What are the drivers 

The European Commission’s Directorate General for Competition (‘DG COMP’) launched its sectory inquiry into IoT in July 2020 focused on smart speakers, wearables and home appliances. The inquiry did not come out of nowhere, and followed suspicions of market distorting behaviour including: restrictive data access policies, limited interoperability between ecosystems, forms of self-preferencing and the use of proprietary standards to block market entrants. DG COMP was also examining Google’s acquisition of the smartwatch producer Fitbit at the time.  

Consumer IoT devices are being scrutinised for several reasons. One is that they are an emerging gateway for consumers to interact with the digital economy. This is particularly true of how IoT devices are used to access subsequent services which themselves are immensely popular among consumers. The sector is still in the early stages of development but the interim report found that providers of services accessed through IoT devices overwhelmingly offer creative content such as music or video (51%), followed by shopping (22%) and search (22%). 

Another reason is the prevalence of IoT devices and/or voice assistants from a select group of companies and the extent to which they use IoT to feed into other areas of their business. The position of the likes of Amazon, Google and Apple are an important consideration as IoT devices form part of their suite of digital services available for consumers and data collection points to inform their other verticals, like advertising. 

Lastly, IoT depends on a system of connected devices communicating seamlessly to deliver the insights and benefits promised with an IoT world. This requires interoperability, data flows and accessibility between devices - which can be undermined without the right policy frameworks in place. 

Main findings

The interim report sets out some initial concerns for the European Commission based on submissions to the inquiry.  These are preliminary and will certainly develop, yet they do give a picture of the main avenues of interest. 

Standards

A lack of interoperability between IoT devices, due to a lack of frameworks and de facto standards from large players is emerging as a result of proprietary technologies. Brands play a strong role here, in creating an ecosystem of devices with the potential for lock-in of users into products or services. However, note is made of the fact that de facto standards from a select group of companies are not always a downside, and enable efficiencies by avoiding too many fragmented approaches. 

Interoperability 

Another concern is whether producers of devices or voice assistants are in effect promoting their own ancillary products by limiting the functionalities of third-party devices and consumer services compared to their own by imposing technical constraints, such as limited APIs. Furthermore, it has been observed that smaller players have less bargaining power when negotiating interoperability frameworks, potentially leading to distortions and barriers for new entrants to compete.

Data

The interest here is where data is controlled or limited, so that providers of services through IoT devices (like apps or streaming), or third-party device manufacturers (like smart TVs), receive limited access to data on consumers’ interaction with their services. Another area of inquiry is how data is combined by large tech companies to drive their advertising models, as well as the scale of data required for new entrants to build and then train IoT systems such as voice assistants.  

Pre-installation and default settings

Devices can have pre-installed services or settings which favour voice assistants or content providers of certain companies. This can lead to competitive advantages and limit the ability for competitors to challenge established providers, as users are not setting up the services that they want to receive through the device. An explanation is given here on how users tend to make requests, such as “tell me the weather”, rather than specifying where they would like to get the information from, giving pre-installed services an advantage. 

Exclusivity 

Some voice assistant providers are ensuring that only their systems are available on certain devices, or tying these together with other offerings from the same provider. 

Disintermediation

The interest here is over who controls the relationship with the user, with some service providers taking issue with disintermediation by voice assistants or device operating systems. Some have found that they lose their brand recognition and their direct relationship with the user. 

The implications 

Sector inquiries are thorough and can unearth all sorts of information leading to extensive policy interventions. For example, an inquiry into e-Commerce which began in 2015 led to bans on the use of certain most favoured nation clauses and eventually led to the introduction of the ‘Platform to Business Regulation’ and by extension elements of the upcoming Digital Services Act.

The sector inquiry will provide the European Commission with a wealth of information when assessing anti competitive behaviour. The work is not over, and it will feed into broader discussions at EU level about competition in digital markets, not least through the proposed Digital Markets Act. 

Moving away from competition policy, there are complex questions on how the wider IoT sector develops interoperability and an open set of standards. Standards are key for IoT - they get to the heart of how devices connect when it comes to device communication and data portability. But there is not a comprehensive framework in place. Corporates that can offer contributions to this puzzle are in a strong position to shape the debate and offer solutions to policy makers. 

Next steps

Taso Advisory supports clients with the political, policy, and regulatory challenges they face. We work with several large technology businesses to monitor and engage with European policy developments. 

For a confidential discussion about how we can support your public policy and public affairs work on IoT please get in touch by emailing [email protected] or by calling +44 (0) 20 3488 4489.

SUMMARY

CONTEXT

The European Union’s (EU) relationship with the US is back on track - at least for now. Over the past months there have been appointments, visits and meetings which draw the Biden administration closer to the EU. This is in stark contrast to recent years. On the environment, digital policy and taxation, US officials are speaking closely and sometimes like-mindedly with their European counterparts.

Some of the commentary on recent changes in the US has raised how radically different Washington’s approach is. Whilst this is true in comparison to the previous administration, some of these changes are simply catching up with the debate. The EU’s positions are helpful indicators to see where the US could end up. 

COMPETITION POLICY

Lina Khan - who has advocated for a reformulation of tech antitrust rules - has been nominated as Commissioner of the Federal Trade Commission and Tim Wu - a prominent and outspoken tech critic - has joined the White House National Economic Council. These have been cast by some as a world change. 

It is certainly true that their appointments are significant. But many of their views are already quite mainstream in Europe. Wu’s refrain that “When an online service is free, you’re not the customer. You’re the product” is often repeated in Brussels competition circles, including by European Commission Vice President Magrethe Vestager. Khan’s advocacy for reconceiving consumer harm, whilst novel, was also picked up in advisory groups to the likes of the European Commission and are certainly part of the debate.

So what next for the US as it moves closer to the EU’s view on antitrust? First would be greater scrutiny of individual big tech companies. The European Commission has investigated all GAFA companies in the last ten years and continues to lead in the area. In the US, there are signs of closer attention like the FTC’s case lodged against Facebook but there are plenty more rocks to look under. 

Second would be more bespoke rules for big tech. If the EU’s experience is anything to learn from, the technicalities and delay of enforcing existing antitrust rules may not satisfy the political will for action. The next step would be regulatory intervention along the lines of the EU’s proposed Digital Markets Act, which will put in place ex ante rules to try and boost competition in digital markets.  

ENVIRONMENT

Similar conclusions can be drawn from US changes toward climate change. President Biden’s decision to rejoin the Paris Climate Accord was an important and symbolic first step. Second was the commitment to multilateral efforts to drive cooperation with the appointment of John Kerry to lead a diplomatic front. 

One challenge for the US is what to do if diplomacy does not deliver. There may be a temptation to adopt a different approach. The EU’s experience saw it take matters into its own hands, making climate policy a flagship area with initiatives like the Green New Deal and Carbon Border Adjustment Plan to try and incentivise others to follow their lead. These were pursued partly because the EU was alone during President Trump’s America and diplomacy stalled. If diplomacy comes up short then the US may use other instruments like trade policy.

DATA AND PRIVACY

Turning to tech regulation, the US is also playing catchup and is unlikely to want the EU to lead the way in setting a global approach as they did with the General Data Protection Regulation. Regardless of the assessment of whether GDPR was a success, it was a first step and has been emulated in other jurisdictions. .

It remains to be seen how the US approaches the next big tech regulation dilemmas currently being dealt with in the EU. The European Commission’s proposed Digital Services Act takes a swipe at content moderation, whereas the US is still relatively behind debating whether in principle s230 should be repealed or reformed. Similarly, the European Commission is expected to publish rules for Artificial Intelligence in April with little to show for a US approach of the same breadth. In both cases, the US has ground to catch up. It may be that the US believes that existing rules are adequate. If they don’t, then they will need to cover matters which the EU is working on like explainability and liability in AI, free speech vs content moderation, and responsibilities for those operating online. 

CONCLUSION

As the new US administration gets up to speed there remains a lot to be considered from the EU’s work on areas from antitrust, climate change and big tech regulation. The EU’s experience in these areas gives some indication of where the US could go and what could follow. Each has their own politics and mindsets. But the US does not need to do much head scratching to see what issues may present themselves. 

Taso Advisory supports clients with the political, policy, and regulatory challenges they face, and helps them to design and deliver credible responses to mitigate risks and seize opportunities. We make complex challenges simple, give actionable advice, and support in delivery. You can find out more about what we do and who we work with.

For a confidential discussion about how we can support your public policy and public affairs work please get in touch by emailing [email protected] or by calling +44 (0) 20 3488 4489.

The proposed Digital Services Act will have significant implications for digital markets in the EU and will apply to almost all operating online. It covers matters such as removing illegal content, transparency on ranking parameters, collecting minimum information on sellers through a platform, and advertising. 

Please complete the form on the side of this page for a free copy of the Taso Advisory briefing document on the provisions in the proposed Regulation and what it means for businesses.

    KEY POINTS

    CONTEXT

    The DSA and DMA will be key pieces of legislation for digital markets. It is hard to overstate the full range of companies and business models which will be impacted by this new legislation. The Acts will reform rules which have governed the internet in the EU for some twenty years

    The DSA will introduce new rules where online platforms intermediate via the internet and allow the dissemination of goods and content. The term “online platforms” here is used in a very broad sense and covers a swathe of companies which act as pivot points between consumers and businesses, and/or allow consumers to create, view or share content. 

    At present, online platforms benefit from the eCommerce Directive which includes a liability exemption for user generated content, and additionally prevents Member States from imposing a general monitoring obligation on platforms. The DSA will reassess this framework and, whilst the European Commission has said that it will maintain provisions against general monitoring obligations, there will be greater duties for businesses to manage what is on their platform

    Meanwhile, the DMA stems from the frustrations among policymakers that existing competition policy tools and frameworks are inadequate for the digital economy. It combines two previously separate policy options from the European Commission into one legislative proposal. The first is a set of ex ante rules for online platforms of a certain size aimed at preventing them from abusing their “gatekeeper” status. The second will provide a “new competition tool”, enabling intervention in digital markets which are deemed at risk of being dominated by large platforms.

    The issues addressed in the proposals are perceived as increasingly central to how content, goods and services are consumed via the internet. They have received attention from the European Commission from a number of angles and Taso Advisory’s previous blog dealt with some of these early initiatives and legislation when the European Commission issued roadmaps and a consultation outlining broad policy options over the summer. The key takeaway is that these are not new topics for policymakers and there is a history of debate informing the upcoming proposals.

    WHERE WE ARE NOW

    Public consultations closed at the end of the summer and received a big response from all sorts of stakeholders. Since then, discussions have begun to crystallise around measures that are likely to make it into the final proposals. The points below are general, and certainly subject to change before the texts are published in December, but provide an emerging picture.

    Digital Services Act 

    The DSA is focused on two broad scenarios that will affect a majority of businesses operating online. The first is how platforms manage business users who list goods and services for purchase or consumption - like online marketplaces or the sharing economy. The second is more broad and covers how illegal content, goods or services are moderated online. This is beyond just social media sites and would include how platforms manage what goods, services or content is available to their users. Ideas which may feature in the final text include:

    Digital Markets Act

    The DMA consists of two pillars, as outlined above, which will equip the European Commission to intervene in digital markets. 

    Ex ante rules

    New Competition Tool

    DYNAMICS AT PLAY

    The debate around the proposals will be intense and they will be two of the key pieces of legislation for the current European Commission’s mandate. Not only will they impact a large number of businesses and business models, the issues at stake could have knock on effects for how the digital economy is run which are yet to be fully appreciated. Some initial dividing lines include:

    NEXT STEPS

    The European Commission is expected to publish its legislative proposals for the DSA and DMA on 9 December 2020. This could of course be delayed further, but once released the proposals will move to the Council of the EU and European Parliament which will scrutinise, propose amendments and adopt their own positions on the legislative proposal over the course of 2021

    Based on the level of interest already shown, these will be lengthy discussions and we can expect negotiations over a final text between the European Commission, the Council of the EU and the European Parliament to take some time. This could well impact when exactly the application of the provisions begin.

    Taso Advisory supports clients with the political, policy, and regulatory challenges they face, and helps them to design and deliver credible responses to mitigate risks and seize opportunities. We make complex challenges simple, give actionable advice, and support in delivery. You can find out more about what we do and who we work with.

    For a confidential discussion about how we can support your public policy and public affairs work with the Digital Services Act and Digital Markets Act, or more broadly, please get in touch by emailing [email protected] or by calling +44 (0) 20 3488 4489.

    THE SCOPE OF THE EUROPEAN COMMISSION’S WORK

    The European Commission’s Directorate General for Competition (‘DG COMP’) is entitled to carry out sector inquiries if they witness anti-competitive practices or see risks of breaches taking place. In announcing its work, DG COMP provides examples of market distorting behaviour that it has observed, including: restrictive data access policies, limited interoperability between ecosystems, forms of self-preferencing and the use of proprietary standards to block market entrants.

    The scope of DG COMP’s work centres around ecosystems that weave IoT devices together with large tech giants and their additional services. Think of Amazon/Alexa, Google/Google Home, Apple/HomePod and the shopping or streaming services that each company offers within their ecosystems. Other smart home appliances like fridges and TVs are also included in the scope.  

    Data forms a central element of the inquiry which acknowledges how digital companies adapt their products and services based on consumer behaviour (and in some cases anticipated behaviour). Here the European Commission appears most interested in how anti-competitive practices can restrict market access for competitors, harm consumers and lead to dominant ecosystems.

    THE IMPLICATIONS

    The importance of IoT devices for the future digital economy means that the European Commission is unlikely to take a transitory glance at this sector. The Commission notes the growth potential for IoT and will want to ensure that its development is not controlled by a handful of tech companies.

    Sector inquiries are thorough and can unearth all sorts of information leading to extensive implications for corporates even before the conclusion of DG COMP’s work. For example, an inquiry into e-Commerce which began in 2015 led to bans on the use of certain most favoured nation clauses and eventually led to the introduction of the ‘Platform to Business Regulation’ and by extension elements of the upcoming Digital Services Act

    The inquiry also adds to the broader regulatory and political interest for the development for the sector. For example, the European Telecommunications Standards Institute (ETSI) recently published cybersecurity standards for consumer devices, focusing on 13 provisions to improve the resilience of consumer IoT devices from attack. Furthermore, wearables and smart devices are already in the crosshairs of DG COMP as it is scrutinising the takeover of smartwatch producer Fitbit by Google (Alphabet) for potential competition concerns. 

    The scope for engagement with the inquiry is not limited to smart watches and speakers. IoT is a nascent sector which raises complex policy questions that have yet to be fully appreciated, like ensuring consumers get clear information when shopping through smart speakers or providing interoperability when deciding between two replacement smart fridges. The potential for corporate engagement covers any IoT operation that includes a consumer facing element, including device manufacturers, software developers or service providers.

    NEXT STEPS

    Taso Advisory supports clients with the political, policy, and regulatory challenges they face, and helps them to design and deliver credible responses to mitigate risks and seize opportunities. We make complex challenges simple, give actionable advice, and support in delivery. You can find out more about what we do and who we work with.

    For a confidential discussion about how we can support your public policy and public affairs work in relation to the IoT sector, and keep you informed of developments, please get in touch by emailing [email protected] or by calling +44 (0) 20 3488 4489.

    This blog follows our previous piece on the DSA and highlights the takeaways of the three reports and what this could mean for the shape of future legislation.

    THE CONTEXT

    The three draft progress reports were produced by the Observatory for the Online Platform Economy, a group of academics and experts tasked with examining key questions to improve the EU’s understanding of the effect of online platforms on the markets in which they operate.

    The Observatory was established by the European Commission alongside the Platform to Business (‘P2B’) Regulation. P2B aimed to promote fairness and transparency for business users of online intermediation services by introducing broad transparency requirements for platforms and setting rules for their operation .

    Taking this legislative action further, the European Commission will make another intervention with the DSA – expected in early 2021 – which Taso Advisory has covered here. These three reports will feed into the DSA, which could introduce greater rules for, among other things, how platforms can act as intermediaries between businesses and consumers.

    MEASURING THE IMPACT OF ONLINE PLATFORMS

    The main report covers the perceived gaps in policy makers’ ability to quantify and observe the effect that online platforms have on the economy.

    In doing so, the Observatory suggests how platforms can be better understood and measured:

    The most headline-grabbing recommendation here is the notification of all M&A activity to the European Commission. Yet the other areas are also important as they reconceptualise the measurement of how consumers and business users are affected by online platforms.

    This is significant because policy makers for the digital economy – particularly competition policy – are increasingly looking for new ways to conceive the welfare gains (or losses) from the operation of the digital economy. Considering a platform’s power based on trade volume, business user dependency or complaint handling systems could change where policy interventions are made in the future and place significant regulatory burdens on platforms.  

    DIFFERENTIATED TREATMENT

    Differentiated treatment is used in a range of different contexts like showing more relevant information in search engine results, or rankings of more popular products sold online. The report acknowledges that prioritising certain content or goods has practical applications to make the online world more accessible to the end user.

    But ultimately the Observatory argues that differentiated treatment can be used by platforms for their own benefit, for instance by promoting their proprietary goods or demoting overly successful business users. The Observatory’s conclusion is: “it is difficult – if not impossible – to reconcile the interests of platforms, businesses and consumers in one particular way that is to be regarded as ‘fair’…‘fairness’ should not be seen as a black-and-white concept, but instead as a range”.

    In response, the Observatory notes further areas of scrutiny to ensure the balance is within a range of ‘fairness’:

    The P2B Regulation was drafted specifically to increase transparency and establish elementary rules for the areas set out above. The European Commission itself has listed some of these in its roadmaps for the DSA and it is probable that they will try to address these when drafting the upcoming legislative proposal.

    DATA AND ONLINE PLATFORMS

    Here the Observatory has considered the different types of data, how it is collected by platforms and the impact it can have on the interactions that platforms mediate between business users and consumers.

    The Observatory acknowledges that platforms will seek to share data with business users for benign reasons, e.g. where it is beneficial for platforms that business users improve goods or services offered to consumers based on data. On the other hand, the Observatory notes that there are instances where data sharing is against the interests of the platform, such as giving too much information so that transactions may take place outside of a platform or where there is a risk that a business user could emerge as a competitor to the platform.

    The strong takeaway here is that the Observatory feels that there is a lack of understanding of the commercial uses of data and that public policy should reflect the nuances and lack of homogeneity. Turning to some recommendations, the Observatory plans to collect:

    NEXT STEPS

    Stakeholders can provide comments on the draft progress reports until 8 September, after which the Observatory will finalise its work and submit a final report to the European Commission by the end of 2020.

    Meanwhile, the Observatory will continue to work on its broader mandate regarding the impact of online platforms. In particular, their work will contribute to the ongoing monitoring of the effectiveness of the P2B Regulation which has just entered into force.

    The ideas presented here and in the final report will be considered by the European Commission as they prepare the text of the upcoming Digital Services Act, expected in 2021. The DSA is set to be one of the most defining pieces of legislation for the digital economy and will have far reaching implications for how online platforms are regulated in the EU while also setting a standard for other jurisdictions.

    Taso Advisory supports clients with the political, policy, and regulatory challenges they face, and helps them to design and deliver credible responses to mitigate risks and seize opportunities. We make complex challenges simple, give actionable advice, and support in delivery. You can find out more about what we do and who we work with.

    For a confidential discussion about how we can support your public policy and public affairs work please get in touch by emailing [email protected] or by calling +44 (0) 20 3488 4489.

    THE CHALLENGES IN REACHING CONSENSUS ON TAXING THE DIGITAL ECONOMY

    NEGOTIATIONS THROUGH THE ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT (‘OECD’)

    The OECD is producing policy proposals and leading negotiations over how to better capture the realities of the changing global economy. There have been long standing discussions convened by the OECD on how to reform global taxation generally, and the organisation was mandated by the G20 to find consensus regarding the digital economy by the end of 2020.

    Most recently in June, the US raised doubts about the OECD timeline when it called for a pause in talks and a resumed effort later in the year. The US pointed to an “impasse” in talks under the OECD’s first pillar of work, which would allow countries to raise taxes in a way that better reflects companies’ sales in their jurisdiction. A second pillar, seeking a global minimum tax rate, had proceeded with more success and was closer to agreement.

    There have been mixed messages as to the extent to which the US has actually halted their engagement. Since the call for a pause, the OECD has sought to clarify that talks have not ceased and the US remains involved.  

    Whether an international solution can be reached is an open question. This uncertainty stems from the fact that US-headquartered tech companies tend to be the burden bearers of taxes aimed at the digital economy, with the added politics of the upcoming US election in November. The balance of these two factors versus the threat of a fragmented approach - outlined below - will decide whether an agreement is reached this year.

    THE RISK OF A FRAGMENTED APPROACH

    Individual countries already have their own DSTs which, for the most part, raise a levy on the revenues generated by the digital economy. These have different rules and are in varying stages of implementation - which adds pressure to reach an OECD agreement. Policymakers and corporates are keen to avoid a patchwork set of DSTs each with varying compliance requirements, fiscal obligations and implementation periods.

    To name but a few, the UK is pushing ahead with its DST, implemented in April, which taxes revenues but the first DST liabilities are not due until 2021. Others such as France had previously paused the collection of their DST on condition of pursuing an agreement at international level through the OECD. Since the United States’s call for a pause in talks, France could move ahead with collecting accrued sums.

    Adding weight behind EU Member State DSTs, the European Commissioner for the Economy Paolo Gentiloni and Executive Vice President Magrethe Vestager have both said that Brussels is prepared to revive their proposals for an EU-wide DST if needed, as well as supporting Member States’ own measures in the interim.

    A patchwork of individual DSTs is nobody’s desired outcome, which applies pressure to reach a harmonised approach through the OECD. Yet, taking the above into consideration, a fragmented set of tax obligations remains a distinct possibility if talks fail, especially whilst governments look for tax income to bolster their ability to recover from the Covid-19 pandemic.

    TRADE

    DSTs quickly became embroiled in trade disputes and this is set to continue. The US has threatened tariffs in retaliation to other countries’ (such as France and the UK) attempts at taxing the digital economy. The main reason for Washington’s threats is their view that US firms facing larger tax burdens in other jurisdictions could reduce US tax income. The US has since issued further plans to investigate - and possibly retaliate with tariffs against - the DTSs of Austria, Brazil, the Czech Republic, the EU, India, Indonesia, Italy, Spain, Turkey and the UK.

    Turning specifically to the UK, DSTs also come into play when looking at how the Government casts its post-Brexit trade ambitions. The UK’s DST will likely be on the table during the ongoing US-UK trade talks. The US has already voiced its opposition to the UK’s DST and it is a clear distinction between the two sides’ starting positions which could be traded for concessions.

    LOOKING FORWARD

    It is clear that there are steep policy and political hurdles to overcome to meet the self imposed deadline of the end of 2020. The run up to the G20 in Saudi Arabia as well as the summit itself on 21-22 November is expected to be where the conclusion of the OECD’s work is sanctioned by global leaders. Ahead of the summit, discussions in the OECD and G20 will continue.

    Overshadowing all of this is the US presidential election, scheduled for 3 November. The new President will be key in deciding the US approach to international organisations, trade, and ultimately whether progress on DSTs is made on time at an international level or pushed back to 2021.

    Taso Advisory supports clients with the political, policy, and regulatory challenges they face, and helps them to design and deliver credible responses to mitigate risks and seize opportunities. We make complex challenges simple, give actionable advice, and support in delivery. You can find out more about what we do and who we work with

    For a confidential discussion about how we can keep you updated on the taxation of the digital economy, or more broadly, please get in touch by emailing [email protected] or by calling +44 (0) 20 3488 4489.

    KEY POINTS

    AN INTRODUCTION TO THE DIGITAL SERVICES ACT

    The European Commission, led by President Ursula von der Leyen, took up its mandate stating that it wished to tackle the biggest questions in regulating the digital economy, namely through a Digital Services Act to update existing rules, some of which have not been touched for 20 years.

    As part of this work the Commission has released roadmaps with options for intervention and consultations covering three areas:

    The previous European Commission started working on these areas, yet interventions were either non-legislative or focused on increasing transparency and learning opportunities rather than prescriptive rules of behaviour. The DSA will take a much more interventionist approach.It will have broad implications for corporates which offer services within the EU and the consultation touches on specific sectors such as on-demand services and online advertising.

    There may well be knock on effects in other jurisdictions wrestling with the same questions. The EU’s leadership (or militancy) in regulating the tech sector has been well established in recent years, and the progress of the DSA will be closely watched elsewhere.

    Corporates have different ways to provide comments. Consultations on the three roadmaps above are open until 30 June, whilst longer questionnaires with broader questions on the Digital Services Act and the New Competition Tool, are open until 8 September.

    REGULATIONS FOR INTERMEDIARY PLATFORMS ACTING AS ‘GATEKEEPERS’

    The approach taken by the European Commission is to build on the Platform to Business Regulation (‘P2B’) which is about to enter into force in EU Member States. The P2B Regulation introduced transparency requirements for online platforms and how they provide their intermediation services between businesses and consumers. Importantly, P2B did not define rules about how platforms treat business users (such as ranking practices, data access policies, unfair contractual provisions etc) but focused on transparency instead.  

    The DSA would build on these requirements and the Commission sets out a series of options which could be overseen by a dedicated regulatory body at EU level:

    The P2B Regulation was always intended as a stopgap measure before further action and its wide scope was underappreciated by several corporates who did not see themselves as intermediaries. Measures in the DSA will follow the same themes and scope whilst allowing greater intervention.

    Also important for the direction of travel is the Observatory on the Online Platform Economy,which the Commission set up in 2019 to consider these approaches and scan for areas requiring intervention. Their interim reports on data access and differentiated treatment are due to be published this year and will feed into work on the DSA.

    NEW RULES FOR DIGITAL SERVICE PROVIDERS AND ILLEGAL CONTENT

    The second issue at hand is how content is shared on a swathe of digital services, including social media platforms, search engines, video gaming platforms, online marketplaces and other information society services and internet service providers.

    The question of online content is not new and is a recurring dilemma created by the cornerstone of the EU’s digital regulatory environment: the E-Commerce Directive (‘ECD’). The Directive includes an exemption from liability for digital services hosting illegal content unless they are aware of the content, effectively disincentivising proactive content moderation measures. 

    This issue was given headline coverage recently when US President Donald Trump signed an executive order which could undermine similar liability exemptions for companies (granted by Section 230 of the 1996 Communications Decency Act) in the US in response to his feud with Twitter. 

    The Commission roadmap is vague here and outlines many options which could be incorporated into the DSA:

    How content is shared online is one of the hardest issues currently facing policymakers and finding balance will be difficult. We can expect recurring debates about how illegal content is defined, free speech vs hate speech, how such measures could be used by repressive governments to muzzle their opposition, and whether private companies should be shouldered with the responsibility at all.

    There are existing policy initiatives which show where the Commission may turn to for inspiration. For example, the above 2018 Recommendation on illegal content included a call for frameworks allowing public authorities to notify digital service providers about illegal content, and mechanisms to contest the decision where the service provider takes down the content in question. Going a step further, a proposed Regulation preventing the dissemination of terrorist content attempted to require service providers remove content within a specified time window and for them to take proactive measures, such as applying automated content moderation tools.

    In short, the liability exemption of the ECD is the most hotly debated element here and will be where the EU potentially diverges from other jurisdictions. The EU approach could also affect how the UK deals with illegal content. The UK Government has been working on a full response to its consultation and White Paper on Online Harms, which is expected later in the year. Ministers and officials will be mindful of how the UK diverges from or aligns with the EU approach

    A NEW TOOL FOR COMPETITION POLICY

    Lastly, the European Commission is considering a New Competition Tool that will allow it to intervene early in markets where they feel that traditional competition policy fails to produce desired outcomes. The Commission has identified a list of behaviours it wishes to address, including: tacit collusion between companies, the effects of algorithm price monitoring and ‘tipping’, whereby dominance in one market is used to leverage entrance into another. Two broad options are outlined:

    This would likely be a controversial move and would broaden the scope of the European Commission’s powers. The tool would not involve findings that a company has infringed competition rules per se, but instead be based on a yet to be defined test.

    The key debate will be on the thresholds required to designate a company as dominant or a market as requiring early intervention, and there will be opposition from those who already feel that competition policy is becoming too interventionist.

    Taso Advisory supports clients with the political, policy, and regulatory challenges they face, and helps them to design and deliver credible responses to mitigate risks and seize opportunities. We make complex challenges simple, give actionable advice, and support in delivery. You can find out more about what we do and who we work with.

    For a confidential discussion about how we can support your public policy and public affairs work with the Digital Services Act, or more broadly, please get in touch by emailing [email protected] or by calling +44 (0) 20 3488 4489.

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