The eCommerce Blog - by Allegro Group

Introduction by Chris Sherwood, Head of Public Policy, Allegro Group

The European Commission is making good progress with its Digital Single Market strategy. The latest steps include a policy paper on online platforms, which indicates that there will be further work on addressing specific problems that can be identified. One of the concepts that is being debated is whether some kind of ‘duty of care’ could be imposed on some online platforms (such as those operated by the Allegro Group and its affiliates) that would imply more proactive action to tackle illegal content like counterfeit goods.

This is an important debate; we wanted to give some space to opposing views here. We hope readers find this exchange useful in understanding the issues at stake. Marie Pattullo argues in favour; Jakob Kucharczyk against.

 


Photo Marie sq Marie Pattullo [ MP ] Jakob Kucharczyk pic Jakob Kucharczyk [ JK ]

Marie Pattullo [ MP ] is Senior Brand Protection Manager at AIM , dealing in particular with trade marks and anti-counterfeiting issues.

Jakob Kucharczyk [ JK ] is Director in the Brussels office of the Computer and Communications Industry Association (CCIA), a position he has held since June 2010. His area of expertise is public policy in the high-tech Internet sector with a focus on e-commerce, competition and intellectual property rights. He currently focusses on EU’s Digital Single Market agenda.


Q: What are some of the opportunities and risks inherent in the changes being brought to our economy and society by various kinds of digital platforms?

MP Digital platforms have created new opportunities for brands to interact with consumers. Brand owners have been pioneers in delivering to users and fans great creative content and in distributing their products online. According to the website Social Bakers, 25 brands belonging to AIM members have more than 550,000,000 fans on Facebook and videos posted on YouTube by 15 brands belonging to AIM members count over 2,200,000,000 views.

On the risk side, a number of challenges both for society and companies hinder Europe’s ability to grasp fully the opportunities offered by the Internet. Counterfeiting is one of them.

JK Online platforms have brought huge benefits to our society and economy. It has never been easier for citizens to interact, exchange and make use of their rights in a democratic society. Online platforms have also enabled European SMEs to effectively plug into cross-border and global commerce which has previously been the preserve of only the largest companies. Online platforms are the reason European ‘micro-multinationals’ are thriving.


Q: What does the ‘duty of care’ as defined by the European Commission mean to you?

MP The ‘duty of care’ is an opportunity to build trust online and create a safer and more dynamic digital environment for people and for businesses. Every actor, and we start with ourselves, has the responsibility to take adequate and reasonable proactive measures to ensure that its operations do not cause harm to others. Taking again the example of counterfeiting, it is a serious and growing menace, accounting for over 5% of EU imports according to OECD figures published last month. More should be done to prevent it.

JK We don’t think that there is a clear definition of a ‘duty of care’ – which makes the concept quite abstract. In any case, it would very likely imply an obligation on online platforms to take some sort of proactive enforcement measures. The risk is that it could substantially undermine key provisions of the E-Commerce Directive, one of the most important legislative pieces for a great variety of online companies.


Q: What would be the economic drawbacks and the benefits of the explicit inclusion in EU law of a ‘duty of care’ for digital platforms?

MP There would be huge economic benefits. In the case of counterfeiting, economic damage goes way beyond reputational impact, hurting growth and jobs, causing serious risks to public health (e.g. fake medicines or toys) and even affecting public security, given the extensive links between counterfeiting and organised crime.

Platforms are brands too. They understand that being known to be ‘clean’ and trustworthy in that respect is a big competitive advantage. Clearly we are not advocating any measures that would impede legitimate access to information or the freedom of speech. The scope of the duty on service providers must be proportionate and should depend on the nature of the risk and the degree of control they exercise.

JK It is difficult to describe economic drawbacks and benefits of a ‘duty of care’ without a clear definition of the concept and without a clear idea where such a provision would be implemented in EU law. But independently of that specific debate we would not expect a single stakeholder to object to two principal goals: first, keeping counterfeit and piracy off online platforms and second, ensuring there is a regulatory environment conducive to digital businesses. As regards the former, cooperation and measures targeting the source of illegal activity are most effective and as regards the latter, the E-Commerce Directive will continue to play a crucial role.


Q: What relationship do you see the ‘duty of care’ having with the limited liability regime set out in the e-Commerce Directive?

MP We do not believe that the introduction of a duty of care requires a modification of the current liability regime. It is not about increasing the liability of digital platforms but rather about recognising their role as strategic partners in the fight against illegal activities online. We are all part of the solution.

JK The liability regime of the E-Commerce Directive is the bedrock of the digital economy. Limiting online companies’ liability for the wrongdoing of their users comes with a rule that online hosts are not required to proactively monitor or censor their platform which in light of the amount of content being shared is quite simply impossible. A duty of care could undermine that rule which would effectively render the liability protections useless, as platforms would be presumed to have actual knowledge of illegal content on their sites – at that point their liability protection ends, and censorship begins.


Q: It is sometimes said that the e-Commerce Directive lacks a ‘Good Samaritan’ principle, which would explicitly protect intermediaries from liability in cases where they take proactive actions. Without this, proactive actions leave them open to accusations that they have ‘actual knowledge’ of illegal content on their platforms. Is this relevant to the debate on the ‘duty of care’?

MP This is exactly why a duty of care addresses that concern and only requires these measures to be ‘adequate and reasonable’. It constitutes an obligation of means – taking active measures in good faith – rather than one of result and does not lead to automatic and direct liability of digital players.

It is also designed to be future-proof and technologically neutral as each actor of the digital value chain would have the choice to put in place the measures it deems to be the most appropriate depending on its business model, resources, technology available, etc.

JK This issue is highly relevant. It is neither in online intermediaries’ interest nor in the interest of brand owners of course to have counterfeit, or any other sort of infringing content for that matter, on their sites. Voluntary cooperation measures exist and work well because they are more efficient then blanket regulations. However, today intermediaries are legally discouraged from taking further voluntary measures as they run the risk of losing the benefit of liability protection. We are happy the Commission took this problem up in its recent Communication on online platforms.


Q: How do you see the ‘duty of care’ beyond IPR protection?

MP The duty of care can in principle apply to any area where fraud or unfair practices are a major issue, taking into account the specific nature of the case and which actors can play a role in finding solutions. For example, consumer associations have expressed their concerns about fake user reviews which mislead consumers.

JK So far the ‘duty of care’ debate has focused on IPR protection. Admittedly, online platforms have been engaged in debates on what they can do to better protect minors or curb hate speech for a long time. In this debate, however, a potential ‘duty of care’ has not been raised. In fact, while the Commission has recently announced it will continue the dialogue on these issues with Internet companies, it also re-affirmed the general principles of the E-Commerce Directive which will not be subject to debate.


Q: What’s in it for the European consumer?

MP The European Commission sees consumer trust as a key pillar of its Digital Single Market (DSM) strategy. Figures presented by the French anti-counterfeiting association UNIFAB show that four out of ten consumers are not aware that they are buying counterfeited products. As a result, consumers are potentially put at risk and also left with an item that has no value, and without any means of redress as the trader who sold the product is often untraceable.

The introduction of a duty of care would give consumers greater confidence about the authenticity of the goods they are purchasing. Over time they will develop the same trust shopping online as they have on the high street.

JK Both tackling counterfeits and piracy as well as ensuring a thriving digital economy are two very consumer-centric goals. A duty of care could deter investments in innovative online services in Europe, which would ultimately be detrimental to consumers. It could equally cause intermediaries to behave overly cautiously, which translates into over-takedown – that of course has not only business implications but it also negatively affects consumers. In light of greater legal uncertainty for intermediaries, the value added of a ‘duty of care’ is not obvious.


Q: What is currently done to improve trust on digital platforms?

MP There are great examples of cooperation between brand owners and online platforms that are giving positive results, but looking at the growing incidence of counterfeits and other forms of fraud and abuse online, it is clear that more efforts are needed, including a modernised framework for enforcement.

All players in the genuine value chain are already cooperating with bodies such as OLAF, Europol, Interpol and EUIPO to raise awareness of fakes and counterfeiting and dismantle illegal and criminal networks.

Brand owners aim to bring alive online the quality associated with the brands offline and guarantee the same level of consumer experience, including on platforms. They do their utmost to uphold the brand’s reputation in the eyes of consumers, by investing constantly in innovation, consistent product quality and consumer service. Trust has to be earned.

JK Consumers and citizens have embraced digital technologies and services. Millions of Europeans use various online platforms every day – that in itself speaks for a high level of trust. Trust is delivered to the market through the cooperative efforts of both sides as well as through measures that make sure infringing goods do not enter the distribution chain in the first place. Neither right owners nor consumers are left alone when engaging with online platforms: the law already requires companies to react to notified infringements as quickly as possible. Online companies will continue to work with right owners and law enforcement authorities to makes sure a high level of consumer trust is maintained.


Q: Is the Commission’s starting point in the DSM strategy the right one? Is the political debate on the ‘duty of care’ a healthy and balanced one?

MP How could it be unhealthy to have a debate about the role of the actors in the digital value chain as to how they can all avoid harm to others by their operations? We are all in favour of balanced debates and solutions so we welcome the type of dialogue we are having in this blog.

Online platforms are already or should become strategic partners and a key part of the solution. The DSM strategy offers a great opportunity to think about the most suitable ways to involve all actors in confronting threats to the public interest.

The “one size fits all” or “horizontal” approach to regulating online platforms’ activities is not what we recommend. A number of well-identified issues can be addressed via the revision of specific and existing legislative instruments. For example, the revision of the Intellectual Property Rights Enforcement Directive will be an opportunity to provide better remedies in the fight against counterfeiting.

JK The Commission’s goal of creating a truly functioning digital single market is laudable. Companies in our sector need to be able to more easily scale-up across borders – that is particularly important for smaller players. In light of many online companies’ investments into technological solutions as well as cooperation schemes with right owners, calls for a ‘duty of care’ quite simply lack justification. It seems the Commission has understood this, since the concept is not mentioned in the Communication on online platforms – quite the opposite: the Commission re-affirms the importance of the E-Commerce Directive.


Q: When thinking about the protection of IP rights, what other rights can come into play, and how can a balance be struck between them?

MP IP rights should be safeguarded in a way that promotes innovation, trust, fair competition and freedom of expression. This is why the duty of care principle refers to ‘reasonable and adequate measures’ and why each actor is best placed to define the measures that will comply with this obligation. Online platforms play a central role online and can become one of the trustees of the right balance between the protection of intellectual property rights and other fundamental rights. Brand owners will always be more than willing to help.

JK European courts have repeatedly stated that IPR enforcement needs to be balanced with other fundamental rights like the freedom to expression and information and the freedom to conduct a business. Advocate General Szpunar has recently stressed this important balance in his opinion to the Mc Fadden case (C-484/14) where he stated that free WiFi access points, while capable of being abused for IP-infringing activity, offer great potential for innovation. Accordingly, enforcement measures need to be balanced and proportionate. Of course, online intermediaries offer great potential for innovation, too – a duty of care risks slowing that innovation by upsetting the balance.


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