IBTBlog

The International Business Transactions Blog

European Union Opens Investigation into TikTok for Alleged Violations of Digital Service Act

By Kelsey McGillis
Law Student Editor

The European Union (EU) has initiated a formal investigation into TikTok, the social media platform owned by the Chinese company ByteDance.  This investigation comes in the wake of similar EU proceedings against Elon Musk’s platform, X, in December 2023, discussed in a January 16 post of the IBTBlog.

Both investigations center around potential violations of the EU’s Digital Services Act (DSA).  Enacted in August 2023, the DSA regulates all online platforms operating within the EU.  Its mandate is to ensure platform transparency and accountability for internet service providers (ISPs) and to streamline certain regulations.  Interestingly, the DSA imposes more stringent requirements on large platforms operating in the EU, with “large platforms” defined as those with over 45 million monthly users.  TikTok, with nearly 136 million monthly active EU users is thus subject to the DSA’s enhanced mandate and increased scrutiny of potential illegal content and security risks.

The formal investigation of TikTok is led by EU internal market commissioner, Thierry Breton, and will specifically focus on potential breaches of child protection rules and transparent advertising guidelines. Breton’s decision to officially investigate TikTok was influenced by the platform’s risk assessment report and TikTok’s responses to multiple information requests. Notably, this investigation follows a $370 million fine imposed on TikTok by EU regulators in September 2023 for insufficient protection of children’s personal information in alleged violation of EU data protection regulations.

The EU Commission will scrutinize TikTok’s age verification tools, designed to prevent children from accessing inappropriate content, to assess their effectiveness. Additionally, they will evaluate TikTok’s transparency regarding advertisements on the platform and the accessibility of its data to researchers. Other areas under review include TikTok’s risk management practices, age verification tools, and concerns about allegedly addictive design, screen time limits, and its algorithmic design.  If TikTok is found to be in violation of DSA rules, ByteDance, TikTok’s parent company, could face fines of up to 6% of its global revenue.  In context, ByteDance reportedly generated over US $110 billion in sales in 2023, which would expose the parent company to a potential fine of US $6.6 billion.

The investigation marks another example of the EU’s aggressive approach to enforce its digital regulations against non-EU companies operating within the EU either physically or digitally.  The EU’s recent DSA enforcements shed light on how regional regulations can transcend geographical boundaries, thereby influencing and shaping the behavior of digital platforms operating on a global scale.

Update on the RCEP and CPTPP

By Kelsey McGillis
Law Student Editor
&
Aaron Fellmeth
Faculty Editor

The Regional Comprehensive Economic Partnership (RCEP) is a free trade agreement intended to foster economic cooperation among its states in East Asia and the Pacific Rim.  RCEP was first conceived in 2011 and was negotiated in parallel with the Trans-Pacific Partnership agreement (now the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, or CPTPP).  After the United States withdrew from the Trans-Pacific Partnership negotiations in 2017, negotiations for both RCEP and CPTPP accelerated, ultimately resulting in a signed CPTPP in 2018 and RCEP in 2020.  CPTPP came into force in December 2018, and RCEP entered into force in January 2022.

CPTPP currently has eleven parties: Australia, Canada, Japan, Mexico, New Zealand, Singapore, Vietnam, Peru, Malaysia, Chile, and Brunei Darussalam.  CPTPP is a WTO-plus agreement, covering trade in goods, trade in services, foreign investment, labor mobility, government procurement, intellectual property, labor rights, and protection of the natural environment, as well as special topics such as telecommunications and financial services.

RCEP represents the world’s largest free trade agreement, encompassing approximately 30% of the global population and 30% of the world’s GDP.  In June 2023, the Philippines signed the agreement, becoming the RCEP’s fifteenth member state.  Nine other signatories are members of ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand, and Vietnam), and the remainder currently include China, Japan, South Korea, Australia, and New Zealand.

The RCEP aims to facilitate trade and investment, streamline regulations, and promote economic cooperation among its member countries. Comprising 20 chapters, the agreement covers a wide spectrum of economic activities including trade in goods, trade in services, foreign investment, and economic and technical cooperation. One of the main goals of the Partnership is to reduce or eliminate customs duties among member states on most categories of goods by approximately 92% over the next twenty years.

Aside from WTO-plus and investment provisions, RCEP includes a mechanism for dispute resolution apart from the WTO Dispute Settlement Understanding (DSU), but that requires consideration of any report of the WTO’s Dispute Settlement Body.  The system is similar to the DSU, requiring consultations and, if necessary, establishment of a panel to issue a “report” on the dispute, which is in reality a binding decision.

According to the Asian Development Bank (ADB), RCEP members are projected to gain $174 billion in real income by 2030 as a direct result of participating in the Partnership, with China, Korea, and Japan expected to benefit the most. Several other major trading states are considering joining RCEP, including India, and CPTPP, including the United Kingdom, which signed an accession agreement in July 2023 and currently awaits ratification.

Although the United States is not a party to either arrangement, it has free trade agreements with some RCEP (Australia, South Korea, and Singapore) and CPTPP members (Australia and Singapore, as well as Canada, Mexico, and Chile).  It also as well as bilateral investment commitments to two CPTPP members Canada and Mexico through the U.S.-Mexico-Canada Agreement (formerly NAFTA).

European Commission Investigates X (Twitter) for Hate Speech and Disinformation

By Kelsey McGillis
Law Student Editor

The European Union (EU) has officially launched an inquiry into X, Elon Musk’s social media platform, formerly known as Twitter. The landmark investigation will determine whether Musk’s X violated the EU’s Digital Services Act (DSA) and marks the EU’s first formal proceeding against a major social media platform. 

The DSA, a legislative framework enacted by the EU in November 2022, aims to protect online consumers by regulating digital services and platforms. The DSA focuses on areas such as content moderation, increased corporate transparency, and accountability for large online platforms.

The EU’s decision to open a formal investigation follows its preliminary 2022 inquiry into X’s policies and the social media company’s responses to requests for information pertaining to certain practices. The investigation will initially focus on the wide spread of illegal content on the X platform, encompassing hate speech, disinformation, and terrorist content related to the Israel-Gaza conflict. More specifically, the investigation is set to analyze the efficacy of X’s fact-checking system, transparency mechanisms for advertisements, and the revamped “blue check” verification system. After Elon Musk took over control of Twitter, he removed nearly all regulation of speech, resulting in the flourishing of antisemitic, homophobic, racist, neo-Nazi, and other hate speech online, as well as the rapid spread of misleading conspiracy theories.

Under the DSA, large online platforms are subject to regulatory standards based on a perception that unregulated social media pose high risks to society.  This point was emphasized by Margrethe Vestager, executive vice president of the European Commission. These additional obligations include diligent identification and mitigation of systemic risks, timely and transparent content moderation decisions, prevention of deceptive user interface design, and providing researchers with effective access to platform data. The DSA categorizes platforms with more than 45 million users per month as “Very Large Online Platforms” (VLOPs). Being classified as a VLOP, which X clearly is, subjects X to fines of up to 6 percent of its total revenue if its practices are found to violate the DSA. 

The European Commission’s authority to conduct a detailed investigation, collect evidence, and implement additional enforcement actions highlights the extreme gravity with which the EU handles potential breaches of the DSA. The Commission can take further enforcement measures and may accept commitments made by X to address the identified issues. There is no legal deadline for concluding proceedings under the DSA, and the duration of the investigation depends on various factors.

Although X is incorporated in Nevada, it has offices throughout the world, including the EU.  The Commission considers X to be obligated to comply with the DSA, addressing concerns related to risk management, content moderation, transparency, and user interface design. The platform’s responses during the investigation, including any commitments to remedy identified issues, will shape the outcome of the proceedings.