Algorithmic Search and Recommender Systems in the Digital Services Act

It is impossible to imagine digital services without algorithmic search and recommender systems. They have the important function of pre-sorting the flood of information online for users. However, they also harbor the risk of competitive distortions and ideological bias. At the European level, the Digital Services Act responds to this primarily with transparency obligations, which we analyze in this article from a law and economics perspective. We conclude that the approach neither prevents possible distortions of competition nor ideological media bias. Therefore, there is a risk that the DSA´s transparency requirements will remain a paper tiger.

By Oliver Budzinski & Madlen Karg^[1]

I. INTRODUCTION

Among the various phenomena of the world of digital services, the channeling of users’ attention to a pre-selection of goods through algorithmic search and recommender systems (ASRS) represents one of the most important issues. On the one hand, information overload on the internet requires some pre-selection, on the other hand, the power of the algorithm raises doubts and fears about their impact on competition and society. The EU Digital Services Act (DSA) applies a cautious regulation of ASRS. In order to assess its adequacy from a law and economics perspective (sections 3 and 4), we first take a look into the economics behind these systems (section 2).^[2]

II. THE ECONOMIC ROLE OF (ALGORITHMIC) SEARCH AND RECOMMENDATION SYSTEMS

A. Information Overload, Search