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DSM Watch: Opposition growing to the regulation of online platforms

07 April 2016
When the European Commission in its Communication on a Digital Single Market Strategy for Europe (DSM) of 6 May 2015 committed to assess the role of online platforms, questions were raised whether this was the start of a new regulation of platforms. In this context, on 24 September 2015 the Commission launched a public consultation seeking views to better understand the social and economic role of platforms, market trends, and the dynamics of platform-development before deciding how to move forward. However, regulation still is one of the possible options the Commission has.

Opposition against this idea is growing. On 4 April 2016, a coalition of 11 EU Member States including the United Kingdom, Poland, Luxembourg, Finland, Sweden, Denmark, Estonia, Latvia, Lithuania the Czech Republic, and Bulgaria issued a Joint Letter to Commission Vice-President Andrus Ansip warning that cumbersome and excessive regulation of online platforms risks harming the Digital Single Market initiative. The Joint Letter echoes recommendations made by Hogan Lovells, including an article appearing in the Spring edition of our Global Media & Communications Quarterly which can be found here, and articles appearing in the French newspapers "Les Echos" and "L'Opinion".

The signatories of the letter highlight that the development of new digital technologies, behavioural patterns and business models is challenging the status quo and raising questions about how platforms function within the Digital Single Market. Although they praise the Commission for the emphasis it has placed on this issue to date, as well as for its collection of evidence as the basis for a comprehensive analysis of the role of online platforms, the parties to the letter nevertheless highlight four key points that they believe the Commission should consider when planning for the future regulation of online platforms. The four issues are set out in the letter as follows:

  • Platforms should be primarily seen as an opportunity, not a threat. The Member States emphasise that platforms should be regarded as a positive development since they are creative, innovative and drive growth and competitiveness. The reason for their success, according to the letter's authors, is that these platforms are advantageous both for businesses and consumers. Based on this point, the signatories stress the importance of allowing platforms to continue to be the drivers of innovation and to meet customer demand.
  • Platforms are already subject to significant regulation. The parties to the letter go on to ask the Commission to first examine the existing regulatory framework when solving concerns about the way platforms operate. In addition, the parties ask the Commission to fully explore the role of self-regulation of the industry, as this may be more appropriate and effective than government regulation in the fast pace of the digital world. A focus on the implementation of existing laws in an effective and consistent manner is strongly favoured by the letter's signatories.
  • Platforms must not be hampered by cumbersome regulation. As platforms are hugely varied and cover a wide range of business models, the parties to the letter claim that policy questions are rarely applicable exclusively to platforms. In cases where policy questions are applicable, the parties note that these questions are limited to a subset of platforms. Therefore, the 11 Member States claim that new ex-ante regulation on online platforms as a segment of the digital economy is not desirable unless there is clear and compelling evidence of need and may even jeopardize the dynamic development of the sector. The signatories are particularly concerned by the threat of new legislation that may act as a barrier to the development of new European digital business models and result in a disadvantage in relation to global competition.
  • Providing the right conditions for growth. Finally, the letter notes that completing the Digital Single Market best supports the development of European platforms. The 11 Member States call for updating existing regulation to make it fit for a digital age, lightening the burden of regulation for small, innovative businesses and encouraging ease of access to finance through the Capital Markets Union package. The parties argue that this line of action is necessary to encourage the growth and development of European platforms by providing a dynamic and competitive environment, which is something that further regulation would struggle to achieve.

To date, the Commission's approach to the regulation of online platforms has consisted of two strategies. First, it has opened a dialogue with concerned parties as to how regulatory instruments should be drafted in order to solve problems with platforms that currently exist within the EU. Second, in its geo-blocking issues paper published on 18 March 2016, the Commission has signalled its intention to continue with the enforcement of competition rules in the market for online platforms, particularly in cases where the practice of geo-blocking can be linked to agreements between suppliers and distributors.

Our DSM Watch team will continue to monitor EU and national developments relevant for online platforms.

 

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