WELCOME TO DIGITAL POLITICS. I'm Mark Scott, and this edition marks the one-year anniversary for this newsletter. That's 61 newsletters, roughly 130,000 words and, hopefully, some useful insight into the world of global digital policymaking.

To thank all subscribers for your support, I'm offering a discounted offer to the paid version of Digital Bridge published each Monday. You can go for either a monthly or an annual subscription — at 25 percent off the regular price. You can also keep receiving these monthly free updates.

Also, for anyone in Brussels, I'll be in town next week from Sept 8 - 11. Drop me a line if you're free for coffee.

— The outcome to a series of legal challenges to online safety legislation will be made public in the coming weeks. The results may challenge how these laws are implemented.

— We are starting to see the consequences of what happens when policymakers fail to define what "tech sovereignty" actually means.

— The vast amount of money within the semiconductor industry comes from the design, not manufacture, of high-end microchips.

Let's get started:

LEGAL CHALLENGES TO ONLINE SAFETY RULES

WE'RE ABOUT TO FIND OUT WHERE THE limits are to some of the Western world's attempts to rein in social media platforms and e-commerce giants.

On Sept. 3, Zalando, the German online shopping site (my decade-old profile here) will find out if one of the European Union's top courts agrees that it should not be designated as a Very Large Online Platform, or VLOP, under the bloc's Digital Services Act. The Berlin-based retailer claims it doesn't represent a so-called "systemic risk" within the EU. Zalando's focus on business customers (in contrast to retailer customers) also means the platform does not technically have 45 million users within the EU, it also argues. Expect a decision from the European Court of Justice before midday CET on Sept. 3 (documents here.)

By challenging Brussels' ability to designate which tech companies fall within its VLOP definition (in which the requirement to have at least 45 million local users is critical), Zalando is taking on a central component of the EU's online safety regime. Under the DSA, these large firm take on greater responsibilities and reporting requirements — and are overseen directly by the European Commission, and not EU national regulators — compared to their smaller counterparts.

Currently, how the bloc determines the threshold for 45 million users is cloaked in secrecy — mostly because officials typically have to rely on company estimates to make such adjudications. Telegram, for instance, maintains it has less than that benchmark, allowing it to avoid the most strenuous oversight offered by the DSA. By challenging the European Commission's (opaque) methodology, Zalando's case (no matter the outcome) will force Brussels to up its game when determining which companies fall within its VLOP definition.

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Here's what paid subscribers read in August:
— Google and Meta's separate decisions to end political ads in Europe is a mistake; What Big Tech's quarterly earnings teach us about geopolitics; Most Brits have yet to jump on the AI bandwagon. More here.
— Everything you need to know about India's AI Impact Summit; How Russia's propaganda machine weaponized the Trump-Putin meeting in Alaska; Who's Who in the shake-up in the European Commission's DG CNECT. More here.
— Why focusing on protecting kids online should not come at the price of breaking encryption; What Kremlin-backed media took from the Trump-Putin summit; The cottage industry of copyright lawsuits targeting AI companies. More here.
— The US, EU and China are building rival "AI Stacks" that will split the world into competing camps; How to understand the EU-US trade framework when it comes to tech and future tensions; The "AI Divide" is playing out in global research. More here.

Next up are Meta and TikTok. In a dual ruling on Sept. 10 (documents here and here), one of Europe's top courts will again decide a key part of the bloc's online safety rules. This time, both tech giants claim the so-called DSA supervisory fee, or annual levy all VLOPs must pay for the regulation's implementation, is disproportionate and opaque.

The fee — which increased 21 percent this year, to €58.2 million — is based on the European Commission's calculation of up to a 0.05 percent charge on these tech firms' annual global net income. Both Meta and TikTok (and, in a separate legal challenge, Google) say those figures should only come from each firm's profit within the 27-country bloc, and not from their overall global income. In response, Brussels says such levies — a tiny slice of these firms' annual profits — do not violate companies' rights.

Depending on how the court rules, the decision will have ramifications for the DSA's (stuttering) implementation.

Currently, the European Commission has scores of open investigations. Temu, the Chinese online retailer, was the latest firm to be accused of breaching the rules. A potential separate enforcement action against X is expected in the coming weeks. These probes cost money. If Europe's top judges start cutting the funds available for DSA enforcement — based on TikTok and Meta's claims — then the regulation's implementation will similarly slow.

If one of Europe's top courts sides with the tech giants, then expect Brussels to claim business-as-usual, and likely dedicate additional resources from the bloc's almost €2 trillion budget. But the ability to charge VLOPs for DSA supervision is a pillar of how these online safety rules are supposed to work. It forms the basis for the European Commission's mutlti-year work plan on DSA supervision and enforcement. To suggest everything is fine, if next week's court decision goes against Brussels, will be a fantasy.

The next legal challenge takes us across the English Channel to the United Kingdom's Online Safety Act, or OSA. There is already growing disquiet after the country's so-called "age assurance" rules came into force late last month. Now, 4chan and Kiwi Farms filed a lawsuit in a federal court in the United States to challenge how the UK's online safety rules apply to these US-based online platforms.

I'm no lawyer. But the lawsuit is worth a read for two reasons.

First, 4Chan and Kiwi Farms — both of which received requests from Ofcom, the UK's online safety regulator, to comply with mandatory transparency demands — relied heavily on history to suggest they did not have to comply with the British rules. (Disclaimer: I sit on an independent advisory committee at Ofcom, so anything I say here is done so in a personal capacity.)

"Where Americans are concerned, the Online Safety Act purports to legislate the Constitution out of existence," lawyers for both firms wrote in the lawsuit. "Parliament does not have that authority. That issue was settled, decisively, 243 years ago in a war that the UK’s armies lost and are not in any position to re-litigate.”

Shots fired, if you will.

Under the UK's online safety regime, a company does not have to have a physical presence within the country to fall under the legislation. Technically, a site only needs to be accessible to British internet users for the regulatory requirements, most of which focus on mandating a base level of transparency about how companies apply their internal online safety protocols. That means thousands of sites worldwide fall under the UK's OSA — even though almost none of them will be contacted as what happened with 4Chan and Kiwi Farms.

Determining how far the UK's OSA can extend to sites with no physical presence in the country — even if that comes via a US federal court — is a marker for how countries can extend their online safety rules in the name of protecting their citizens.

The second reason the case is important is more political.

Expect the federal lawsuit against Ofcom to be name-checked during a Congressional hearing, overseen by Congressman Jim Jordan, on Sept 3 entitled: "Europe's Threat to American Speech and Innovation." It will start at 10am ET and the current witness list includes noted online safety expert (jk!) Nigel Farage. Former European Commissioner Thierry Breton was invited, though he preferred to respond in an OpEd for The Guardian.

The 4Chan/Kiwi Farm lawsuit is important as it represents a new attack from some in the US who view any form of online safety regulation as a direct threat to Americans' First Amendment rights.

These individuals — most commonly associated with the "Censorship Industrial Complex" — have already accused researchers of acting in unison with the US federal government and social media platforms to censor those mostly on the political right. So far, there has been no evidence to back up those allegations.

Now, many are turning to non-US online safety legislation, most notably the EU's DSA and the UK's OSA, as a new attack vector to claim Americans' free speech rights are under attack. The 4Chan/Kiwi Farm lawsuit's arguments, including the illegal extraterritoriality of the British rules, are likely to be re-used in these ongoing efforts to thwart countries' push to protect their own citizens against online abuse and illegal content like terrorist propaganda.

Chart of the Week

EVERY COUNTRY UNDER THE SUN wants to be a semiconductor superpower. That's especially true in the global battle between rival "AI stacks" reliant on next generation semiconductors.

But there's a significant difference between those who make semiconductors and where the value resides in the overall global chip market.

The chart on the left depicts the 2024 worldwide revenue, divided as a percentage per company, for semiconductor foundries, or facilities that manufacture microchips. The chart on the right represents overall market values for semiconductor companies (based on Dec. 31, 2024 prices), divided by companies and countries.

On manufacturing, Taiwan is the global leader, by some margin. But in overall semiconductor value, the US (and, to a large degree, NVIDIA) are the ones to beat.

That's a reminder for any country spending taxpayers' dollars to entice semiconductor foundries to be built locally. Just because you back such in-country manufacturing doesn't mean the overall value within the semiconductor supply chain will follow.

Source: JPMorgan; Companiemarketcap.com. Data as of Dec. 2024

The consequences of tech sovereignty

I KNOW I'M BIASED. BUT IT'S HARD NOT TO VIEW the first eight months of 2025 as a demonstration of what happens when countries blend politics and technology in ways that lead to bad outcomes. Think the US-China stand-off on pretty much everything. Think the EU-US dispute over trade/digital regulation. Think the failure of Middle Powers to articulate a path on digital that is different to that offered by China, the US and Europe, respectively.

This is what happens when politicians and policymakers put forward a vision of "tech sovereignty" without thinking through what happens when you mix national/regional political needs with the global nature of how technology actually works.

Back in March, I made a plea for a more joined-up approach to that amorphous definition that, ever since European Commission president Ursula von der Leyen went hard on "tech sovereignty" five years ago, has been plagued with false starts, conflicting efforts and a failure to understand how such digital policymaking would end up playing out in the real world.

Fast forward to late(ish) 2025, and we are starting to feel the consequences of rival and, frustratingly, allied countries implementing "tech sovereignty" concepts that will inevitably harm citizens' fundamental rights and their ability to take advantage of what technology has to offer.

For me, those concepts include: countries asserting legal claims over the global internet; politicians subsidizing the creation/support of domestic industries that do not have the scale to compete on the global stage; the creation of artificial barriers between digital markets/goods that undermine fundamental rights; the politicization of apolitical digital regulation aimed at quelling abuse.

Some of these issues were almost inevitable, given the vast differences between how countries approach both digital policymaking and industrial policy. The US — based on its financial muscle, deregulatory stance and domestic industry — is just in a different place to, say, Singapore, which must approach questions about how technology affects its society in ways that meet its own domestic needs.

What I worry, though, is that the push toward 'tech sovereignty' has reached a point where it may be difficult to bring countries back from the edge of creating siloed digital worlds. That goes for everything from high-tech manufacturing that may face high import tariffs elsewhere to digital regulation aimed at safeguarding people's fundamental rights.

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As technology has become a powerful engine, both for politics and industry, it was inevitable that politicians would want to exert greater power over digital areas of the economy and society. Where we are currently, however, is nearing a point of potentially killing the golden goose.

Technology, at its basic level, is an apolitical tool. And ever since the Web 1.0 era, that has been based on a borderless, hand-off approach to digital oversight — something that just isn't possible given the geopolitical nature of technology in 2025.

What I've been thinking a lot about is how can we marry the best of this laissez-faire approach to technology — one that allows firms and people to connect to each other, within seconds, across the globe — with the ability for politicians and policymakers to both protect citizens from harm and harness what technology has to offer to serve domestic economic interests.

Right now, that balance is failing, and badly.

It is leading to the siloing of citizens within national/regional digital fiefdoms. It is embracing a top-down approach to "tech sovereignty" that relegates people to passive spectators as their digital experiences are dictated for them. It is leaving millions behind as digital policymaking falls into three camps: led by China, the EU and US, respectively.

Watch this space for thoughts on how to fix that.

What I'm reading

— The Molly Rose Foundation analyzed TikTok and Instagram and found an ongoing high-level risk of exposure for minors to content linked to suicide, self-harm and depression-related material. More here.

— Bits of Freedom, a Dutch non-profit organization, filed a lawsuit against Meta so that its local users could access their Instagram and Facebook feeds in ways not based on user profiling. More here.

— Researchers from the University of Amsterdam created a social media network based on AI agents, and discovered the platform quickly recreated levels of polarization seen in real-world networks. More here.

— The White House's recent AI Action Plan is full of contradictory policies that may lead to the concentration of power of the emerging technology, argue three former Joe Biden-appointed officials for Tech Policy Press.

— Meta's Oversight Board published its annual report, including details into the 217 voluntary policy recommendations it had made to the tech firm since 2027. More here.

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