Robot Charter

The Artificial Intelligence report by the European Parliament's Committee on Legal Affairs noted in the preceding post features a draft framework

Definition and classification of 'smart robots'

A common European definition for 'smart' autonomous robots should be established, where appropriate including definitions of its subcategories, taking into consideration the following characteristics:

The capacity to acquire autonomy through sensors and/or by exchanging data with its environment (inter-connectivity) and the analysis of those data

The capacity to learn through experience and interaction

The form of the robot’s physical support

The capacity to adapt its behaviours and actions to its environment

Registration of 'smart robots'

For the purposes of traceability and in order to facilitate the implementation of further recommendations, a system of registration of advanced robots should be introduced, based on the criteria established for the classification of robots. The system of registration and the register should be Union-wide, covering the internal market, and should be managed by an EU Agency for Robotics and Artificial Intelligence.

Civil law liability

Any chosen legal solution applied to robots' liability in cases other than those of damage to property should in no way restrict the type or the extent of the damages which may be recovered, nor should it limit the forms of compensation which may be offered to the aggrieved party on the sole grounds that damage is caused by a non-human agent. The future legislative instrument should provide for the application as a rule of strict liability to damage caused by 'smart robots', requiring only proof of a causal link between the harmful behaviour of the robot and the damage suffered by the injured party. An obligatory insurance scheme, which could be based on the obligation of the producer to take out insurance for the autonomous robots it produces, should be established. The insurance system should be supplemented by a fund in order to ensure that damages can be compensated for in cases where no insurance cover exists.

Interoperability, access to code and intellectual property rights

The interoperability of network-connected autonomous robots that interact with each other should be ensured. Access to the source code should be available when needed in order to investigate accidents and damage caused by 'smart robots'.  Criteria for ‘intellectual creation’ for copyrightable works produced by computers or robots should be drawn up.

Disclosure of use of robots and artificial intelligence by undertakings

Undertaking s should be obliged to disclose:

– the number of 'smart robots' they use,

– the savings made in social security contributions through the use of robotics in place of human personnel,

– an evaluation of the amount and proportion of the revenue of the undertaking that results from the use of robotics and artificial intelligence.

The report also features a Charter of Robotics - 

The proposed code of ethical conduct in the field of robotics will lay the groundwork for the identification, oversight and compliance with fundamental ethical principles from the design and development phase. The framework must be designed in a reflective manner that allows individual adjustments to be made on a case-by-case basis in order to assess whether a given behaviour is right or wrong in a given situation and to take decisions in accordance with a pre-set hierarchy of values. The code should not replace the need to tackle all major legal challenges in this field, but should have a complementary function. It will, rather, facilitate the ethical categorisation of robotics, strengthen the responsible innovation efforts in this field and address public concerns. Special emphasis should be placed on the research and development phases of the relevant technological trajectory (design process, ethics review, audit controls, etc.). It should aim to address the need for compliance by researchers, practitioners, users and designers with ethical standards, but also introduce a procedure for devising a way to resolve the relevant ethical dilemmas and to allow these systems to function in an ethically responsible manner.

The Code of Ethical Conduct for Robotics Engineers has the following Preamble

• The Code of Conduct invites all researchers and designers to act responsibly and with absolute consideration for the need to respect the dignity, privacy and safety of humans.

• The Code asks for close cooperation among all disciplines in order to ensure that robotics research is undertaken in the European Union in a safe, ethical and effective manner.

• The Code of Conduct covers all research and development activities in the field of robotics.

• The Code of Conduct is voluntary and offers a set of general principles and guidelines for actions to be taken by all stakeholders.

• Robotics research funding bodies, research organisations, researchers and ethics committees are encouraged to consider, at the earliest stages, the future implications of the technologies or objects being researched and to develop a culture of responsibility with a view to the challenges and opportunities that may arise in the future.

• Public and private robotics research funding bodies should request that a risk assessment be performed and presented along with each submission of a proposal for funding for robotics research. Such a code should consider humans, not robots, as the responsible agents. Researchers in the field of robotics should commit themselves to the highest ethical and professional conduct and abide by the following principles:

Beneficence – robots should act in the best interests of humans;

Non-maleficence – the doctrine of ‘first, do no harm’, whereby robots should not harm a human;

Autonomy – the capacity to make an informed, un-coerced decision about the terms of interaction with robots;

Justice – fair distribution of the benefits associated with robotics and affordability of homecare and healthcare robots in particular.

Fundamental Rights

Robotics research activities should respect fundamental rights and be conducted in the interests of the well-being of individuals and society in their design, implementation, dissemination and use.

Human dignity – both physical and psychological – is always to be respected.

Precaution

Robotics research activities should be conducted in accordance with the precautionary principle, anticipating potential safety impacts of outcomes and taking due precautions, proportional to the level of protection, while encouraging progress for the benefit of society and the environment.

Inclusiveness

Robotics engineers guarantee transparency and respect for the legitimate right of access to information by all stakeholders. Inclusiveness allows for participation in decision-making processes by all stakeholders involved in or concerned by robotics research activities.

Accountability

Robotics engineers should remain accountable for the social, environmental and human health impacts that robotics may impose on present and future generations.

Safety

Robot designers should consider and respect people’s physical wellbeing, safety, health and rights. A robotics engineer must preserve human wellbeing, while also respecting human rights, and disclose promptly factors that might endanger the public or the environment.

Reversibility

Reversibility, being a necessary condition of controllability, is a fundamental concept when programming robots to behave safely and reliably. A reversibility model tells the robot which actions are reversible and how to reverse them if they are. The ability to undo the last action or a sequence of actions allows users to undo undesired actions and get back to the ‘good’ stage of their work.

Privacy

The right to privacy must always be respected. A robotics engineer should ensure that private information is kept secure and only used appropriately. Moreover, a robotics engineer should guarantee that individuals are not personally identifiable, aside from exceptional circumstances and then only with clear, unambiguous informed consent. Human informed consent should be pursued and obtained prior to any man-machine interaction. As such, robotics designers have a responsibility to develop and follow procedures for valid consent, confidentiality, anonymity, fair treatment and due process. Designers will comply with any requests that any related data be destroyed, and removed from any datasets.

Maximising benefit and minimising harm

Researchers should seek to maximise the benefits of their work at all stages, from inception through to dissemination. Harm to research participants/human subject/an experiment, trial, or study participant or subject must be avoided. Where risks arise as an unavoidable and integral element of the research, robust risk assessment and management protocols should be developed and complied with. Normally, the risk of harm should be no greater than that encountered in ordinary life, i.e. people should not be exposed to risks greater than or additional to those to which they are exposed in their normal lifestyles. The operation of a robotics system should always be based on a thorough risk assessment process, which should be informed by the precautionary and proportionality principles.

The associated Code for Research Ethics Committees (RECs) is

Principles

Independence

The ethics review process should be independent of the research itself. This principle highlights the need to avoid conflicts of interest between researchers and those reviewing the ethics protocol, and between reviewers and organisational governance structures.

Competence

The ethics review process should be conducted by reviewers with appropriate expertise, taking into account the need for careful consideration of the range of membership and ethics-specific training of RECs.

Transparency and accountability The review process should be accountable and open to scrutiny. RECs need to recognise their responsibilities and to be appropriately located within organisational structures that give transparency to the REC operation and procedures to maintain and review standards.

The role of a Research Ethics Committee

A REC is normally responsible for reviewing all research involving human participants conducted by individuals employed within or by the institution concerned; ensuring that ethics review is independent, competent and timely; protecting the dignity, rights and welfare of research participants; considering the safety of the researcher(s); considering the legitimate interests of other stakeholders; making informed judgements of the scientific merit of proposals; and making informed recommendations to the researcher if the proposal is found to be wanting in some respect.

The constitution of a Research Ethics Committee

A REC should normally: be multidisciplinary; include both men and women; be comprised of members with a broad experience of and expertise in the area of robotics research. The appointment mechanism should ensure that the committee members provide an appropriate balance of scientific expertise, philosophical, legal or ethical backgrounds, and lay views, and that they include at least one member with specialist knowledge in ethics, users of specialist health, education or social services where these are the focus of research activities, and individuals with specific methodological expertise relevant to the research they review; and they must be so constituted that conflicts of interest are avoided.

Monitoring

All research organisations should establish appropriate procedures to monitor the conduct of research which has received ethics approval until it is completed, and to ensure continuing review where the research design anticipates possible changes over time that might need to be addressed. Monitoring should be proportionate to the nature and degree of risk associated with the research. Where a REC considers that a monitoring report raises significant concerns about the ethical conduct of the study, it should request a full and detailed account of the research for full ethics review. Where it is judged that a study is being conducted in a way that is unethical, it should consider the withdrawal of its approval and require that the research should be suspended or discontinued.

In relation to Licensing of designers - 

• You should take into account the European values of dignity, freedom and justice before,  during and after the process of design, development and delivery of such technologies including the need not to harm, injure, deceive or exploit (vulnerable) users.

• You should introduce trustworthy system design princi ples across all aspects of a robot’s operation, for both hardware and software design, and for any data processing on or off the platform for security purposes.

• You should introduce privacy by design features so as to ensure that private information is kept secure and only used appropriately.

• You should integrate obvious opt-out mechanisms (kill switches) that should be consistent with reasonable design objectives.

• You should ensure that a robot operates in a way that is in accordance with local, national and international ethical and legal principles.

• You should ensure that the robot’s decision-making steps are amenable to reconstruction and traceability.

• You should ensure that maximal transparency is required in the programming of robotic systems, as well as predictability of robotic behaviour.

• You should analyse the predictability of a human-robot system by considering uncertainty in interpretation and action and possible robotic or human failures.

• You should develop tracing tools at the robot’s design stage. These tools will facilitate accounting and explanation of robotic behaviour, even if limited, at the various levels intended for experts, operators and users.

• You should draw up design and evaluation protocols and join with potential users and stakeholders when evaluating the benefits and risks of robotics, including cognitive, psychological and environmental ones.

• You should ensure that robots are identifiable as robots when interacting with humans.

• You should safeguard the safety and health of those interacting and coming in touch with robotics, given that robots as products should be designed using processes which ensure their safety and security. A robotics engineer must preserve human wellbeing while also respecting human rights and may not deploy a robot without safeguarding the safety, efficacy and reversibility of the operation of the system.

• You should obtain a positive opinion from a Research Ethics Committee before testing a robot in a real environment or involving humans in its design and development procedures.

The Licence for Users is simpler -

• You are permitted to make use of a robot without risk or fear of physical or psychological harm.

• You should have the right to expect a robot to perform any task for which it has been explicit ly designed.

• You should be aware that any robot may have perceptual, cognitive and actuation limitations.

• You should respect human frailty, both physical and psychological, and the emotional needs of humans.

• You should take the privacy rights of indi viduals into consideration, including the deactivation of video monitors during intimate procedures.

• You are not permitted to collect, use or disclose personal information without the explicit consent of the data subject.

• You are not permitted to use a robot in any way that contravenes ethical or legal principles and standards.

• You are not permitted to modify any robot to enable it to function as a weapon.

EU rights for robots?

The European Parliament's Committee on Legal Affairs in a draft report on Civil Law Rules on Robotics has called for a new legel framework for artificial intelligence, with recommendations that are unlikely to be embraced by the full Parliament later in the year.
The draft report comments -  

Introduction

A. whereas from Mary Shelley's Frankenstein's Monster to the classical myth of Pygmalion, through the story of Prague's Golem to the robot of Karel Čapek, who coined the word, people have fantasised about the possibility of building intelligent machines, more often than not androids with human features;

B. whereas now that humankind stands on the threshold of an era when ever more sophisticated robots, bots, androids and other manifestations of artificial intelligence ("AI") seem poised to unleash a new industrial revolution, which is likely to leave no stratum of society untouched, it is vitally important for the legislature to consider all its implications;

C. whereas between 2010 and 2014 the average increase in sales of robots stood at 17% per year and in 2014 sales rose by 29%, the highest year-on-year increase ever, with automotive parts suppliers and the electrical/electronics industry being the main drivers of the growth; whereas annual patent filings for robotics technology have tripled over the last decade;

D. whereas in the short to medium term robotics and AI promise to bring benefits of efficiency and savings, not only in production and commerce, but also in areas such as transport, medical care, education and farming, while making it possible to avoid exposing humans to dangerous conditions, such as those faced when cleaning up toxically polluted sites; whereas in the longer term there is potential for virtually unbounded prosperity;

E. whereas at the same time the development of robotics and AI may result in a large part of the work now done by humans being taken over by robots, so raising concerns about the future of employment and the viability of social security systems if the current basis of taxation is maintained, creating the potential for increased inequality in the distribution of wealth and influence;

F. whereas the causes for concern also include physical safety, for example when a robot's code proves fallible, and the potential consequences of system failure or hacking of connected robots and robotic systems at a time when increasingly autonomous applications come into use or are impending whether it be in relation to cars and drones or to care robots and robots used for maintaining public order and policing;

G. whereas many basic questions of data protection have already become the subject of consideration in the general contexts of the internet and e-commerce, but whereas further aspects of data ownership and the protection of personal data and privacy might still need to be addressed, given that applications and appliances will communicate with each other and with databases without humans intervening or possibly without their even being aware of what is going on;

H. whereas the 'soft impacts' on human dignity may be difficult to estimate, but will still need to be considered if and when robots replace human care and companionship, and whereas questions of human dignity also can arise in the context of 'repairing' or enhancing human beings;

I. whereas ultimately there is a possibility that within the space of a few decades AI could surpass human intellectual capacity in a manner which, if not prepared for, could pose a challenge to humanity's capacity to control its own creation and, consequently, perhaps also to its capacity to be in charge of its own destiny and to ensure the survival of the species;

J. whereas several foreign jurisdictions, such as the US, Japan, China and South Korea, are considering, and to a certain extent have already taken, regulatory action with respect to robotics and AI, and whereas some Member States have also started to reflect on possible legislative changes in order to take account of emerging applications of such technologies;

K. whereas European industry could benefit from a coherent approach to regulation at European level, providing predictable and sufficiently clear conditions under which enterprises could develop applications and plan their business models on a European scale while ensuring that the EU and its Member States maintain control over the regulatory standards to be set, so as not to be forced to adopt and live with standards set by others, that is to say the third states which are also at the forefront of the development of robotics and AI;

General principles

L. whereas, until such time, if ever, that robots become or are made self-aware, Asimov's Laws must be regarded as being directed at the designers, producers and operators of robots, since those laws cannot be converted into machine code;

M. whereas, nevertheless, a series of rules, governing in particular liability and ethics and  reflecting the intrinsically European and humanistic values that characterise Europe's contribution to society, are necessary;

N. whereas the European Union could play an essential role in establishing basic ethical principles to be respected in the development, programming and use of robots and AI and in the incorporation of such principles into European regulations and codes of conduct, with the aim of shaping the technological revolution so that it serves humanity and so that the benefits of advanced robotics and AI are broadly shared, while as far as possible avoiding potential pitfalls;

O. whereas a gradualist, pragmatic cautious approach of the type advocated by Jean Monnet should be adopted for Europe;

P. whereas it is appropriate, in view of the stage reached in the development of robotics and AI, to start with civil liability issues and to consider whether a strict liability approach based on who is best placed to insure is not the best starting point;

Liability

Q. whereas, thanks to the impressive technological advances of the last decade, not only are today's robots able to perform activities which used to be typically and exclusively human, but the development of autonomous and cognitive features – e.g. the ability to learn from experience and take independent decisions – has made them more and more similar to agents that interact with their environment and are able to alter it significantly; whereas, in such a context, the legal responsibility arising from a robot’s harmful action becomes a crucial issue;

R. whereas a robot's autonomy can be defined as the ability to take decisions and implement them in the outside world, independently of external control or influence; whereas this autonomy is of a purely technological nature and its degree depends on how sophisticated a robot's interaction with its environment has been designed to be;

S. whereas the more autonomous robots are, the less they can be considered simple tools in the hands of other actors (such as the manufacturer, the owner, the user, etc.); whereas this, in turn, makes the ordinary rules on liability insufficient and calls for new rules which focus on how a machine can be held – partly or entirely – responsible for its acts or omissions; whereas, as a consequence, it becomes more and more urgent to address the fundamental question of whether robots should possess a legal status;

T. whereas, ultimately, robots' autonomy raises the question of their nature in the light of the existing legal categories – of whether they should be regarded as natural persons, legal persons, animals or objects – or whether a new category should be created, with its own specific features and implications as regards the attribution of rights and duties, including liability for damage;

U. whereas under the current legal framework robots cannot be held liable per se for acts or omissions that cause damage to third parties; whereas the existing rules on liability cover cases where the cause of the robot’s act or omission can be traced back to a specific human agent such as the manufacturer, the owner or the user and where that agent could have foreseen and avoided the robot’s harmful behaviour; whereas, in addition, manufacturers, owners or users could be held strictly liable for acts or omissions of a robot if, for example, the robot were categorised as a dangerous object or if it fell within product liability rules;

V. whereas in the scenario where a robot can take autonomous decisions, the traditional rules will not suffice to activate a robot's liability, since they would not make it possible to identify the party responsible for providing compensation and to require this party to make good the damage it has caused;

X. whereas the shortcomings of the current legal framework are apparent in the area of contractual liability insofar as machines designed to choose their counterparts, negotiate contractual terms, conclude contracts and decide whether and how to implement them make the traditional rules inapplicable, which highlights the need for new, more up-to-date ones;

Y. whereas, as regards non-contractual liability,  can only cover damage caused by a robot's manufacturing defects and on condition that the injured person is able to prove the actual damage, the defect in the product and the causal relationship between damage and defect (strict liability or liability without fault);

Z. whereas, notwithstanding the scope of the Directive 85/374/EEC, the current legal framework would not be sufficient to cover the damage caused by the new generation of robots, insofar as they can be equipped with adaptive and learning abilities entailing a certain degree of unpredictability in their behaviour, since these robots would autonomously learn from their own, variable experience and interact with their environment in a unique and unforeseeable manner;

The report, underGeneral principles concerning the development of robotics and artificial intelligence for civil use, accordingly

1. Calls on the Commission to propose a common European definition of smart autonomous robots and their subcategories by taking into consideration the following characteristics of a smart robot: o acquires autonomy through sensors and/or by exchanging data with its environment (inter - connectivity) and trades and analyses data o is self-learning (optional criterion) o has a physical support; o adapts its behaviours and actions to its environment;

2. Considers that a system of registration of advanced robots should be introduced, and calls on the Commission to establish criteria for the classification of robots with a view to identifying the robots that would need to be registered;

3. Underlines that many robotic applications are still in an experimental phase; welcomes the fact that more and more research projects are being funded with national and European money; calls on the Commission and the Member States to strengthen financial instruments for research projects in robotics and ICT; emphasises that sufficient resources need to be devoted to the search for solutions to the social and ethical challenges that the technological development and its applications raise;

4. Asks the Commission to foster research programmes that include a mechanism for short-term verification of the outcomes in order to understand what real risks and opportunities are associated with the dissemination of these technologies; calls on the Commission to combine all its effort in order to guarantee a smoother transition for these technologies from research to commercialisation on the market;

Ethical principles

5. Notes that the potential for empowerment through the use of robotics is nuanced by a set of tensions or risks relating to human safety, privacy, integrity, dignity, autonomy and data ownership;

6. Considers that a guiding ethical framework for the design, production and use of robots is needed to complement the legal recommendations of the report and the existing national and Union acquis; proposes, in the annex to the resolution, a framework in the form of a charter consisting of a code of conduct for robotics engineers, of a code for research ethics committees when reviewing robotics protocols and of model licences for designers and users;

7. Points out that the guiding ethical framework should be based on the principles of beneficence, non-maleficence and autonomy, as well as on the principles enshrined in the EU Charter of Fundamental Rights, such as human dignity and human rights, equality, justice and equity, non-discrimination and non-stigmatisation, autonomy and individual responsibility, informed consent, privacy and social responsibility, and on existing ethical practices and codes;

A European Agency

8. Calls for the creation of a European Agency for robotics and artificial intelligence in order to provide the technical, ethical and regulatory expertise needed to support the relevant public actors, at both EU and Member State level, in their efforts to ensure a timely and well-informed response to the new opportunities and challenges arising from the technological development of robotics;

9. Considers that the potential of robotics use and the present investment dynamics justify the European Agency being equipped with a proper budget and being staffed with regulators and external technical and ethical experts dedicated to the cross-sectorial and multidisciplinary monitoring of robotics-based applications, identifying standards for best practice, and, where appropriate, recommending regulatory measures, defining new principles and addressing potential consumer protection issues and systematic challenges; asks the Commission and the European Agency to report to the European Parliament on the latest developments in robotics on an annual basis; Intellectual property rights and the flow of data

10. Notes that there are no legal provisions that specifically apply to robotics, but that existing legal regimes and doctrines can be readily applied to robotics while some aspects appear to need specific consideration; calls on the Commission to come forward with a balanced approach to intellectual property rights when applied to hardware and software standards, and codes that protect innovation and at the same time foster innovation; calls on the Commission to elaborate criteria for an ‘own intellectual creation’ for copyrightable works produced by computers or robots;

11. Calls on the Commission and the Member States to ensure that, in the development of any EU policy on robotics, privacy and data protection guarantees are embedded in line with the principles of necessity and proportionality; calls, in this regard, on the Commission to foster the development of standards for the concepts of privacy by design and privacy by default, informed consent and encryption;

12. Points out that the use of personal data as a 'currency' with which services can be 'bought' raises new issues in need of clarification; stresses that the use of personal data as a 'currency' must not lead to a circumvention of the basic principles governing the right to privacy and data protection;

Standardisation, safety and security

13. Calls on the Commission to continue to work on the international harmonisation of technical standards, in particular together with the European Standardisation Organisations and the International Standardisation Organisation, in order to avoid fragmentation of the inter nal market and to meet consumers’ concerns; asks the Commission to analyse existing European legislation with a view to checking the need for adaption in light of the development of robotics and artificial intelligence;

14. Emphasises that testing robots in real-life scenarios is essential for the identification and assessment of the risks they might entail, as well as of their technological development beyond a pure experimental laboratory phase; underlines, in this regard, that testing of robots in real-life scenarios, in particular in cities and on roads, raises numerous problems and requires an effective monitoring mechanism; calls on the Commission to draw up uniform criteria across all Member States which individual Member States should use in order to identify areas where experiments with robots are permitted;

Autonomous vehicles

15. Considers that the automotive sector is in most urgent need of European and global rules to ensure the cross-border development of automated vehicles so as to fully exploit their economic potential and benefit from the positive effects of technological trends; emphasises that fragmented regulatory approaches would hinder implementation and   jeopardise European competitiveness; notes that although current private international law rules on traffic accidents applicable within the EU do not need urgent modification to accommodate the development of autonomous vehicles, simplifying the current dual system for defining applicable law (based on Regulation (EC) No 864/2007 of the European Parliament and of the Council and the 1971 Hague Convention on the law applicable to traffic accidents) would improve legal certainty and limit possibilities for forum shopping;

Care robots

16. Points out that human contact is one of the fundamental aspects of human care; believes that replacing the human factor with robots could dehumanise caring practices;

Medical robots

17. Underlines the importance of appropriate training and preparation for doctors and care assistants in order to secure the hig hest degree of professional competence possible, as well as to protect patients' health; underlines the need to define the minimum professional requirements that a surgeon must meet in order to be allowed to use surgical robots; emphasises the special importance of training for users to allow them to familiarise themselves with the technological requirements in this field; draws attention to the rising trend towards self-diagnosis using a mobile robot which makes diagnoses and might take over the role of a doctor;

Human repair and enhancement

18. Notes the great potential of robotics in the field of repairing and compensating for damaged organs and human functions, but also the complex questions raised in particular by the possibilities of human enhancement; asks for the establishment of committees on robot ethics in hospitals and other health care institutions tasked with considering and assisting in resolving unusual, complicated ethical problems involving issues that affect the care and treatment of patients; calls on the Commission and the Member States to develop guidelines to aid in the establishment and functioning of such committees;

Drones (RPAS)

19. Stresses the importance of a European framework for remotely piloted aircraft systems (RPAS) to prote ct the safety, security and privacy of EU citizens, and calls on the Commission for a follow-up to the recommendations of the European Parliament resolution of 29 October 2015 on safe use of remotely piloted aircraft systems (RPAS), known as unmanned aerial vehicles (UAVs), in the field of civil aviation

20. Draws attention to the Commission's forecast that by 2020 Europe might be facing a shortage of up to 825000 ICT professionals and that 90% of jobs will require at least basic digital skills; welcomes the Commission’s initiative of proposing a roadmap for the possible use and revision of a Digital Competence framework and descriptors of Digital Competences for all levels of learners;

21. Considers that getting more young women interested in a digital career and placing more women in digital jobs would benefit the digital industry, women themselves and Europe's economy; calls on the Commission and the Member States to launch initiatives in order to support women in ICT and to boost their e-skills;

22. Calls on the Commission to start monitoring job trends more closely, with a special focus on the creation and loss of jobs in the different fields/areas of qualification in order to know in which fields jobs are being created and those in which jobs are being destroyed as a result of the increased use of robots;

23. Bearing in mind the effects that the development and deployment of robotics and AI might have on employment and, consequently, on the viability of the social security systems of the Member States, consideration should be given to the possible need to introduce corporate reporting requirements on the extent and proportion of the contribution of robotics and AI to the economic results of a company for the purpose of taxation and social security contributions; takes the view that in the light of the possible effects on the labour market of robotics and AI a general basic income should be seriously considered, and invites all Member States to do so;

Liability

24. Considers that robots' civil liability is a crucial issue which needs to be addressed at EU level so as to ensure the same degree of transparency, consistency and legal certainty throughout the European Union for the benefit of consumers and businesses alike;

25. Asks the Commission to submit, on the basis of Article 114 of the Treaty on the Functioning of the European Union, a proposal for a legislative instrument on legal questions related to the development of robotics and artificial intelligence foreseeable in the next 10-15 years, following the detailed recommendations set out in the annex hereto; further calls on the Commission, once technological developments allow the possibility for robots whose degree of autonomy is higher than what is reasonably predictable at present to be developed, to propose an update of the relevant legislation in due time;

26. Considers that, whatever legal solution it applies to robots' liability in cases other than those of damage to property, the future legislative instrument should in no way restrict the type or the extent of the damages which may be recovered, nor should it limit the forms of compensation which may be offered to the aggrieved party, on the sole grounds that damage is caused by a non-human agent;

27. Considers that the future legislative instrument should provide for the application of strict liability as a rule, thus requiring only proof that damage has occurred and the establishment of a causal link between the harmful behaviour of the robot and the damage suffered by the injured party;

28. Considers that, in principle, once the ultimately responsible parties have been identified, their liability would be proportionate to the actual level of instructions given to the robot and of its autonomy, so that the greater a robot's learning capability or autonomy is, the lower other parties' responsibility should be, and the longer a robot's 'education' has lasted, the greater the responsibility of its 'teacher' should be; notes, in particular, that skills resulting from 'education' given to a robot should be not confused with skills depending strictly on its self-learning abilities when seeking to identify the person to whom the robot's harmful behaviour is actually due;

29. Points out that a possible solution to the complexity of allocating responsibility for damage caused by increasingly autonomous robots could be an obligatory insurance scheme, as is already the case, for instance, with cars; notes, nevertheless, that unlike the insurance system for road traffic, where the insurance covers human acts and failures, an insurance system for robotics could be based on the obligation of the producer to take out an insurance for the autonomous robots it produces;

30. Considers that, as is the case with the insurance of motor vehicles, such an insurance system could be supplemented by a fund in order to ensure that reparation can be made for damage in cases where no insurance cover exists; calls on the insurance industry to develop new products that are in line with the advances in robotics;

31. Calls on the Commission, when carrying out an impact assessment of its future legislative instrument, to explore the implications of all possible legal solutions, such as:

a) establishing a compulsory insurance scheme whereby, similarly to what already happens with cars, producers or owners of robots would be required to take out insurance cover for the damage potentially caused by their robots;

b) ensuring that a compensation fund would not only serve the purpose of guaranteeing compensation if the damage caused by a robot was not covered by an insurance – which would in any case remain its primary goal – but also that of allowing various financial operations in the interests of the robot, such as investments, donations or payments made to smart autonomous robots for their services, which could be transferred to the fund;

c) allowing the manufacturer, the programmer, the owner or the user to benefit from limited liability insofar as smart autonomous robots would be endowed with a compensation fund – to which all parties could contribute in varying proportions – and damage to property could only be claimed for within the limits of that fund, other types of damage not being subject to such limits;

d) deciding whether to create a general fund for all smart autonomous robots or to create an individual fund for each and every robot category, and whether a contribution should be paid as a one-off fee when placing the robot on the market or whether periodic contributions should be paid during the lifetime of the robot;

e) ensuring that the link between a robot and its fund would be made visible by an individual registration number appearing in a specific EU register, which would allow anyone interacting with the robot to be informed about the nature of the  fund, the limits of its liability in case of damage to property, the names and the functions of the contributors and all other relevant details;

f) creating a specific legal status for robots, so that at least the most sophisticated autonomous robots could be established as having the status of electronic persons with specific rights and obligations, including that of making good any damage they may cause, and applying electronic personality to cases where robots make smart autonomous decisions or otherwise interact with third parties independently;

International aspects

32. Notes the need also to consider amendments to international agreements such as the Vienna Convention on Road Traffic and the Hague Traffic Accident Convention;

33. Strongly encourages international cooperation in setting regulatory standards under the auspices of the United Nations;

34. Points out that the restrictions and conditions laid down in the 'Dual use regulation  on the trade in dual-use items – goods, software and technology that can be used for both civilian and military applications and/or can contribute to the proliferation of weapons of mass destruction – should apply to applications of robotics as well;

Final aspects

35. Requests the Commission to submit, on the basis of Article 225 of the Treaty on the Functioning of the European Union, a proposal for a directive on civil law rules on robotics, following the detailed recommendations set out in the annex hereto;

36. Confirms that the recommendati ons respect fundamental rights and the principle of subsidiarity;

37. Considers that the requested proposal will not have any financial implications;

38. Instructs its President to forward this resolution and the accompanying detailed recommendations to the Commission and the Council.

Platforms

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

Pharma Costs and Counterfeits

'High Prices in the U.S. For Life-Saving Drugs: Collective Bargaining Through Tort Law?' by Paul J. Zwier in (2016) 17(2) Marquette Benefits and Social Welfare Law Review comments

Sudden exorbitant price hikes to patients who have long taken life-saving drugs are more and more common in today's pharmaceutical market. The anxiety caused to patients who have been prescribed these drugs by their doctors is predictable and severe. Even when initially covered by insurance or through government programs, patients and their families can soon be made destitute by the high copays or caps on payments. This Essay argues that those who buy up life-saving drugs and decide to raise their prices, despite their knowledge of the consequences to patients, are committing the torts of intentional infliction of emotional distress and negligent infliction of emotional distress.

Despite challenges presented by class certification law, these patients should be allowed to qualify as a class for purposes of pursuing a price reduction in these drugs. Through class action collective bargaining, courts can avoid the pitfalls of waiting for piecemeal legislation for consumers of individual drugs and still receive the advantages of free market principled pricing through collective bargaining. And, in combination with legislation, patterned on statutes designed to address bad faith insurance practices, the courts can most effectively moderate high pricing and curtail pricing practices that may otherwise soon bankrupt our-healthcare system.

A different perspective on things that harm and do not work is provided in Health Care Complaints Commission v Attia [2016] NSWCATAD 309, a decision from 23 December last year.

The Tribunal states

Viagra® is widely known as a drug used to treat erectile dysfunction. One of its lesser known uses is for the treatment of pulmonary arterial hypertension. It was as a result of this use that in June 2010 it was discovered that counterfeit Viagra® had been distributed to the Sydney pharmaceutical market.

On 7 June 2010 a pharmacist working at the Sydney Children’s Hospital became suspicious when she noticed that in preparing medication to be given to paediatric patients the Viagra® tablets she was crushing were uncharacteristically gritty. She immediately notified the manufacturer Pfizer Australia. Pfizer determined that the tablets were counterfeit. The Therapeutic Goods Administration (TGA) issued an alert and the licenced wholesaler who had supplied the hospital issued a national counterfeit recall. The Children’s Hospital had purchased the tablets from a licensed pharmaceutical wholesaler which had purchased the tablets from another licensed wholesaler, Hillmear Trading Pty Ltd, which in turn had purchased the tablets from Sajay Rai.

Mr Rai was not licensed to supply Viagra® as required by the Poisons and Therapeutic Goods Regulation 2008 (NSW), or to act on behalf of an entity which held such a licence. In November 2013 he was convicted of two counts of “supply counterfeit therapeutic goods”. One count related to the supply to Hillmear. Mr Rai was subjected to a community service order and required to perform 350 hours of community service.

These reasons concern complaints referred by the Health Care Complaints Commission (the Commission) to the New South Wales Civil and Administrative Tribunal (NCAT) concerning registered pharmacist, Mina Attia, and his part in the distribution of counterfeit Viagra®. At all material times, Mr Attia was the sole director of Hillmear.

Mr Attia does not dispute that, in breach of the conditions of his pharmaceutical wholesaler’s licence, he purchased Viagra® from an unlicensed supplier, namely Mr Rai. He also admits that he failed to ensure that the purchased product was genuine by contacting the manufacturer, Pfizer. In respect of the complaints referred by the Commission, the key factual issues in dispute are:

(1) Whether Mr Attia knew, or ought to have known, that the Viagra® he purchased from Mr Rai was not genuine; and

(2) Whether Mr Attia provided the Therapeutic Goods Administration (TGA) with false and misleading information in the course of its investigation into the distribution of the counterfeit Viagra®.

For the reasons that follow, we find that some of conduct particularised in the Complaints amounts to unsatisfactory conduct and professional misconduct. We have decided to cancel Mr Attia’s registration as a pharmacist and to order that he not apply for review of that decision for a period of 12 months.

Among the fascinating - and perturbing - literature on counterfeit medications see Peter Aldhous, ‘Counterfeit pharmaceuticals: murder by medicine’ (2005) 434(7030) Nature 132; Amy M Bunker, ‘Deadly dose: Counterfeit pharmaceuticals, intellectual property and human health’ (2007) 89 Journal of the Patent and Trademark Office Society 493; Paul Newton et al, ‘Counterfeit anti-infective drugs (2006) 6(9) The Lancet Infectious Diseases 602; Theodore Kelesidis et al, 'Counterfeit or substandard antimicrobial drugs: a review of the scientific evidence' (2007) 60(2) Journal of Antimicrobial Therapy 214; Graham Jackson, Seema Patel and Saima Khan, 'Assessing the Problem of Counterfeit Medications in the United Kingdom' (2012) 66(3) International Journal of Clinical Practice 241; Alexandra Hall and Georgios A Antonopoulos, Fake Meds Online: The Internet and the Transnational Market in Illicit Pharmaceuticals (Springer, 2016); and Roger Bate, Phake: The Deadly World of Falsified and Substandard Medicines (AEI Press, 2011) and Making a Killing: The Deadly Implications of the Counterfeit Drug Trade (AEI Press, 2008).