The European Union’s content moderation law known as the Digital Services Act (DSA) mandates that profitable large technology companies help fund the DSA’s enforcement. While not directly targeting non-European enterprises, this tax on large tech companies is part of a much broader EU move toward protectionism and has come at the expense of U.S. businesses.

The DSA is designed to establish a single European-wide standard intended to help companies detect and remove illegal content and protect EU citizens, especially children. The law has varying requirements for different categories of service providers. The classifications Very Large Online Platforms (VLOP), and Very Large Search Engines (VLOSE) are defined as any platform or search engine having more than 45 million monthly users in the EU. They have the strictest rules on reporting illegal activity and making advertising and other algorithmic functions of social media more transparent.

To help fund the DSA’s enforcement, the EU has issued fees to companies labeled as VLOPs or VLOSEs based on their annual income and size of user base. Several companies, including Meta, have challenged this because it allows non-profitable establishments to pay nothing even though they may require more resources to regulate their platforms. This leaves companies that did post a profit to pay a disproportionate amount of the total, essentially forcing some corporations to subsidize others regardless of which platform is more of a burden for regulators.

With the exception of German-owned  Zalando, all VLOPs or VLOSEs are European branches of non-European companies, such as Meta and other American tech companies. When taken together with other aspects of the DSA, it is easy to conclude that the law disproportionately harms American companies. In addition to content moderation and privacy protections, the DSA intends to make it easier for small European tech companies to get started and scale up quickly.

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Trey Price is a policy analyst with the American Consumer Institute, a nonprofit education and research organization. For more information about the Institute, visit us at www.TheAmericanConsumer.Org or follow us on X @ConsumerPal.