January 22, 2016
The platform regulation discussion is a nuanced, multi-stakeholder debate that has the potential to shape the future of platforms as we know them. Depending on the outcome of the European Commission’s platform regulation consultation, home-grown European e-commerce platforms like ours could be faced with new obligations that would fundamentally change the way we do business, which would in turn affect other players in the ecosystem, including SMEs and consumers. This blog post serves as an analysis of the current debate from the perspective of a fast-growing European platform, the Allegro Group.
We must challenge underlying assumptions and prejudices.
Policy making in Europe suffers from some incorrect, and damaging, assumptions and prejudices about digital technologies and the Internet. These are essentially based on the observation that the biggest and most successful Internet companies are American. This has led to a tendency among our leaders to identify the interests of established, traditional, and disrupted industries as being European, and a willingness to see the Internet community as being American. Policy is far too often made with Google, Facebook or other Silicon Valley giants in mind. Looking at policy through this prism will inevitably result in an environment that is even more hostile to smaller, European digital challengers, because they do not yet have the scale or resources to cope as well with any burdens Europe might impose on them.
We must choose the politics of hope over the politics of despair.
The view that the only way to fight against powerful American multinationals is to hurt them or slow down the disruption they cause to our economy is the politics of despair. The alternative is the politics of hope, based on the view that Europe has already created many of the world’s leading digital technologies (e.g. in games, fintech, and others) and is capable of overtaking the United States (and indeed maintaining its lead over other parts of the world), if only we embrace digital disruption and empower our own digital entrepreneurs to shake us up. We believe that the philosophy underpinning the bulk of the Digital Single Market strategy is the politics of hope. This deserves our strong support.
Disruption should be embraced, not feared.
The interests European policy makers too often favour are interests that are looking for protection from digital disruption and competition. This mindset must be turned on its head if Europe is to succeed in becoming a technology powerhouse again. We must see digital technology overwhelmingly as an opportunity, rather than a threat. We must welcome disruption and force uncompetitive, old-fashioned industries to modernize. This is the only way to ensure that Europe maintains its competitiveness in the face of long-term American excellence and the remarkably swift rise of Asian technology giants.
Our generation has a responsibility to help, not frustrate, the next.
The generation whose mindset is decisive in policy making is not the generation that will have to live with the consequences. This is truer today than it has ever been, because of the speed of change we are seeing in our society and economy, driven by technology. The next generation is ‘Generation D’ (digital, data). This new generation has little interest in old ways of doing things, and instead is enthusiastic about the opportunities provided by digital technologies, the data- driven economy, and the Internet. We have a responsibility to support Generation D’s aspirations, not to preserve the word as we know it.
Digital platforms are already regulated.
If you say it often enough, people will begin to believe it is true. This is the case with regulation and the Internet. The belief that the Internet is an ‘unregulated’, ‘Wild West’ is widespread, and completely false. In many cases, digital industries are more regulated than their analogue counterparts. Digital retailers are subject to the same consumer protection rules as supermarkets. Search engines have to comply with far stricter privacy rules than the Yellow Pages. Digital payments are subject to far stricter regulations than cash transactions. It is of course true that digital technology and the Internet enable new business models and industries to emerge that are not regulated. But it is not their digital nature that requires us to consider regulation; it is the specific characteristics of each individual industry or business model.
The “Duty of Care” is completely incompatible with the existing liability rules and the growth of European digital platforms.
Many policy makers – even some who are pro-digital – believe that the imposition of a ‘duty of care’ on online intermediaries could be done without affecting the limited liability regime established under the e-Commerce Directive, and would be beneficial because it would increase the incentives for intermediaries to reduce illegal content appearing on their platforms. In fact, however, the ‘duty of care’ is effectively the same as a ‘general obligation to monitor’, banned under Article 15 of the Directive. Such a duty or obligation would not only reduce the competitiveness of European platforms, it would also negatively affect the freedom of platform users to post legal content, because platforms would inevitably take a precautionary approach and remove content that is legal. Europe has already been here, with the ACTA debacle, and a return to this type of politically toxic choice is not in anyone’s interests.
The search for a definition of platforms is a distraction.
The European Commission has rightly launched a consultation on the possibility of regulating digital platforms. Although it is natural to want to define the terms of reference for such a consultation, it is not at all clear that the energy expended in agreeing a definition is well spent. If the Commission wants to facilitate a debate on digital platforms more broadly, one could argue that the definition it proposes is too narrow. But if the intention is to use the definition as a basis for specific regulatory initiatives, the definition is very likely to be too broad, since it is hard to imagine any problematic characteristic of all digital platforms that requires regulation.
We must focus on identifying and addressing specific problems.
We therefore believe that policy makers should focus on identifying problems first. Once identified, the scope of digital platforms concerned can be addressed much more efficiently and accurately.
Existing rules must be better enforced.
At a time of a severe crisis of confidence in the European Union, notably in terms of the security of our external borders, immigration, the state of the economy in general and the Euro in particular, and the possibility of Brexit, the EU badly needs institutions that can prove they have teeth, and do so credibly and professionally. The European Union already has the strictest data protection and consumer protection rules in the world. Its competition law framework, crowned by the proud record of the European Commission as one of the world’s premier competition regulators, is one of the most important aspects of the credibility and attractiveness of the EU market to investors, and indeed of the value of the Single Market to EU citizens. However, as sophisticated as the legal framework is, and as proud a history as the Commission’s Directorate-General for Competition can boast of, it is clear that more can be done to enforce existing rules. It is widely acknowledged in political circles in Brussels that the “platform regulation” agenda is driven in large part by frustration with the slow pace of progress on the Google Search antitrust case. Many believe that this case proves that the enforcers move too slowly for the market, and that ex ante rules are a better way to regulate.
We contend that there is an enormous amount of work to be done to enforce existing rules better. The 2000 E-Commerce Directive is a world-class framework that is compatible and comparable with US rules, notably on the liability of intermediaries for illegal content. The recently implemented Consumer Rights Directive (CRD) aims to address the challenges posed by new digital modes of business interaction with consumers. The 1995 Data Protection Directive will be replaced by a Regulation that will take European privacy protections to a new and even higher level – perhaps in a damaging way for European industry. The competition law framework is also world-leading. But while the competition rules are certainly fit for purpose, the enforcement system has arguably not yet proven itself in the new digital platform environment (the most recent important case was the Microsoft browser case of a decade ago). All of these legal frameworks are either new and need to be given time to become established, or could be better enforced adding credibility to the Single Market without new regulation. The competition law framework in particular would benefit from reforms aimed at increasing the expertise of enforcers in new digital industries, technologies and business models, and increasing the speed with which antitrust processes are concluded (without necessarily reverting only to settlements).
We must keep our eyes on the objectives and stay true to the pro-digital philosophy of the DSM Strategy
For several years now, all of the most successful Internet companies have sought to implement ‘mobile first’ strategies. The idea is that all business activities must be re-thought with a view to catering first of all to the mobile environment (as opposed to the desktop environment), because mobile is where the future of digital products and services is. Resources invested in the old way of doing things will be wasted. Policy makers can use a similar logic and implement a ‘digital first’ approach, according to which all policy is measured against the test of whether it will contribute to the swift modernization and digitalization of our economy – not whether it will harm or disrupt established industries.
The DSM strategy contains a large number of initiatives that will deeply concern a great many stakeholders. That is the nature of policy making. The political noise that will be created around various parts of the strategy will be deafening, and it will inevitably be necessary to make pragmatic compromises. As this process moves forward, it is essential that policy makers keep their eyes on the objectives of the DSM, cut through the noise, and in so doing stay true to the politics of hope, embrace disruption, listen to Generation D, and think ‘digital first’.
By:Chris SherwoodChris Sherwood