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Maryland became the first U.S. state to create a digital advertising tax on February 12, 2021. The Digital Advertising Gross Revenue Tax (DAGRT) was originally passed in March of 2020, but subsequently vetoed by Maryland Governor, Larry Hogan. Maryland’s legislature voted to override the Governor’s veto, however. The contentious journey for DAGRT passage is likely to be overshadowed by a litigious future.

DAGRT (full text here) imposes a progressive tax on the sale of digital advertising services’ gross revenue within the state. DAGRT focuses on large providers of digital advertising services; entities with revenue exceeding $100 million. The rate of the tax imposed, based on global revenue, is 2.5% for annual global gross receipts of $100 million to $1 billion, 5% for gross receipts of $1 billion to $5 billion, 7.5% for gross receipts of $5 billion to $15 billion, and 10% for gross receipts exceeding $15 billion. The rate then applies to digital advertising services’ gross revenue in Maryland. However, DAGRT does require all entities with an annual gross revenue derived from digital advertising services within the state over $1 million to file a specialized tax return. DAGRT’s focus on large providers of digital advertising services might incentivize these providers to find avenues to avoid the tax by changing their digital advertising strategies. For example, more companies may offer advertisement-free subscription options. It’s also possible that the companies faced with paying the tax may simply pass the cost on to the smaller businesses purchasing the advertisements and to consumers.
Continue Reading Maryland’s Digital Advertising Tax: A Contentious Start, and an Uncertain Future

In the coming weeks or months, the European Commission is expected to table an ambitious set of draft legislation that, if adopted, will have a major impact on the business practices of digital service providers in the EU, including non-EU companies serving European users: the Digital Services Act (DSA) and the Digital Markets Act (DMA). The Commission’s legislative proposals aim to strengthen the responsibilities of online platforms and to support fair competition in digital markets.

1. The Digital Services Act (DSA): increasing responsibilities for digital service providers

The DSA’s main objective is to update the e-Commerce Directive. This is long overdue, as the legal framework for digital services has remained largely unchanged since the e-Commerce Directive was adopted in 2000. The update aims to clarify the liability regime for digital intermediaries active in the EU and to reinforce oversight and enforcement.

The DSA will require digital service providers to take more responsibility for dealing with harmful or illegal content and dangerous or counterfeit products. They will have to put in place clear and simple procedures to deal with notifications about harmful or illegal content or goods on their platforms. They will also have to verify the identity of traders before letting them on their platforms (“know your business customer”). At the same time, they will have to make available simple procedures for platform users to complain if they think the removal of their material was unwarranted.
Continue Reading New EU Proposals to Regulate Digital Markets – What to Expect

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Last December, authorities arrested Edgar Welch, a 28-year old man from Salisbury, North Carolina, who had entered Comet Ping Pong, a Washington, D.C. pizza parlor, armed with a shot gun. Mr. Welch reportedly came to Comet Ping Pong on a self-described mission to free child sex slaves that he believed might be imprisoned there at the bidding of Hillary Clinton and her campaign Chief of Staff, John Podesta. After Welch shot his gun into the ceiling, terrified employees fled the building. Then, after encountering swarms of local police, and having found no evidence of the vast conspiracy he had been led by social media to believe existed, he gave himself up peacefully to authorities.

As outlandish as the story may seem, Mr. Welch was not the only one duped by the story. For weeks, dozens of anonymous posters had fanned the flames and pursued the imaginary conspiracy theory on Reddit.com, a hugely popular social news aggregation site.

This fake conspiracy was likely fueled in part by armies of “bots,” which are fake social media accounts often purchased and organized centrally, and mobilized to push a particular opinion or agenda and sway public opinion. It is surprisingly easily to purchase bots online. For example, Russian websites, such as BuyAces, sell empty social media accounts to anyone willing to pay with digital currency. Once purchased, programmers can enable these accounts to disseminate information or respond to news stories en masse. It is widely reported that Special Prosecutor, Robert Mueller, is investigating whether the Russian government used such tactics to influence the last election.

What does this have to do with advertising, you might ask? Everything.

Continue Reading This Week in Digital Advertising: Fake News, Bots, and Implications for Digital Trust