Digital advertising in the crossfire of upcoming EU regulations

EU institutions have recently reached a political agreement on the Digital Markets Act and Digital Services Act. These regulations are set to have far-reaching consequences for the digital economy, particularly on how data is collected and processed for online advertising.

The European co-legislators intended to address the online advertising industry, which collects massive amounts of data and bolsters a market imbalance that favors a small number of large technology companies.

“We are optimistic that the DMA and DSA will address the gross imbalance of market power by a few large tech companies. The majority of the impact will be on the ability of these companies to continue profiling and targeting consumers across their digital lives,” he said. Chris Pedigo, Senior Vice President at Digital Content Next, an association of premium publishers.

Curbing Big Tech

The Digital Markets Act is legislation targeting only a few companies with significant market power (Google, Amazon, Meta, Apple, Microsoft and the likes) to make the digital market more contestable and enable the business users to bypass these gatekeepers.

The Big Tech law includes provisions specific to advertising, as companies like Google and Meta will have to provide access to the relevant ad performance tools. So far, advertisers could not know for sure that their campaigns were running on the best value money.

As a result, on measurement, the gatekeepers will have to open up their “walled gardens” to other players in the ecosystem, such as advertisers, adtech and publishers. What remains to be seen is how this obligation will be operationalized, for instance, if the data will be comparable across different gatekeeper platforms.

However, the data provisions of the DMA underwent a last-minute surprise. After a political agreement was reached March 24, the text went back to the technical level for “fine-tuning.” When a new version leaked almost a month later, the article that regulated how gatekeepers manage and process data were turned upside down.

Last-minute surprise

The Irish Council for Civil Liberties lobbied to change this article to clarify that the gatekeepers would have to require consent for each data processing purpose. Instead, the initial text left the door open for a single sign-in option.

At the same time, the ICCL insisted on putting the European Commission in charge of supervising what so far had been a prerogative of Data Protection Authorities.

The initially accepted ICCL amendment was completely changed afterward, prompting the reaction of privacy advocates and competition experts. Publishers from both sides of the Atlantic echoed these concerns, particularly the potential loophole related to digital advertising that could further strengthen the gatekeepers’ dominant position.

A new paragraph was added to prevent gatekeepers from processing the personal data of users who are using a third-party service without their explicit consent for the purpose of providing advertising services.

Critics pointed out that there are dozens of data processing activities behind the display of an ad, where the wording suggested there was only one purpose. Once again, this ambiguity was seen as favoring gatekeepers that could argue for a single opt-in option, while the other companies would have to list all the processing purposes for advertising as required by the EU General Data Protection Regulation.

The leading lawmakers pushed back against this criticism, stressing there was no ambiguity since the DMA was never meant to supersede the GDPR. The commission made a similar pointarguing these concerns are based on a “misunderstanding of the notion of consent as provided for in the GDPR,” and that the DMA complements but does not alter the data protection rulebook.

All about enforcement

In spite of this latest spat, many European companies look at the DMA positively as a way to try to rebalance the power relations with the tech giants. The question mark now is to what extent the European Commission will be able to enforce these obligations.

“Gatekeepers do not try to comply with the law – they merely try not to get caught. I therefore do not expect them to change anything of importance by themselves,” said Johannes Kotte, managing director of Visual Meta, an online shopping portal.

Visual Meta is one of the “aggrieved parties” in the Google Shopping case, which criticized Google for leveraging its market-dominant position to favor its shopping unit. Even though the case was upheld by the Court of Justice of the European Union after more than 10 years of litigation, Visual Meta insists that Google is still not complying with the commission’s decision.

Protection of minors

One month after the DMA agreement, it was the turn of the Digital Services Acthorizontal legislation that will provide rules on content moderation, platform accountability, illegal products and risk management for all actors operating in the European digital single market.

The DSA includes provisions for the protection of minors, a compromise concession made to left-to-center MEPs who were pushing for a total ban on targeted advertising. In particular, targeted advertising based on the use of the personal data of minors is prohibited.

Moreover, according to the agreement, online platforms accessible to minors will have to put in place a high level of privacy, safety and security for minors, notably in terms of online interfaces, adopting relevant industry standards or participating in codes of conduct.

The debate here focused on how to identify minors while respecting the data minimization principle of the GDPR. Privacy-sensitive lawmakers advocated that the platforms will not have to process additional data to assess that a user is a minor. However, the wording on accessibility is not entirely clear to industry practitioners as, in principle, the web could get flooded with age-gating pop-ups.

“I’m not entirely sure how this would play out in any clear and executable manner,” said Otto Lindholm, Head of Data and Privacy at Dottir. “My guess is that we will continue insufficient and confusing executions in operationalizing the obligation, rather than seeing the platforms, publishers and advertisers taking the most cautious route and decrease their advertising.”

Sensitive data

Progressive MEPs also managed to include in the DSA a ban on advertising based on the profiling of users that employs sensitive data as defined under the GDPR. This concept includes political views, religious beliefs, sexual orientation and racial information.

The proposal was initially resisted by some member states that believe users should be able to choose whether they could get targeted on these bases or not. However, lawmakers insisted on a ban since requesting consent is already covered in the GDPR.

“The ban decided under the DSA will likely have to be enforced by the DPAs considering the direct reference these measures make to the GDPR. The DPAs are familiar with the impact of inferred data, and how they constitute personal data, hopefully, the enforcement of this ban will be comprehensive, “Access Now Global Data Protection Lead Estelle Massé said.

At the same time, privacy advocates have criticized the provisions as “missing the mark.” The criticism is related to the fact that the ban only refers to profiling, whereas most of the targeted ads are based on statistical inference. By contrast, from the industry perspective, civil society is pushing for an interpretation of sensitive data as broadly as possible in order to expand the DSA ban.

On the eve of the first turn of the French presidential elections, far-right candidate Eric Zemmour tried to mobilize the Jewish community by targeting thousands of Jews with anti-Muslim content. The Commission nationale de l’informatique et des libertés, the French DPA, opened an investigation; it is not clear if the DSA’s sensitive data ban would prevent this sort of aggressive campaigning.

There is currently little guidance by the data protection authorities in relation to sensitive data, but the general trend seems to point out that the determining factors would be the intention and usage of the ads.

“If you can infer relevant information with a reasonable degree of certainty then it’s likely to be special category data even if it’s not a cast-iron certainty. But if it is just a possible inference or an ‘educated guess,’ it is not special category data (unless you are specifically processing to treat someone differently on the basis of that inference) – even if that guess turns out to be right, ” the UK Information Commissioner’s Office advises.

What is clear, however, is that the wording limited to profiling was also pushed by Google, as revealed by documents obtained by the NGOs Corporate Europe Observatory and Global Witness. The advertising giant has been working on moving away from individual profiles based on cookies to aggregate data based on groups (ie cohorts) or theme-based targeting (ie, topics).

However, the DSA’s final text has not been circulated yet. Therefore, some last-minute changes to these provisions cannot be excluded.

Photo by Nathan Watson on Unsplash

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