Last year's House of Lords report on
Online Platforms and the Digital Single Market comments
Online platforms, which comprise a wide range of software-based technologies,
from search engines and social networks to price comparison websites and
collaborative economy platforms, are drivers of growth, innovation and
competition. They enable businesses and consumers to make the most of the
opportunities created by the digital economy. Supported by the emergence
of mobile devices and pervasive wireless connectivity, online platforms have
transformed how we live, interact and transact. In doing so they have disrupted
existing sectors of the economy and challenged regulatory frameworks.
As part of its Digital Single Market Strategy the EU Commission announced its
plans to launch a consultation to investigate how the largest online platforms use
their market power and whether the current regulatory environment remains
‘fit for purpose’. This report responds to that consultation.
Our assessment of the features of these markets suggests that online platforms
that succeed in harnessing strong network effects can become the main provider
in a sector, gateways through which markets and information are accessed, and
an unavoidable trading partner for dependent businesses. Such platforms are
likely to possess substantial market power. However, the possibility of disruptive
innovation is higher in these markets than in other networked industries and this
may create competitive pressures even where firms have high market shares. We
conclude that determining whether a firm possesses substantial market power,
or is abusing that power, requires meticulous case-by-case analysis.
On this basis we advise against the creation of a platform-specific regulatory
regime. Instead, to protect consumers and to ensure that market power is not
abused, we recommend that existing regulators should be vigilant in these
markets. We also considered three areas of existing regulation and suggested a
number of adaptations to each.
Despite the challenges competition authorities face when dealing with online
platforms, we find that the flexibility of competition law means that it should be
well-suited to addressing the subtle and complex abuses of dominance that may
arise. We suggest that the merger control regime should be modified, to prevent
the acquisition of smaller digital tech firms by large online platforms from
escaping scrutiny. The slowness of competition enforcement, as exemplified by
the ponderous Google case, is cause for concern in such fast-moving markets:
we recommend that the Commission make greater use of ‘interim measures’
and impose time limits on commitment negotiations, to make enforcement
more responsive. There are also sector-specific issues. For example, some allege
that online travel agents exploit their bargaining power relative to their trading
partners by engaging in a variety of aggressive and misleading practices. To
address these concerns, we urge the Competition and Markets Authority to
investigate the sector. In markets where online platforms have been found to
impose unfair terms and conditions on their trading partners, we suggest that
competition authorities could usefully develop codes of practice.
The collection and use of consumer data are integral to the provision of online
platforms’ services. We are therefore concerned to find that consumer trust
in how online platforms manage personal data is worryingly low. Consumers
seem to be unaware that they trade their personal data in exchange for access
to many of the so-called ‘free services’ that online platforms provide and that
their data are used to generate advertising revenues or are sometimes sold on
and shared with third parties. The opaque and legalistic privacy notices used
by online platforms are one reason for this lack of trust. We also identify a
lack of competition between platforms on privacy standards, and suggest that
online platforms could potentially abuse a dominant position by downgrading
their privacy standards. To address this, we recommend that the Government
work with the Commission to develop a privacy seal that incorporates a graded
scale, and that platforms found to have repeatedly or egregiously breached data
protection laws should be required to communicate this directly to their users.
We also urge Government to press for the proper implementation of the recently
agreed General Data Protection Regulation, and invite the Commission to
clarify some of its more ambiguous provisions.
While some online platforms have gone beyond the requirements of existing
consumer protection law, bad practices also persist. There is a widespread lack
of transparency in how platforms rank and present information to their users.
We recommend that existing regulation be altered to require online platforms
clearly to communicate the basis on which they rank results, and also to inform
consumers when ‘personalised pricing’ is taking place.
Underlying the Digital Single Market Strategy is Europe’s conspicuous failure
to produce any truly global online platforms. Yet Europe is getting better at
producing $1bn-valued tech firms (‘unicorns’), and within Europe the UK
leads the field, having produced half of the unicorns in Europe. The UK thus
stands to gain more from the creation of a Digital Single Market than any other
EU Member State. We suggest that the fundamental aim of the Strategy—to
create a scale market of 500 million consumers—is the right one: if it is achieved
Europe has the potential to play a leading role in the next phase of the digital
revolution. We urge a sharp focus on this fundamental aim.
We support the ambitions of the Digital Single Market Strategy, but we note
that the sensitive concerns raised by online platforms have created pressure
on regulators and legislators to act at Member State level. This has increased
regulatory fragmentation and threatens to undermine the possibility of making
the Digital Single Market a reality.
We believe that it is necessary to put in place an ongoing process that can act
as an outlet for the concerns of regulators and legislators, as well as businesses,
consumers and indeed citizens. To this end, we recommend the appointment of
an independent expert panel that would seek to gather concerns, subject them
to rigorous analysis, and make policy recommendations to enable the sustained
growth of Europe’s digital economy. The nature and role of this panel are
outlined in the concluding section of our report.
The report's Summary of Conclusions and Recommendations states
Chapter 2: The importance of online platforms
1.
Online platforms are drivers of growth, innovation and competition, which
enable businesses and consumers to make the most of the opportunities
provided by the digital economy.
2.
E-commerce platforms allow SMEs to access global markets without having to
invest in costly digital infrastructure, and provide consumers with increased
choice. Search engines enable their users to navigate the web efficiently,
and enable businesses to engage in more targeted advertising. Social media
and communication platforms provide citizens with new opportunities for
interaction, self-expression and activism.
3.
Policymakers should take care when examining the challenges these rapidly
developing markets present not to lose sight of the very considerable benefits
that online platforms provide.
4.
The Commission’s decision to conduct a comprehensive assessment of
online platforms should not be seen as inherently protectionist. Given the
impact these businesses have had on people’s lives and the economy, and
concerns about whether existing regulatory regimes are still fit for purpose,
a thorough analysis of online platforms is timely. If the growth of Europe’s
digital economy is to be maximised, it is important that such concerns are
investigated and, where appropriate, addressed.
Chapter 3: Defining ‘online platforms’
5.
The Commission’s primarily economic definition of multi-sided online
platforms offers insight into central aspects of these businesses including their
intermediary role, the interdependencies that arise between their distinct
user groups, and the role that data plays in intermediating between these
groups. This provides a helpful way of thinking about online platforms that
can usefully inform the work of policymakers and regulators.
6.
The boundaries of the definition are, however, unclear. This is illustrated by
the Commission’s own list, which excludes traditional platform businesses
that now operate online, yet includes some digital platforms that are not
multi-sided. Broadly interpreted, the proposed definition could encompass
‘all of the Internet’; strictly applied, it would only capture specific elements
of the businesses with which it is concerned.
7.
We recommend that further consideration of the need for regulation of
online platforms should start by attempting to more precisely define the
most pressing harms to businesses and consumers, and then consider the
extent to which these concerns are common to all online platforms, sector-
specific, or specific to individual firms.
Chapter 4: Market power and online platforms
8.
The markets in which online platforms operate are characterised by
accelerated network effects. These may fuel exponential growth, increase
switching costs, increase entry barriers for potential competitors and lead
to monopolistic outcomes. Firms that succeed in harnessing these network
effects may become the main platform in a sector, gateways through which
markets and information are accessed. This can reduce choice for users and mean that they become an almost unavoidable trading partner for businesses.
Such platforms are likely to possess a significant degree of market power.
9.
However, in contrast to some networked industries, the market power of
the most successful online platforms is secured through innovation that has
succeeded in harnessing network effects. The risk of disruptive innovation is
also greater in these markets because the up- front investment in infrastructure
required for market entry is often lower. Therefore, ‘competition for the
market’ may create competitive pressure even when one firm has a high
market share.
10.
Furthermore, we note that competitive pressures vary in type and intensity
from sector to sector, and many online platforms are unlikely to possess
significant market power. Case by case analysis is therefore necessary.
11.
On this basis, while competition authorities reserve the power to break up
firms and limit their market shares, we do not believe that ex ante regulation
of platforms that sought to substantially restrict their activities on the
basis of their market share alone, is necessary. Nonetheless, the potential
for dominant positions to emerge means that competition authorities must
be vigilant in these markets, to ensure that market power is not abused.
Protecting users in these markets also requires that consumer rights and
data protection rights are effectively enforced.
Chapter 5: Competition law and online platforms
Restrictions on pricing
12.
The increasing use of restrictive pricing practices by online platforms
requires critical scrutiny by competition agencies. While some restraints may
be justified to enable price comparison websites to operate, these clauses
may also, especially when broadly designed, enable firms to exploit suppliers
and exclude competitors. A case by case analysis by competition authorities
is therefore necessary.
13.
While we commend the commitments secured by National Competition
Authorities from Booking.com and Expedia to drop the use of wide price
parity clauses, we note that the asymmetries of bargaining power that
characterise the online travel agent sector may mean that the effects of wide
parity clauses persist in practice, even after the prohibition of these clauses.
14.
We recommend that the Competition and Markets Authority urgently order
a market investigation into the online travel agent sector. This investigation
should consider the extent to which banning wide parity clauses has been
effective, claims that online travel agents continue to prevent suppliers
from offering other online travel agents a lower price, and other misleading
practices alleged against online travel agents, including the creation of
‘shell websites’. As this is a Europe-wide issue, we recommend that the
Commission support this investigation and co-ordinate any related activity
by other National Competition Authorities.
15.
We believe the findings of this investigation may be of wider application and
could provide helpful insights about how to address similar practices in other
sectors. While the evidence we received applied to travel accommodation, the
findings of this investigation may be useful in considering the relationship
between Online Travel Agents and other supplier businesses, which also
affects fares and travel costs for consumers.
16.
We note the growing regulatory fragmentation in the online travel agent
sector that has arisen as a result of unilateral action by Member States.
This undermines ambitions to create a Digital Single Market. We urge DG
Competition to publish guidance in due course clarifying the use of wide
and narrow parity clauses by online travel agents.
Asymmetries in bargaining power in other industries
17.
We support the Government’s view that developing codes of practice, most
likely on a sectoral basis, could help to discourage unfair trading practices in
these markets. Such codes of practice should be based on rigorous analysis.
We therefore recommend that the Competition and Markets Authority use
its market investigation tool to examine markets where concerns about unfair
trading practices are most widespread, with a view to determining whether
codes of practice are needed.
18.
We note with concern that DG Competition’s ‘sector inquiry’ power does
not enable it to impose legally binding sector-wide remedies. This limits
the ability of the EU competition regime to address market-wide problems
efficiently. We recommend that DG Competition be granted powers to
impose legally binding sector-wide remedies as a result of a sector inquiry,
subject to conditions to be agreed with National Competition Authorities.
19.
Extending the EU’s online dispute resolution platform to cover business-
to-business disputes could help to address concerns about unfair trading
practices by online platforms. Such a mechanism could complement codes of
practice described above. However, we note that the business-to-consumer
online dispute resolution tool appears not to have been well-implemented.
We recommend that the Commission’s first priority should be to ensure the
effective implementation of the online dispute resolution mechanism in its
current form.
20.
Fear of commercial retaliation by the online platforms on which they depend
may prevent complainants from approaching competition authorities. We
recommend that the Competition and Markets Authority introduce new
measures to protect complainants in these markets. These should include
imposing substantial penalties upon online platforms that are found to have
engaged in commercial retaliation.
Vertical integration and leveraging
21.
Google’s search engine shows how the tendencies to concentration in these
markets may result in a successful innovator becoming the main provider of
a particular service. Google Search has become a gateway through which a
large proportion of the world accesses information on the Internet, which
many businesses consequently depend on in order to be visible and to
compete online.
22.
The Google case illustrates the way in which a platform may use a strong
position in one sector (in this case, general search) to integrate a range of
other services into its core offering, thereby entering into direct competition
with trading partners on its platform. Such integration can offer consumers
benefits, such as increased convenience; it can also exclude competitors and
harm consumers, if they are not directed to the best service or if innovation
is reduced.
23.
The evidence we have received indicates that it is not possible to formulate
useful general rules about vertical integration in relation to online platforms,
because each case is substantially different. Whether individual examples
should be deemed an abuse must be ascertained through rigorous case by
case analysis. Competition enforcement is the most appropriate instrument
to deal with such concerns where they arise.
Mergers and acquisitions
24.
Large online platforms frequently acquire innovative firms, often at a
significant premium, in order gain a competitive advantage over rivals; it is
important that competition authorities are vigilant to ensure that, in doing
so, they are not also buying up the competition.
25.
We are concerned that mergers and acquisitions between large online
platforms and less established digital businesses may escape scrutiny by
competition authorities, because the target company generates little or no
revenue and so falls below the turnover threshold adopted by the European
Commission’s Merger Regulation.
26.
We recommend that the Commission amend the Merger Regulation to
include additional thresholds that better reflect this dynamic, examples of
which might include the price paid for the target or a version of the ‘share of
supply’ test used in the UK.
Data and competition law
27.
Data are integral to the operation of many online platforms and the benefits
they provide. For this reason, exclusive access to multiple sources of user
data may confer an unmatchable advantage on individual online platforms,
making it difficult for rival platforms to compete.
28.
As well as providing new benefits, rapid developments in data collection and
data analytics have created the potential for new welfare reducing and anti-
competitive behaviours by online platforms, including subtle degradations of
quality, acquiring datasets to exclude potential competitors, and new forms of
collusion. While some of these abuses are hypothetical, they raise questions
as to the adequacy of current approaches to competition enforcement.
29.
We recommend that the European Commission co-ordinate further research
regarding the effects that algorithms have on the accountability of online
platforms and the implications of this for enforcement. We also recommend
that the Commission co-ordinate further research to investigate the extent
to which data markets can be defined and dominant positions identified in
these markets.
30.
It is clear that dominant online platforms could potentially abuse their market
position by degrading privacy standards and increasing the volume of data
collected from their users. We welcome ongoing research and competition
investigations that seek to clarify the circumstances under which degradation
of privacy standards could be deemed abuse under competition law. In the
meantime, these concerns underline the clear need for the enforcement
of data protection law to be sufficiently robust to deter bad behaviour.
The adequacy of competition law
31.
The sheer diversity of online platforms and the complexity of their business
models raise obvious challenges for competition authorities. The lack of price
signals on the consumer side, and the presence of multiple prices in multi-
sided markets, create difficulties for standard antitrust analysis. Quality is a
key parameter of competition in these markets, but is not easily measured.
32.
While these challenges are significant, we note that the flexible, principle-
based framework of competition law, which can be customised to individual
cases, is uniquely well-suited to dealing with the subtlety, complexity and
variety of possible abuses that may arise in these markets. We cannot see
how a less flexible regulatory approach could be more effective.
33.
Competition law is perceived as being too slow to react to rapidly evolving
digital markets. While the length of time taken to arrive at a decision in
the Google case reflects its importance, it also highlights a wider problem.
In such fast-moving markets a competitor who falls foul of anti-competitive
conduct may suffer irreversible harm long before a competition case
concludes. This undermines public confidence in the ability of regulators to
hold large online platforms to account and may create political pressure for
legislators to regulate unnecessarily.
34.
In order to speed up the enforcement of competition law, and in light of
recent changes in UK legislation, we recommend that the Competition and
Markets Authority make greater use of interim measures. DG Competition
should also make greater use of interim measures by lowering the threshold
for their use, bringing it into line with that of the UK Competition and
Markets’ Authority. (Paragraph 200)
35.
We recommend that the Competition and Markets Authority and DG
Competition consider introducing time limits for the process of negotiating
commitments between competition authorities and dominant firms.
Restricting the period for discussion of commitments should encourage
parties to offer serious proposals at the outset and prevent them from delaying
the process.
36.
We also note that our proposal to provide DG Competition with market
investigation powers would enable the Commission to identify and address
market-wide problems more efficiently and comprehensively than its current
sector inquiry tool.
Chapter 6: Data protection law and online platforms
Consumer concerns about personal data and online businesses
37.
Consumers agree to share their personal data with online platforms in
exchange for access to their services. However, the complex ways in which
online platforms collect and use personal data mean that the full extent of
this agreement is not sufficiently understood by consumers. As a result,
trust in how online platforms collect and use consumers’ data is worryingly
low and there is little incentive for online platforms to compete on privacy standards. We believe this presents a barrier to future growth of the digital
economy. Online platforms must be more effective in explaining the terms of
such agreements to consumers.
General Data Protection Regulation
38.
We welcome the wide range of reforms contained within the General Data
Protection Regulation which will strengthen and modernise the EU data
protection regime. This Regulation will expand the definition of personal
data to include data collected through the use of cookies, location tracking
and other identifiers, and will mean that the data protection regime will
apply directly to online platforms established outside the EU for the first
time.
39.
Nonetheless, given the limitations of the consent-based model, and industry’s
reluctance to make the mechanisms of consent more meaningful, we are
concerned that the provisions that widen the definition of ‘personal data’
will be difficult to apply in practice. We recommend that the Commission
investigate how the requirement for all businesses to seek consent for the
collection of personal data through online identifiers, device identifiers,
cookie IDs and IP addresses can be applied to online platforms in a practical
and risk-based way.
40.
The privacy notices used by online platforms are inaccessible to the average
consumer. They are too long and expressed in complex language. While
the General Data Protection Regulation will require more transparency in
privacy notices, and introduce heftier fines for non-compliance, this alone
may not be sufficient to make consumers understand the value of their data
when transacting with online platforms.
41.
We support provisions within the General Data Protection Regulation to
allow organisations to use privacy seals, or kite-marks, to give consumers
confidence that they comply with data protection rules.
42.
In order to encourage competition on privacy standards, not just compliance
with the law, we recommend that the Government and the Information
Commissioner’s Office work with the European Commission to develop a
kite-mark or privacy seal that incorporates a graded scale or traffic light
system, similar to that used in food labelling, which can be used on all
websites and applications that collect and process the personal data of EU
citizens.
43.
To discourage misuse of users’ personal data, we recommend that the
European Commission reserve powers to require online platforms that are
found to have breached EU data protection standards, or to have breached
competition law by degrading privacy standards, to communicate this
information clearly and directly to all of their users within the EU through
notifications on their web-sites and mobile applications. We suggest that
this power be used sparingly, for repeat offenders or particularly egregious
breaches of the law.
44.
Data portability could be one of the most significant changes brought in
under the General Data Protection Regulation. It could promote quality-
based competition and innovation by making it easier for consumers to switch
platforms. This would facilitate the emergence of new market entrants.
45.
However, we are concerned that the principle of data portability may unravel
in practice. If applied too rigidly, it could place onerous obligations on
emerging businesses; however, unless it is more clearly defined, it is unlikely
that it will be implemented by many online platforms.
46.
We recommend that the Commission publish guidelines explaining how
data portability requirements apply to different types of online platform.
These guidelines should match data portability requirements to different
types of online platform, adopting a proportionate approach depending on
the essentiality of the service in question.
47.
The use of personal data as the basis of research, particularly on social media,
goes beyond what most users would ordinarily expect or consider acceptable.
We recommend that the Government and Information Commissioner’s
Office publish guidelines in the next 12 months setting out best practice
for research using personal data gathered through social media platforms.
48.
In the past, online platforms established outside the EU were not subject
to European data protection rules. This resulted in a weak data protection
regime in which European citizens’ fundamental rights were breached, and
reduced consumer trust in how online platforms collect and process personal
data. We are therefore concerned that industry remains sceptical about the
forthcoming General Data Protection Regulation. Online platforms must
accept that the Regulation will apply to them and will be enforced, and
prepare to make the necessary adaptations.
49.
We urge the Commission, the Government, regulators and industry to use
the time before the Regulation enters into force to ensure that its terms are
well understood and effectively implemented.
Chapter 7: Consumer protection and online platforms
Consumer-to-consumer transactions
50.
Some online platforms take consumer protection issues seriously and
dedicate significant business resources to addressing problems as and when
they arise.
51.
Nonetheless, the growth of online platforms and the collaborative economy
raise important questions about the definitions of ‘consumer’ and ‘trader’,
which form the cornerstone of consumer protection law. This creates
uncertainty about the liability of online platforms and their users in instances
where consumer protection concerns may arise.
52.
We recommend that the Commission and the Government review the
use of these definitions within the consumer protection
acquis
in order to
determine whether gaps in legislation exist and if legislative change is needed.
The Commission should also publish guidance about the liability of online
platforms on consumer protection issues in relation to their users, including
their trading partners.
53.
We also recommend that online platforms clearly inform consumers that
their protection under consumer protection law may be reduced when
purchasing a good or service from an individual, as opposed to a registered
trader.
Transparency in how online platforms present information
54.
Concerns about the lack of transparency in how search and meta-search
results are presented to consumers are well founded, especially in relation
to price comparison websites, where the results of a search may be based on
a commercial deal between the website and a business, rather than on the
best possible price. However, we do not believe that this problem should be
addressed by requiring online platforms to disclose their algorithms, which
are their intellectual property. Instead, we believe that these concerns should
be addressed through increased transparency.
55.
We recommend that the Commission amend the Unfair Consumer Practices
Directive so that online platforms that rank information and provide search
and specialised results are required to clearly explain on their website the
basis upon which they rank search results. We also recommend that the
Commission amend the Directive to require online platforms to provide a
clear explanation of their business models and relationships with suppliers,
which should also be prominently displayed on their websites.
56.
We note concerns that online platforms can and do engage in personalised
pricing, using personal data about consumers to determine an individual
price for a particular good or service, without clearly communicating this
to consumers. This is another worrying example of the lack of transparency
with which some online platforms operate. We recommend that DG
Competition build on the work of the Office of Fair Trading and investigate
the prevalence and effects of personalised pricing in these markets. We also
recommend that online platforms be required to inform consumers if they
engage in personalised pricing.
57.
The rating and review systems used by online platforms are instrumental in
creating the trust necessary for consumers to engage in online transactions.
To ensure transparency, however, we believe that all online platforms should
have publicly accessible policies for handling negative reviews, and clearly
distinguish between user reviews and paid-for promotions. We recommend
that the Commission publish guidance clarifying how the Unfair Commercial
Practices Directive applies to the rating and review systems used by online
platforms.
Chapter 8: How to grow European platforms
58.
European policymakers should not allow concerns about online platforms to
obscure the fact that they are key drivers of competitiveness, productivity and
growth. It is important that Europe develop its ability to compete in these
markets. We therefore urge the European Commission, as part of its current
and future work on online platforms, to prioritise actions that promote the
emergence and growth of online platforms in Europe.
The UK’s strengths
59.
The UK has a population of early adopters, the highest levels of e-commerce
in Europe, a thriving tech start-up scene, exceptionally strong e-commerce
and creative sectors, and is a world-leader in FinTech or Financial Technology
services. As a result, the UK stands to gain more than any other EU Member
State from the creation of a digital single market.
Create a Digital Single Market of 500 million consumers
60.
Market scale is paramount for online platforms, whose value resides in the
size of the networks they can create. The fragmentation of the European
market in digital goods and services—with 28 different rulebooks—
substantially limits growth and acts as an incentive for businesses to shift
the locus of their operations to the US, to maximise their growth potential.
We therefore strongly endorse the central aim of the Digital Single Market
Strategy, which is to reduce regulatory fragmentation and remove barriers to
cross border trade, and urge the Commission to retain a sharp focus on this
over-riding purpose.
61.
Initiatives in the Digital Single Market Strategy, particularly the greater
harmonisation of contract law and consumer protection, are critically
important to enabling digital tech start-ups and platforms to operate
without friction across borders and to fully exploit a potential market of
over 500 million consumers. We recommend that the Commission and the
Government pursue an ambitious degree of integration in these areas, and
resist a lowest common denominator approach.
Facilitate increased investment
62.
We note the weakness of the European venture capital market compared to
that of the US is a barrier to the growth of EU-based start-ups and scale-
ups, and an incentive for emerging platforms to move to the US. This lack of
investment is not unique to online platforms, and represents a major obstacle
to generating economic growth across the Union. We therefore welcome
the unprecedented large-scale action from the Commission to address this
lack of investment through the Capital Markets Union, the €315 billion
Investment Plan for Europe and its proposal to create a venture capital ‘fund
of funds’.
63.
We also note the difficulty of establishing small-scale investment funds in
the UK, compared to the US. We recommend that the Government review
the example provided by the US Jumpstart Our Business Startups (JOBS)
Act, and consider whether comparable reforms could facilitate increased
investment in UK-based start-ups and scale ups. (Paragraph 339)
Embrace the strategic role of innovation
64.
If the European Union and its Member States wish to facilitate the growth of
online platforms that can compete in these global markets, they must embed
innovation at every level of policymaking. The need to update existing
regulation in order to protect consumers and the competitive process should
be carefully balanced with the need to promote innovation in these markets:
we suggest that regulating after markets have matured may be preferable to
adopting a more pre-emptive approach.
65.
If the EU and its Member States can get this balance right, facilitate increased
investment in digital tech firms, and—most importantly of all—create a scale
market of 500 million consumers, Europe has the potential to play a leading
role in the next stages of the digital revolution.
Chapter 9: Regulating online platforms
Disrupted regulation
66.
The rapid growth of online platforms has disrupted many traditional markets.
It has also resulted in uncertainty about how existing regulation, designed
in a pre-digital age, applies to these new disruptive business models. As a
consequence there is a perception that large online platforms are above the
law.
Responding to regulatory disruption
67.
We do not consider that highly restrictive regulation that seeks to contain
disruption would be the right response. It would risk entrenching existing
market structures and make it difficult for new platforms to emerge, thereby
discouraging innovation. Nonetheless, we acknowledge the need to protect
fundamental rights and to ensure that existing regulation is effective and up-
to-date.
68.
In addition to the adaptations proposed elsewhere in this report, we
recommend that the Commission, in concert with regulators at Member
State level, critically review and refit existing regulation to ensure that
its application to online platforms is clear. We believe that in many cases
specific guidance from the Commission could provide this clarification.
69.
As many concerns relate to the enforcement of existing laws rather than
the content of those laws, we invite both the Commission and the Member
States to consider whether providing regulators with increased resources
would be a more efficient way to address concerns about enforcement than
introducing additional rules.
70.
We recommend that regulators robustly enforce against online platforms they
believe to be in breach of the law. Enforcement authorities should sometimes
proceed even where there is a risk of losing the case or having the outcome
appealed—such outcomes help to clarify how the law applies. For this reason
we welcome Commissioner Vestager’s decision to proceed with the Google
case, without prejudice to the outcome.
71.
Online platforms present regulators and enforcement agencies with multiple
challenges, outlined in detail in this report. In addition to a perceived gap in
enforcement, popular concerns about their use of personal data, disruption
of traditional industries and corporate tax contributions have put pressure on
policymakers to act at Member State level, resulting in increased regulatory
fragmentation. Unless these concerns are addressed in a concerted way at a
European level this fragmentation will continue to increase, undermining
the possibility of creating a single market in digital goods and services.
72.
While the Digital Single Market Strategy identifies specific policy interventions
designed to achieve this goal, we consider that the political sensitivity of
questions relating to online platforms, as well as their sheer variety, make
reaching a consensus in this policy area difficult.
73.
Although we welcome the Commission’s consultation as a valuable first step,
we believe that it is too broadly designed to address these issues decisively.
To support the growth of innovative online platforms across the EU in a sustainable way, we believe that the process of reviewing the effectiveness
of existing laws in relation to online platforms must be continuous.
74.
We therefore recommend that the European Commission appoint an
independent panel of experts tasked with identifying priority areas for
action in the digital economy and making specific policy recommendations.
75.
The panel would consist of a representative group of independent experts
with deep insight into the digital economy and the emerging challenges it
presents, drawn from outside the Commission itself. It would be supported
by staff that would enable it to effectively pursue its objectives, and would
seek input from a wide range of specialists on specific issues. The panel
would report annually to the European Commission, the European Council
and the European Parliament.
76.
The panel would act as a channel for public concerns, engaging with
regulators, policymakers, businesses and citizens, but would then subject
those concerns to rigorous and impartial analysis, before formulating
its recommendations. In this way the panel would seek to build political
consensus around its policy proposals, thus reducing the risk of regulatory
fragmentation and removing obstacles to the creation of a Digital Single
Market.
77.
While the panel would set its own agenda, on the basis of this report we
identify three subjects that require immediate consideration:
•
The effectiveness of enforcement in these markets, including whether
enforcement agencies have the necessary powers and resources to act
against abuse by the largest online platforms, and whether enforcement
could be better co-ordinated across different jurisdictions and
regulatory regimes;
•
The lack of competition between platforms on privacy standards, and
how data portability requirements should apply to different types of
online platform; and
•
Ways to open up access for emerging and disruptive innovation into
the digital economy, including in areas such as the Internet of Things
and the expansion of the collaborative economy into new sectors
