DeepSeek Blocked in Italy by the Italian Privacy Authority

In this in-depth episode of Diritto al Digitale, we shine a spotlight on DeepSeek, the Chinese AI company that has shaken the tech world with its revolutionary data distillation technique. Host Giulio Coraggio, a technology and data lawyer at DLA Piper, breaks down how DeepSeek’s model outperforms or rivals U.S. counterparts at a fraction of the usual AI training costs—and why it has swiftly become the most downloaded free app in America. But as we uncover, success comes with scrutiny: Euroconsumer has filed a GDPR complaint over potential data privacy issues, prompting the Italian Data Protection Authority to demand answers.

Discover the legal and regulatory challenges DeepSeek now faces, the parallels with OpenAI’s past troubles in Italy, and how EU compliance and privacy laws might shape the future of emerging AI technologies. We also discuss the broader geopolitical stakes—including the U.S. restricting advanced chip sales to China—and the ripple effects on companies like Nvidia, whose stock prices recently took a hit. Tune in to learn why this case could redefine the global AI race and what it means for technology, law, and innovation. 

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Transcript

A groundbreaking AI system emerges from China, promising to rival the biggest U.S. players at a fraction of the usual cost. Within days, it’s taking app stores by storm—but suddenly finds itself under intense scrutiny in Italy. What’s behind this meteoric rise and the looming legal storm? Stay with us as we unravel a story that’s shaking the tech world and could redefine the future of artificial intelligence.

Welcome to Diritto al Digitale, the podcast where we explore the unchartered territories when law, technology, and innovation converge. I’m Giulio Coraggio, your host, a technology and data lawyer at the global law firm DLA Piper.

Let’s start with the spark that ignited this frenzy. China’s DeepSeek AI recently unveiled a model it claims can rival industry leaders, from OpenAI to other U.S. giants, but at a dramatically lower training cost. The secret? A cutting-edge technique called data distillation, which allows large datasets to be compressed into a refined core, requiring less computing power.

DeepSeek’s model was reportedly trained with under $6 million worth of Nvidia’s H800 chips—an astonishing figure compared to the sky-high budgets typically seen in AI development. Within a single week of release, the DeepSeek app shot to the top of free downloads in the U.S.

Almost as swiftly as it rose to fame, however, DeepSeek found itself in the crosshairs of Euroconsumer, a prominent consumer association in Italy. They filed a complaint with the Italian Data Protection Authority, claiming the company’s data processing might violate the EU’s General Data Protection Regulation (GDPR).

Key points raised include:

1. Data Transfers
   Concerns over personal data of European users potentially being transferred to China without adequate safeguards. Under Chinese law, state access to data can be opaque and may not meet proportionality standards set by the GDPR.
2. Privacy Policy
   Allegations that DeepSeek’s policy falls short of European and national data protection rules.
3. Incomplete Information
   Lack of clarity around data retention, user rights, and what categories of data are collected.
4. Profiling and Automated Decisions
   Insufficient transparency about how DeepSeek uses user data in its algorithms.
5. Minors’ Data
   No evident system for verifying age or handling minors’ personal information.

In response, the Italian Data Protection Authority has demanded that DeepSeek clarify:

• What personal data is collected, from which sources, and for what purposes.
• Whether data is stored in China and if proper safeguards exist.
• Whether personal data is used for AI training, including any web-scraping practices.

DeepSeek was given 20 days to reply, but in the meantime, the Authority has decided to suspend DeepSeek’s operations in Italy pending further review.

Echoes of OpenAI’s Past Challenges

Long-time followers of AI developments might remember that OpenAI encountered similar hurdles in Italy two years ago, culminating in a €15 million fine and a revamp of its compliance measures. Since then, European data protection authorities have become even more vigilant about AI companies, and with the looming AI Act, compliance has never been more critical for emerging players.

This case also unfolds against the backdrop of a global AI race. The U.S. government has restricted the sale of advanced chips to China, forcing Chinese AI developers to innovate with fewer resources. DeepSeek’s breakthrough in data distillation has the potential to disrupt the entire AI industry, especially if it can maintain high performance while using limited hardware.

Not surprisingly, Nvidia’s share price took a hit, plummeting 17% on Monday and wiping out roughly $600 billion in market value, fueled by fears that Chinese AI firms might reduce dependency on U.S. chips.

These developments could also prompt a re-evaluation of AI governance in the U.S. Could a more systematic regulatory framework actually become a competitive advantage in the global AI marketplace?

So, what’s next for DeepSeek? Will it comply with the Italian regulator’s demands and regain access to the European market? Or is this the start of a broader crackdown on AI platforms that aren’t fully aligned with GDPR standards? As innovation, regulation, and geopolitics collide, all eyes are on Italy to see how this story unfolds.

 Thanks for tuning in to Diritto al Digitale. This case underlines how emerging technologies can light up the global stage—only to confront the realities of stringent data protection rules. I’d love to hear your thoughts: do you think stricter AI regulations help keep companies in check, or do they risk stifling innovation?

If you enjoyed this episode, subscribe, leave a review, and share it with your friends. I look forward to our next deep dive into the fascinating world where law meets digital transformation.

Until next time, stay curious, stay compliant, and keep exploring the digital frontier with me.