Companies comply not because the EU has a right to that information, but because Europe is too valuable a market to abandon.
Risk Beyond Tech
If applied beyond Big Tech, this enforcement model could devastate low-margin industries.
- Airlines and shipping firms often make billions in revenue but only 2–5% in profit.
- A fine of 6% of global turnover could wipe out their annual earnings — or bankrupt them outright.
- This exposes the arbitrary nature of global-revenue fines: survivable for high-margin tech giants, catastrophic for industries like transportation.
Transatlantic Tensions
Unsurprisingly, the U.S. sees the DSA as overreach.
- The FTC has warned American firms not to let DSA compliance undermine U.S. protections for free speech or encryption.
- The Trump administration is weighing sanctions on EU officials involved in the DSA, treating it as a hostile economic act.
- Meanwhile, EU regulators defend the law as essential for protecting citizens and holding foreign corporations accountable.
This is no longer just about content moderation — it’s about digital sovereignty and economic power.
Conclusion
The Digital Services Act is pitched as a framework for safety and accountability, but its enforcement mechanism tells another story. By tying penalties to global revenue — and demanding financial data it has no sovereign right to claim — the EU has created a system that functions less like regulation and more like taxation in disguise.
For Big Tech, this means risking exposure of proprietary algorithms. For other industries, it sets a precedent that could one day be devastating. And for transatlantic relations, it’s another flashpoint in the battle over who writes the rules of the digital world.
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