The COVID-19 crisis affected our lives in many ways. Almost overnight, we were pushed to live more ‘online’ than ‘offline’: teleworking, online shopping, online ‘gatherings’ became the norm. Our way of living is subjected to irreversible digitalisation. Regrettably, often instead of being ahead of the new realities, we are hastily trying to catch up with them.
Do we want to transform Europe into leader of digital transition or we will let it uncomfortably lag behind? I think our choice is clear. Now we should be brave to own and act upon it. We need to be ambitious in shifting our paradigm. We need to have the courage to review, adapt and renew the status quo and make European regulatory environment fit for the digital age. There should be no taboos. There is no place for elephants in the room.
What are the realities?
The role of the internet has drastically evolved over the last two decades and the platform economy has significantly changed. Online platforms became important part of the digital economy. Today, 1 million EU businesses are already selling goods and services via online platforms. 60% of private and 30% of public consumption of goods and services in the digital economy go via online intermediaries. 82% of European SMEs rely on search engines to promote their business and services. More than 50% of SMEs using online marketplaces sell cross-border.
Online platforms are drivers for innovation and growth in Europe. They facilitate exchange of information and communication on Internet. They enable digital trade, increase consumer choice and convenience, and improve competitiveness of the industry. The online landscape constantly evolves in terms of new operators and business models. New technologies reliant on big data and AI are being developed. Many new platforms operate on the EU market with few being substantially bigger and many being more interactive.
These developments are much needed and most welcomed. They drive digital transition and have the potential to strengthen Europe’s industrial resilience and sovereignty. Inevitably, they also pose certain risks and regulatory challenges that we have to address.
What are the risks and challenges, or facing the ‘the elephant in the room’?
Successful online platforms benefit from growing number of users and data accumulated over time. Currently the value is concentrated around the seven largest companies, which account for 69%. Although there are over 10 000 EU platforms, most of these are start-ups and they account for only 2% of total value. Clearly, there is considerable concentration of market power in the hands of systemic big platforms. This enables them to operate as powerful ‘gatekeepers’ to information, content and market access and could lead to different forms of abuse.
Unfair practices of online platforms vis-a-vis their business users, misleading or aggressive advertising to consumers, insufficient means of redress, dissemination of illegal content online, violation of fundamental rights in terms of data protection, abuse of dominant position, tax avoidance and spreading disinformation are also part of the reality we face. The current regulatory framework already addresses those, but it seems that further action may be needed.
The trust of consumers is vital for the success of businesses being it ‘offline’ or ‘online’. We build trust when we are vulnerable and not taken advantage of. The current crisis provided us with real proof of how vulnerable we could be and how important is the responsible behaviour of online platforms, traders and advertisers. In March, the Commission required the cooperation of online platforms as part of a wider EU’s effort to help platforms and other digital players become more responsible and tackle coronavirus related disinformation and consumer fraud. The online platforms responded positively to the call for closer cooperation with national authorities and the Commission to signal and tackle illegal practices online. They have taken robust measures to combat disinformation, take down illegal content that could lead to physical harm, demote fact-checked content that is false or misleading, and limit ads that promote false products and services news. They also have implemented specific checks on price increases and promotions, as well as ‘sweeps’/screening/ of content. The most recent sweep, nevertheless, has shown, that rogue traders continue to find new ways to exploit consumers’ vulnerabilities, circumvent algorithmic checks and set up new websites. Out of 268 websites, 206 were flagged for further investigation for potential breaches of EU consumer law, 88 websites contained products with claims of alleged healing or preventive effects against the coronavirus. 30 websites contained inaccurate claims on the scarcity of products. 24 websites were suspected of unfair practices to obtain excessive prices. In sum, it is a good effort that deserves applaud but clearly social media companies and Big Tech must take more proactive approach to tackle disinformation and harmful misleading practices.
Online platforms and internet service providers should follow up on their voluntarily taken commitments. The policy makers should evaluate whether different and more binding arrangements are needed.
What could be the policy responses?
The social and economic challenges brought by the COVID-19 pandemic demonstrated the resilience of the e-commerce sector and its potential as a driver for relaunching the European economy. At the same time, the pandemic has also exposed serious shortcomings of the current regulatory framework. Alongside strengthened enforcement, these have to be addressed in order to improve consumer protection and increase trust in digital environment.
Reflection on effectiveness of competition law in digital age in order to promote pro-consumer innovation. Adoption of Digital Services Act, that will upgrade the liability and safety rules by targeted ex-ante regulation of the systemic big platforms. Developing a common approach to tackle disinformation online. Introducing digital tax as part of the new framework for own resources and ideally based on OECD work. These are already high on our political agenda.
The Digital Services Act is meant to deepen the single market for digital services, to increase and harmonize the responsibilities of online platforms and reinforce the oversight over platforms’ content policies in the EU, mainly through the revision of Ecommerce Directive.
We could consider:
- Ex-ante, proportionate and targeted regulation of big platforms and imposing specific reinforced obligations on them in order to promote competition and innovation by stimulating the development of emerging competitive players;
- Adapting competition rules to face digital challenges;
- Enhancing platforms’ responsibility with regard to tackling illegal content online;
- The notice-and action mechanism to be complemented by stay down obligation in order to ensure that illegal content that was once removed stays down.
The debate is ongoing. We need flexible and future-proof regulatory choices. Choices that address the ‘elephant in the room’. Choices that strike the right balance between encouraging innovation and consumer protection. Choices, that advance growth and competitiveness while respecting fundamental rights. Choices that increase our trust in the internal market as a realm of possibilities without unjustified and disproportionate barriers. Choices that will turn Europe into global leader in digital transition.