EU Proposes Digital Fairness Act to Rein In Manipulative Online Design

What the proposal would do

The Digital Fairness Act targets the design tricks that pull users deeper into apps and sites. It would let people turn off features that encourage excessive or compulsive use and would prohibit dark patterns in online sales - design choices that push or mislead consumers into unwanted decisions.

Examples include telling buyers that a product is almost out of stock and making subscription cancellations cumbersome. These rules may also reach AI assistants that nudge people to continue engaging.

Who could be covered and punished

EU enforcers are taking aim at the tactics that keep billions of users engaged, a move that could have major impact on Google's YouTube, Meta Platforms Inc.'s Instagram, and ByteDance Ltd.'s TikTok, along with e-commerce services and AI chatbots. In certain cases, the European Commission could levy fines reaching as much as 6% of a company's worldwide annual revenue for violations.

Per the Commission, small firms fall outside the scope of direct EU enforcement. Today, consumer protection cases are handled by national authorities.

New tools that change online behavior can also change how investors find advantage. We're hosting our first ever investor livestream on 11/17 to show you how to use ChatGPT and Claude to invest like a pro, hosted by Briefs Finance CEO Jaspreet Singh. Save your seat.

Enforcement shift

Alongside the proposal, the EU is claiming powers to enforce consumer rules directly when violations affect two-thirds of the bloc's population. That would add a central layer on top of the current member state system.

Earlier this week, Bloomberg revealed the Commission's plans.

Process and what to watch

Michael McGrath, the commissioner responsible for consumer protection, underscored the crackdown on deceptive scarcity claims, saying, "We are making it absolutely clear that false claims about the scarcity of a product or service are a dark pattern and therefore are not allowed."

The bottom line: this package is still a proposal. European lawmakers still need to hash out and sign off on the proposal, and it could be substantially revised before it becomes law. For your portfolio, watch how large platforms adjust product design and compliance costs if these rules advance.

Investors who learn to use smart technology thoughtfully often see clearer opportunities. On 11/17, our CEO Jaspreet Singh goes live for our first ever investor livestream on how to use ChatGPT and Claude to invest like a pro. Register to join him.