WhatsApp's DSA Designation Showcases Power Contest Over Tech In Europe

The European Commission (EC) has designated WhatsApp a Very Large Online Platform (VLOP), subjecting it to more stringent requirements under the EU’s Digital Services Act (DSA). WhatsApp’s designation is the latest EC move to complicate operating in the European market as a US tech company.

While European lawmakers have repeatedly said they want to work alongside tech firms to create an internet that reflects European values, they more often seem to be on a collision course with US corporations. WhatsApp’s designation, and the headache it will cause Meta, underscore a bigger question: whether Europe wants what US tech companies have to offer at all. As I outline here, the regulatory tightrope and the enforcement environment suggest not.

Implications of WhatsApp designation

The announcement comes amid a flurry of EU tech regulatory developments, including an investigation into Grok’s proliferation of sexual images, X receiving the DSA’s first fine, and a court ruling that digital marketplaces must vet advertisers’ use of personal data.

Still, WhatsApp’s designation as a VLOP is a long time coming. Last February, WhatsApp informed the Commission that it had surpassed 45 million average EU monthly active users, the benchmark that serves as the main qualifier for VLOP status. The 2022 regulation requires intermediary platforms to screen illegal products and speech, appropriately handle the data they collect, and offer transparency in their ad and recommendations algorithms.

While private messaging apps have come under EC ire from other legislative proposals, they have thus far avoided falling under DSA’s obligations. The Commission’s designation hinges on WhatsApp’s Channels feature, which allows for one-way announcements to broad audiences, an intermediary function akin to those of the social media, marketplace, and app store platforms that the DSA primarily regulates.

In theory, WhatsApp doesn’t need to make many substantial changes to its service, since its private messages are unaffected by the designation and its internal Channels guidelines already police illegal, credibly dangerous, fraudulent, or age-inappropriate content. In WhatsApp’s case, complying with the DSA should entail more paperwork than tech reconfiguration. But for Meta, which has faced European fines averaging more than a billion dollars each year since 2022, compliance with the DSA will seem more like walking a tightrope than a walk in the park.

The balancing act of complying with the DSA and DMA

The difficulty Meta will have in complying has little to do with WhatsApp specifically. Instead, it highlights the conflicts within EU tech regulations. The DSA attempts to complement the Digital Markets Act (DMA), which was adopted the same month.

The DSA aims to protect consumers against various forms of manipulation and harm, whether it be hateful speech, addictive feeds, or granular data collection used to sell hyper-targeted products and politics. The DMA seeks to ensure sufficient market players to contest mammoth big tech firms.

These laws are a response to harms borne out in digital markets. Walled gardens that monopolistically set the terms of service, online marketplaces that use their proprietary data to compete with the retailers they platform, and the ability for “digital town squares” to become breeding grounds for Russian propaganda all animate the DMA and DSA.The underlying objective of these laws, to ensure the open internet does not become either lawless or oligarchic, is legitimate and increasingly universal.

In the pursuit of this objective, there are natural tensions — protectionism vs. the free market, content moderation vs. free speech rights, data privacy vs. data access — such that a win for smaller firms will sometimes be a loss for consumers and a win for interoperability will sometimes be a loss for privacy advocates.

Balancing competing interests is nothing new in the governance of large corporations, but in a good regulatory environment, lawmakers make clear their choices with respect to these tradeoffs, rather than leave them ambiguous and seemingly contradictory for the companies tasked with compliance. This is one reason the EC and tech firms so often lock horns (though firm obstinance in the face of fairly straightforward compliance requests is another).

As just one example of how the DMA and DSA obligations contend with each other, consider how supporting an even playing field for business users and competitors means sharing more user data. The DSA prohibits ads targeted at users based on personal data, while the DMA mandates gatekeepers share with businesses the granular, non-aggregated data that they generate on the gatekeeper’s platform. This means that a platform like Google search (designated both a VLOP under the DSA and a gatekeeper under the DMA) must share with a retailer the search behavior, clicks, and views of a particular shopper. Presumably, that retailer will use that data to draw conclusions about a user, including their race, religion, and sexual orientation, all of which are protected categories. If that retailer then tries to advertise using that information, Google must preemptively screen the ad for use of such sensitive data and prohibit it. This makes Google liable for information it was reluctant to share in the first place, such that the better it complies with the DMA, the harder DSA compliance becomes.

The fine line between welcomed and worrisome

These competing regulatory interests create an enforcement environment that makes staying in regulators' good graces seem like a moving target. This hits home for Meta, which has played the role of the disruptor as well as the dominant incumbent. In 2020, the German competition authority highlighted Facebook Marketplace as a newcomer that could keep the classified ad market, then dominated by eBay, competitive. Just one year later, the EC opened an investigation into whether Facebook Marketplace was abusing its dominant position in the same market, including by illegally tying the service to Facebook, eventually fining Meta 800 million euros. In antitrust, “tying” typically consists of forcing the purchase or use of one product when another is purchased or used. In Meta’s case, the mere fact that Facebook Marketplace was available on the same website as its social media platform constituted tying.

Being able to predict how laws will be enforced is a prerequisite for economic flourishing. The enforcement environment on display in the Facebook Marketplace case is what makes WhatsApp’s designation an earnest liability for Meta. For instance, WhatsApp considers which Channels users follow when determining which ads it shows, information that could easily reveal protected categories of personal data. While WhatsApp only shows ads based on users’ “broad characteristics,” the fact that it collects information that, in other circumstances, it would be required to share with third-party businesses under the DMA, could easily trigger scrutiny from the European Commission.

Consumers will be the judge

With enough fines and enough ambiguity, US firms will pull back from the European market, including by withholding or slow-rolling new features that US consumers enjoy. Indeed, the Facebook Marketplace incident shows that even well-received new services may quickly become liabilities if successful.

Explicitly or not, regulators and tech firms are both vying for consumer allegiance. If European regulators remain confident that their constituents believe in the DSA’s goals more than they dislike the costs, then regulators can stand firm as ever. If, however, they fear popular backlash, regulators will have to clarify the tradeoff choices they have made and take a more lax enforcement approach when companies struggle to strike the right balance.

Meta’s boisterous criticism of the DSA points to an underlying truth about its operations in Europe. US tech companies have been clear on how they weigh the tradeoffs at play, and for that, they are selling more than their products. They are selling a proposition — the proposition that their network effects benefit consumers more than a fragmented market would. That the internet inherently amplifies both the democratic and dangerous aspects of free speech. That their proprietary algorithms serve you as well as them, and exchanging your data for their services is a mutually beneficial economic trade.

Lawmakers are only as empowered as the populace allows them to be. It will be up to European consumers to decide whether the proposition is one worth buying.