Rabbit Hole Effect is a figurative term used to describe that Internet users are easily attracted by continuous content when browsing on the network, and gradually penetrate into a complex information or entertainment network, often unable to easily exit, thus spending a large amount of time in this process. This phenomenon is similar to the protagonist Alice in Wonderland falling into a mysterious rabbit hole and entering a completely different and bottomless world.

This time, TIKTOK has been launched by the European Union into a DSA investigation due to its algorithm addiction. As TIKTOK, who has just lost a lawsuit in the European Court and became a "gatekeeper" enterprise, its journey to the European Union has become Alice's fairyland dream.

1. According to the EU, a DSA investigation into TikTok was officially launched on February 19, 2024. The EU side stated that this investigation is an action in line with the EU legal framework and values, aimed at protecting the rights of consumers, users, and competitors in the EU market, as well as safeguarding the EU's digital sovereignty and security. DSA is a legal proposal released by the European Union in December 2020, aimed at regulating and strengthening the responsibilities and obligations of companies providing digital services in the EU, including effective supervision and management of content and behavior on their platforms to prevent and combat illegal and harmful content and behavior, as well as protecting user privacy and data. The DSA also requires these companies to provide transparent and fair rules and mechanisms to promote fair competition and innovation in the market.

TikTok is a popular short video platform worldwide, with hundreds of millions of users and creators, including a large number of European users. The influence and position of TikTok in the EU market, according to data released by the EU, has exceeded 1.4 billion users, making it a key regulatory target of DSA.

The EU's DSA investigation into TikTok is mainly based on the following considerations:

Has TikTok effectively protected the rights of minors and adolescents, including appropriate age grading and filtering of content and advertisements on its platform, as well as effective age verification and privacy settings for its users. Does TikTok transparently disclose the advertising content and sources on its platform, as well as its algorithms and logic for recommending and ranking users, so that users can distinguish and identify advertising and non advertising content, as well as understand the basis and impact of what they see. Does TikTok provide sufficient data and information for researchers and regulatory agencies to effectively analyze and evaluate the content and behavior on its platform, as well as to effectively monitor and manage the risks and impacts of its platform. Has TikTok conducted effective risk assessment and management of potential addictive designs and harmful content on its platform, and has it provided users with sufficient choices and controls to protect their physical and mental health and well-being.

According to the European Commission, the purpose of this investigation is to ensure the effective implementation of the Digital Services Act (DSA) and to protect the rights and interests of European users and businesses. The European Commission stated that DSA aims to address issues such as illegal content, harmful and counterfeit products, and unfair market practices, in order to enhance the security, transparency, and accountability of digital services. The European Commission also emphasizes that DSA is not targeted at any specific country or enterprise, but applies to all digital service platforms operating within the EU.

Although the European Commission stated that this investigation is not aimed at protecting local digital service companies or motivated by trade protectionism, but rather to maintain fair competition in the digital service market and the interests of consumers. However, this statement may be questioned by some overseas technology companies in the United States and China, who believe that the European Commission's investigation is discriminatory regulation that restricts its development in the European market.

2. In the past few years, digital service enterprises in the European Union have also been investigated and punished by the European Commission, mainly involving violations in antitrust, taxation, data protection, and other areas. In 2017, the European Commission imposed a penalty of 125 million euros on Booking.com, a subsidiary of Booking Holdings, for using misleading price information and sales strategies on hotel booking websites in France, Italy, and Sweden. In 2018, the European Commission launched an anti-monopoly investigation into Spotify and several other music streaming service providers, investigating whether they were suspected of abusing copyright licensing agreements. In 2019, the European Commission conducted a data protection compliance check on Zalando and several other e-commerce platforms to ensure compliance with the EU's General Data Protection Regulations (GDPR).

The current situation for local digital service enterprises in the European Union is facing fierce competition from overseas technology giants, as well as benefiting from policy support and market demand from the EU. On the one hand, digital service enterprises in the European Union still have a significant gap in scale, innovation, and internationalization compared to technology enterprises in the United States and China, making it difficult to form a leading advantage. On the other hand, digital service enterprises in the EU have also benefited from some of the EU's policy dividends, such as the EU's Digital Single Market Strategy, Digital Services Law, Digital Markets Law, etc., providing them with greater market space and clearer legal frameworks. In addition, digital service enterprises in the European Union can also meet the needs of European users and enterprises for localization, personalization, and social responsibility, forming a certain market advantage.

The debate over whether the EU has deliberately engaged in trade protection will continue, but it is undeniable that the value gap between European born and raised companies and EU regulators will be easier to bridge.

3. On the other side of the coin are the digital giants of the United States and China. As an overseas technology company, the EU has implemented strict regulation and constraints, especially in areas such as competition, taxation, data, and security. The EU believes that these aspects are important means to safeguard Europe's sovereignty, autonomy, and value.

The regulation and restraint of overseas technology enterprises by the European Union are mainly carried out through investigations and penalties by the European Commission, such as anti-monopoly investigations and huge fines imposed by the European Commission on American technology enterprises such as Google, Apple, Amazon, and Facebook, investigations and rulings by the European Commission on tax preferential policies in countries such as Ireland and Luxembourg, inspections and requirements by the European Commission on data protection and privacy compliance of overseas technology enterprises, and reviews and restrictions by the European Commission on the cybersecurity and digital sovereignty of overseas technology enterprises. The EU's regulation and constraints on overseas technology enterprises are also reflected in some laws, regulations, and policies formulated and implemented by the EU, such as the General Data Protection Regulation (GDPR), Digital Services Act (DSA), Digital Markets Act (DMA), etc.

The EU has a strong value orientation and often maintains a cautious attitude towards companies that do not align with their values. Mainly based on the values of democracy, human rights, freedom, and equality in Europe. Twitter (X) became the first company to be investigated under the DSA bill due to issues with Musk's values.

At the same time, the European Union also has concerns about the market position, data security, fair competition, intellectual property, human rights, and other aspects of Chinese enterprises. Therefore, it has strengthened its review and regulation of Chinese enterprises to protect the interests and values of Europe.

The attitude of the European Union towards Chinese enterprises will also vary and change according to different industries and fields, different enterprises and projects, different periods and situations. Chinese companies going abroad are greatly influenced by EU digital regulation, as the EU is a highly regulated market with strict laws and standards for digital services, such as the General Data Protection Regulation (GDPR), Digital Services Act (DSA), Digital Markets Act (DMA), etc. These laws and standards are not only applicable to local digital service enterprises in the EU, but also to overseas enterprises providing digital services in the EU. Therefore, Chinese enterprises need to comply with these laws and standards in order to operate normally in the EU market. Otherwise, Chinese companies may face risks such as fines, injunctions, and lawsuits.

Chinese digital enterprises are currently facing not many sanction cases when going global in the European Union, mainly because Chinese companies still have a large market share in Europe. In fact, the most sanctioned companies in the EU are American companies. It is common for companies such as Google, Twitter, and Apple to face antitrust investigations and sanctions in Europe. We should learn from American companies.

4. Legal and policy issues

The EU's digital laws and policies are constantly updated and changing, posing higher requirements and standards for Chinese enterprises, such as data protection, content regulation, market competition, tax collection, and so on. Chinese enterprises need to timely understand and adapt to changes in these laws and policies to avoid violations and penalties. At the same time, Chinese enterprises also need to respond to changes in the political and social environment of the EU, such as Brexit, the COVID-19 epidemic, and China EU relations. These changes may affect the market access, business cooperation, investment returns, and other aspects of Chinese enterprises in the European Union.

Cultural and Language Issues

The EU is a diversified market with differences in countries, regions, languages, cultures, customs, preferences, and other aspects. Chinese companies need to understand and respect these differences in order to provide digital services that meet the needs and expectations of European users. At the same time, Chinese companies also need to overcome language and cultural barriers in order to have effective and friendly communication and exchange with European partners, regulatory agencies, media, the public, etc. Some related cases include: in 2019, WeChat, a social platform in China, was complained about by some users in Europe for containing inappropriate or offensive content in WeChat's emoticons and stickers, such as those with racial or gender discrimination connotations. In 2018, China's e-commerce platform AliExpress launched a promotion called "11.11" in the European Union, attempting to draw inspiration from the success of China's "Double Eleven" shopping festival. However, it was met with resistance and criticism from EU users, who believed that "11.11" was a solemn and sorrowful day commemorating the end of World War I, unsuitable for commercial activities and consumption.

Technology and innovation issues

The EU is a highly developed market with advanced technology and innovation capabilities, as well as strict technology and innovation standards. Chinese companies need to continuously improve their technology and innovation level to keep pace and interact with European competitors and users. At the same time, Chinese companies also need to comply with the EU's technology and innovation rules to ensure the quality and security of their digital services, as well as to protect Europe's technology and innovation interests. Some related cases include: in 2018, Huawei, a telecommunications equipment supplier in China, was refused or restricted from participating in the construction of its 5G network by some EU countries and operators because Huawei's equipment was considered to have security risks and could be used to steal or destroy European data and information. In 2020, China's search engine Baidu was criticized by some users and media in the European Union for its search results and recommended content being inconsistent with European values and information standards, such as being too biased towards China's political and economic interests and neglecting European human rights and environmental interests.

5. Return to this TikTok DSA survey.

TikTok is the second ultra large online platform to violate DSA; The EU conducted an investigation into X last year. The investigation has no results yet and is still ongoing. The European Commission announced on December 18, 2023 that it has launched a formal investigation into X, stating that it may have violated the Digital Services Act (DSA) by disseminating illegal content in the context of the Hamas Israel conflict. This is the first time that the European Commission has initiated formal procedures under the Digital Services Act. The European Commission stated that the next step will be to collect evidence, such as by sending additional information requests, conducting interviews or inspections, and possibly taking temporary enforcement actions against X. The Digital Services Law does not set any statutory deadline for ending formal procedures.

The EU's investigation into X has sparked dissatisfaction and opposition from X owner Elon Musk and American politicians, who believe that EU regulation unfairly targets American companies, not many Chinese or EU companies. Musk responded to the European Commission on X, "Have you taken action against other social media platforms? Because if you encounter these issues on this platform and none of them are perfect, then everything else is even worse." A bipartisan group of US lawmakers has written to President Biden, warning that EU technology regulation unfairly targets US companies, not many Chinese or EU companies, and demanding that Biden ensure that the EU promises to enforce these regulations fairly.

The EU's investigation into TikTok's violation of DSA may focus on suspected violations of transparency and obligations to protect minors, including addiction design and screen time restrictions, rabbit hole effect, age verification, and default privacy settings. Rabbit Hole Effect is a figurative term used to describe that Internet users are easily attracted by continuous content when browsing on the network, and gradually penetrate into a complex information or entertainment network, often unable to easily exit, thus spending a large amount of time in this process. This phenomenon is similar to the protagonist Alice in Wonderland falling into a mysterious rabbit hole and entering a completely different and bottomless world. In digital product design, the rabbit hole effect is often consciously utilized by algorithmic recommendation systems to continuously provide content that interests users, increase their engagement and retention time. For example, video sharing platforms may immediately recommend a series of similar or related videos after users watch a particular video, and users may unconsciously spend a lot of time on the platform by constantly clicking to watch the next video. The reasons for this effect may include personalized recommendations, automatic playback of the next content, and providing unlimited scrolling. These design choices may lead users to develop addictive behaviors, such as overuse or dependence on specific applications or services, and it is difficult to set boundaries for stopping on their own. The impact of this design on minors is particularly noteworthy, as it may affect their behavior patterns, time management abilities, and even have adverse effects on their psychological and social development. In the context of discussing violations of transparency and the obligation to protect minors, the rabbit hole effect is often the focus of criticism. Many people believe that stricter age verification programs and default privacy settings are needed to protect underage users from potential addictive designs and help them better control screen time. Through these measures, transparency can be improved, allowing users (and their guardians) to have a clear understanding of the services they are using and better control over their usage.

6. Where is the problem, the EU or China?

At present, the most fundamental problem that Chinese digital service enterprises face when going abroad is not abroad, but domestically. The lagging regulatory and legislative capacity in China has led to a very loose regulatory environment for large Internet companies. Many regulations can be easily circumvented. The most typical one is the rule of minimizing information collection. Although the Personal Insurance Law has made relevant provisions, that is, information collection must not exceed the APP base