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DSM Watch: European Commission presents targeted approach to online platforms

On 25 May 2016, the European Commission published a long-awaited Communication on “Online Platforms and the Digital Single Market: Opportunities and Challenges for Europe“, together with a Staff Working Document. Both documents rely on the results of the public consultation on online platforms carried out between September 2015 and January 2016. The main ideas developed in the Communication are similar to the ones mentioned in the draft released by the website statewatch.org mid-April (see https://www.hlmediacomms.com/2016/04/28/dsm-watch-online-platforms-commission-communication-to-be-the-next-major-milestone-on-the-road-to-a-digital-single-market/), even though the wording has been changed to a large extent.

The starting point remains that the Commission acknowledges the key role played by the platforms in creating innovation and growth in the Digital Single Market. The Commission also notes the diversity existing among platforms in terms of sizes and activities. This being said, online platforms all share some important and specific characteristics according to the Commission. First, they have the ability to create new markets based on the collecting and processing of large amounts of data. This digital value creation by online platforms challenges traditional markets, as underlined by the Commission. Secondly, platforms operate on multi-faceted markets  and benefit from network effects, by relying on information technologies to reach users instantly and effortlessly.

The Commission thrives to set the right environment to let online platforms grow and develop  because having competitive EU-based platforms is both an economic and strategic imperative for the European Union. Indeed, as of today, the EU represents only 4% of the total market capitalization of online platforms, despite the size and importance of the European Single Market. The Commission thus calls for a balanced regulatory framework taking into account existing regulations, having in mind that the latter need to be effectively enforced to ensure fairness and trust. In this respect, the Commission offers a targeted, problem-driven sector-by-sector approach underlining the importance of self-regulatory/co-regulatory measures.

To this end, the Commission proposes four principles.

  1. A level playing field for comparable digital services

The Commission underlines the need in some areas to review existing regulations with a view to simplifying, even downsizing, and modernising them, in order to apply similar rules to platforms and traditional operators. The purpose is to avoid imposing a disproportionate burden on either group. The Commission ties this principle up with the upcoming review of EU telecoms regulatory framework and ePrivacy Directive in 2016.

  1. Responsible behavior of online platforms to protect core values

The Commission considers that the existing intermediary liability regime set out in the eCommerce directive should be maintained because, even though it was elaborated when information technologies did not have the same impact, it created a technology-neutral regulatory environment which facilitated online platforms’ development. Moreover, the Consultation showed great support for the existing principles despite a call for platforms’ wider responsibility. The Commission fully understands the need to maintain a balanced and predictable liability regime for platforms.

This being said, the Commission is of the view that specific problems (e.g.: content harmful to minors, hate speech, fair allocation of revenues for the use of copyright-protected content) need to be addressed through targeted instruments (including notably the updated AVMS Directive, the copyright package). The Commission indicates that it will further encourage coordinated EU-wide self-regulatory efforts by online platforms (e.g. codes of conduct). As platforms have expressed concerns in the course of the consultation that such efforts may deprive them from their limited liability regime, the Commission is prepared to provide guidance and clarity in this respect. After targeted instruments are adopted, the Commission will at a later stage assess the potential need for formal notice-and-action procedures.

  1. Transparency and fairness for maintaining user trust and safeguarding innovation

The consultation showed a lack of trust from a significant share of Internet users towards online platforms: over 75% of the respondents asked for more transparency and information from the platforms, while 90% consider there is room for improvement in B2B relations between online platforms and suppliers.

According to the Commission, transparency and fairness requirements should apply to the relationships of online platforms with (i) individual users (e.g. about ‎practices in terms of data collection and data sharing with other platforms, use of user data to customise the way information is presented to a specific user, fake online reviews and ratings), hence notably the draft regulation on authority cross-border cooperation, the promotion of interoperability and industry-led trust-ensuring practices; and (ii) suppliers (e.g.: terms or practices imposed by platforms in B2B relationships, competition between the platform and its cocontracting party, issues around data ownership). The Commission overall considers that competition law, thanks to its flexibility, can be applied to online platforms. This being said, the Commission will investigate further some of the issues raised in the consultation to determine whether additional action is needed by spring 2017.

  1. An open and non-discriminatory markets in a data-driven economy

The responses to the consultation reflected a broad preference for the implementation of common standards on interoperability, portability and transferability of personal and non-personal data to allow users to switch from one platform to another when they are not satisfied by one platform’s service. There should be no technical obstacles to such switching. This is also in relation to the “free flow of data” initiative scheduled for the end of 2016.

The approach of the Commission is dual: effectively stimulating innovation and growth for competitive European platforms to emerge, by dealing with the challenges associated with their environment, notably the fragmentation of the EU market and the legal uncertainty it creates, while at the same time creating a regulatory framework respecting the legitimate interests of consumers and other users. The Commission ends its Communication with a call upon all Member States and stakeholders to support its approach (which could be read as targeting the French attempts to regulate platforms, in particular the currently pending Digital Bill, see https://www.hlmediacomms.com/2016/05/20/french-platform-regime-the-saga-continues-after-the-adoption-by-the-french-senate-of-the-digital-bill/).

In a subsequent article, we will further analyse the results of the consultation and the Staff Working Document also issued by the Commission on 25 May 2016.