Rather than following its commitment to embracing non-legislative but self regulatory solutions, the Commission is about to undertake a second attempt in clamping down on platforms.
Platforms are recognised for a while now as the prevailing model for the digital economy. Finally entrepreneurs can spend time doing what they do best without having to be part-accountants, salesmen, IT-experts, web-developers or part-whatever. Building a business pre-platform was like digging out your house from snow before you actually could go in. Every day.
Platforms triggered an explosion of new startups who benefit from lower entry barriers and fractional costs when launching a business. We see new platforms emerging and even platform to platform (P2P) solutions.
Not only entrepreneurs but also users are becoming very aware of what they are good at and start to focus, in a nonchalant way, on what they do best and chose the most convenient way to buy a ticket or save their documents. As individuals we are becoming more aware of our strengths and skills. This seems like a very logical continuation of the separation of labour. Not everyone has to do everything.
While startups and entrepreneurs across the planet are still in the buzz of grasping the opportunities they now have to change the world, the conversation policy makers have is taking a different turn.
‘Fairness in Platform-to-business relations’ reads the European Commission’s work programme for 2018. Search results reveal that P2B is a term solely used in the political Europe and its notion is imminent, impending and even threatening if we attend to some of the stories around. The motivation seems less like a solid legal concept but more like a feeling; a feeling that something must be wrong. If we do something about fairness we presume that the current situation is unfair.
The motivation of the proposal limps for several reasons. First of all it highlights how the European Commission has pivoted and adapted their story over the years, changing its position more than once. A wide-ranging consultation in 2015 and 2016 resulted in no justification for sweeping legislation on platforms.
Part of the reason at the time was that the lawmakers did not manage to define what they were talking about. Considering platforms as matchmakers in multi sided markets, the Commission was not able to find evidence that there are structural problems. On the contrary, benefits of platforms overweight and the Commission committed to embracing non-legislative but self regulatory solutions .
Rather than following this commitment the Commission undertook a second attempt in clamping down on platforms. This time it follows a “problem based approach”.
Licenses and copyright protected content would not be sufficiently protected on online platforms, so the lawmakers say. The draft legislation that followed goes by far beyond its declared scope, obliging crowdfunding platforms, blogs, online shops or developer platforms to restrict parts of their content and conclude licenses similar to those of Spotify or Youtube for the rest of it.
This is by far the only area where “government comes after platforms”. Policy makers are quick in pushing responsibility on platforms about all kinds of controversial content or use or make often unrealistic demands.
All in all, the discussion often seems polarised and naive. It is true that technology can achieve more than eyes and hands, but this mustn’t mean that long established and enshrined principles of power and responsibility have to be shifted to technology. Many of the policy advances seem half-assesses and are sending mixed messages.
Coming back to platforms. We should ask ourselves if we really want to adopt regulation clamping down on e-commerce like asos, Zalando, HelloFresh, Lieferando, Deliveroo, payment platforms like Adyen, Klarna, Stripe or Transferwise? Platforms as business model brings producers, consumers, partners and owners together in ways that go far beyond what some of our political elites feel uncomfortable with Amazon, Google, Booking, ebay or Apple?
Is it all new? Part of the accusation is that a handful of platforms, which happen not to be founded or headquartered in Europe, abuse their position, do not provide enough transparency, push unfair contractual arrangements and keep valuable insights from data to themselves.
If we look back in time or into other sectors like retail supermarkets, we find that such practises are neither new nor necessarily abusive. The question arises: Why does the European Commission now want to intervene and not before. Or did we ever speak about where a “fair” position for products in a supermarket is or if it’s “fair” if Delhaize launches own brands on those products that sell well?
What’s the logic? It might seem easy and opportunistic to give in to the immediate picture of “big platform abuses power vs small business,” but such behaviour would not make sense in reality. As a platform you don’t only care about but you rely on business users. If there is no trust and users are unhappy with the product they will leave, regardless how big a platform is.
But let’s be clear, apart from some individual stories the image of platforms as malicious black boxes has never been supported by evidence.
Missing the point? So why is it that startups launch much faster today than before? Why do we experience a democratisation of entrepreneurship and a “wave of European innovative startups,” as President Juncker put it? For one part it is because we have the technology at our fingertips, i.e. startups as well as their users can easily afford the devices they need to interact on a marketplace.
Secondly it is because technology allows us to offer products of scale. Once a startup develops a software product or service, the majority of the sales, marketing and subscription service can be automated. So if we give in to one of the assumptions of the European Commission, that business clients cannot negotiate fair contracts with platforms – that actually is for a good reason because obliging them to put a lawyer behind every contract would do nothing less than rendering the entire advantage of technology useless.
Is it all about B2P? It seems evident that the Commission wants to stick up for businesses that have experienced issues with platforms. If such issues exist and deserve attention, first and foremost by the platform itself. Digital savvy consumers, startup entrepreneurs and pretty much anyone reacts to bad customer service and redress.
And if choice is limited that this might actually be a case for competition authorities rather than for legislators. The legislator rightfully envisaged this as one of the policy options which seems the most adequate and least invasive for startups in Europe and across the world as they offer the most efficient and speedy solution to problems when they arise. Startups don’t want to wait month or years for regulation and its enforcement to see it unfit for current realities and technologies.
Picture credits: Shelley Ginger
Hanover’s recent TechFast roundtable on the role of online platforms brought together stakeholders and key policy makers to exchange views on this topic. Here are the highlights.
The overarching theme of the EU’s Digital Single Market initiative is how to make Europe more digitally innovative and competitive globally.
It is one of the favourite topics of discussion in Brussels, and since the launch of a consultation in September, the conversation about “online platforms” has taken centre stage.
Hanover’s recent TechFast debate on the role of online platforms brought together stakeholders and key policy makers to exchange views on this topic.
The discussion kicked-off with the question of how to define an online platform. The definition of platform in the consultation is very broad. It’s a catch-all one, potentially including everything from search engines such as Google, eCommerce marketplaces like Amazon, social networks à la Facebook and collaborative sharing economies, with Uber a recent hot topic.
It emerged that the European Commission and Parliament are themselves trying to get a grasp on these many types of platforms, with the goal of finding the appropriate definition.
The intentions and political driving forces are equally numerous: more transparency for consumers, preventing anti-competitive market dominance, stimulating growth and jobs, and preserving innovation.
It emerged from the discussion that the role of platforms as a market for data is a key focus point, as it raises questions on what information is gathered, how it is used, and if it can be transferred when switching platforms.
Concerns, such as trust and security also ring loudly in light of recent terrorist attacks and cybercrime case
Another underlying whisper, if not outright public statement, is the fear that Europe is lagging behind the USA and, soon, China. Participants agreed that the EU has many success stories in the eCommerce and video game sectors with the potential to compete globally.
Creating the right conditions for these unicorns to rise and for start-ups to scale up should be one of the ultimate outcomes of any policy intervention. Europe cannot lose this momentum and policy makers should duly take it into consideration when thinking of the right approach to platforms.
On top of all of this, the tech sector innovates fast and can be difficult to predict. Years of drafting and implementing regulation or legislative rules risk stifling this growth and innovation and compliance costs would hit newcomers and start-ups the hardest.
Meanwhile, ex-post enforcement, such as an antitrust investigation, can be more targeted, acting only when problems arise, but such cases have proven to be notoriously complex and sluggish to resolve.
With regulatory solutions likely to take quite some time, firms, young and old, will continue to innovate and develop ways to bring content to the market.
Consumers often make happy use of the convenience of platforms and they have proven to be a boon for many businesses, start-ups and citizens, enabling a rapid growth of online trading, sharing and interaction across borders.
The challenge ahead for policy makers therefore is to strike the right balance of all interests at stake. Neither a fragmented nor an over-regulated EU market will benefit anyone, as MEP Dita Charanzova made clear in the interview given to The Digital Post at the TechFast session.
A word of advice, follow the motto of Commission President Jean-Claude Juncker: “No time for business as usual”.
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photo credit: erik forsberg
The more nation states try to build radio spectrum customized policies on a country-by-country basis, the slower the auctions happen, the later consumers get LTE, says Christopher Yoo.
The DSM strategy is a huge opportunity for Europe, he stresses, but it requires a genuine commitment by member states towards opening their borders: in the Internet economy refusing change is not an option and if you protect your domestic economy you’ll simply be left behind.
Europeans have to make sure that they do not cave in to people who oppose increased competition stemming from creating a pan-European digital market across borders, adds Professor Yoo. This change can be very disruptive but it will ultimately yield tremendous benefits.
photo credits: drew baker
Much of what the Commission proposes goes in the right direction although some actions, such as plans to harmonize copyright, could stir controversy. Even US tech giants might be less worried than expected.
On May 6th, more quickly than expected, the European Commission released its much anticipated “Digital Single Market Strategy” (DSM).
The Juncker Commission has made the DSM the top priority of its five-year term, claiming €340 billion in potential economic gains, an exciting figure that should be supported by quantitative research analysis.
Much of what the Commission proposes in the 20-page document seems to go in the right direction, setting out three main areas to be addressed:
– Better access to digital goods and services. The Commission claims that delivery costs for physical goods impede e-commerce, pointing the finger to parcel delivery companies; that many sellers use unjustified geo-blocking to avoid serving customers outside their home market; that copyright needs to be modernized; and that VAT compliance for SMEs should be simplified.
– Creating the right conditions for digital networks and services to flourish by, encouraging investment in infrastructure; replacing national-level management of spectrum with greater coordination at EU level; looking into the behavior of online platforms, including consumer trust and the swift removal of illegal content and personal data management.
– Maximising the growth potential of our European Digital Economy by, encouraging manufacturing to become smarter; fostering standards for interoperability; making the most of cloud computing and of big data, said to be “the goose that laid the golden eggs”; fostering e-services, including those in the public sector; developing digital skills.
It is understandable that the Internet provides a channel for businesses to reach consumers more widely than traditional media, both in their own markets and abroad, and for consumers to have a wider choice and bargain-hunt more effectively.
In a truly single digital market there are opportunities to scale up that are not present in the much smaller national markets.
More controversial are the commission’s plans to harmonize copyright law, in particular its plan to ban “geo-blocking”, the practice of restricting access to online services based upon the user’s geographical location.
However, the most problematic point concerns “platforms”: the digital services, such as Amazon, Google, Facebook, Netflix and iTunes on which all sorts of other services can be built upon and which have come to dominate the internet.
Worried that the mainly American-owned platforms could abuse their market power, the Commission will launch by the end of this year an assessment of their role.
However the fact that most of the 32 internet platforms identified for assessment by the Commission are American and only one (Spotify) is European, hints more towards the fact that it is harder for new firms to scale up rapidly rather than abuse of market power.
What it is interesting is that Mark Zuckerberg doesn’t seem to consider a Digital Single Market a disadvantage for Facebook.
Instead, he supports the idea. Facebook has to deal with different laws in every country and a single set of regulation for the whole European continent would actually make things easier for Facebook.
The digital economy also depends on the availability of reliable, high-speed and affordable fixed and mobile broadband networks throughout Europe. There are no good reasons to still have national telecom laws in this field.
How will Europe successfully deploy 5G without enhanced coordination of spectrum assignments between Member States?
Let us not forget that these networks do not only have an economic value; they are increasingly important for public access to information, freedom of expression, media pluralism, cultural and linguistic diversity.
The following two pieces of legislation are related to the DSM:
– The General Data Protection Regulation (GDPR), replacing the 1998 Directive that generated the data protection regimes of 28 Member States, with a single one, was proposed by the Commission in 2012, has undergone amendments by both the EP and the Council of Ministers and could be adopted in 2015 or 2016.
– The Telecoms Regulation, reviewing the 2002 Telecoms Regulation to cover net neutrality and roaming fees, was proposed by the Commission in 2012, was amended by the EP and is currently with the Council, which has scaled back the EP’s amendments.
The upcoming negotiations on the Telecoms Single Market will give a hint of the challenges to come in creating a Digital Single Market over the next years.
If the latest leaked version is a good indication of where things will come out, there are serious grounds for optimism about the Juncker Commission’s Digital Single Market
As a Brussels veteran, it is tempting to lapse into cynicism when confronted with a new Commission’s policy programme. Recent Commissions have often re-packaged existing policy initiatives and added generous doses of jargon and waffle, guaranteeing under-delivery.
But if the latest leaked version is a good indication of where things will come out, there are serious grounds for optimism about the Juncker Commission’s Digital Single Market strategy.
There are several reasons for this:
First, the Commission’s starting point is exactly right.
In striking an optimistic tone that is positive about Europe’s strengths, assets, and potential (“Europe has the assets to succeed in this global digital economy”), the Commission is allowing space for a shift in mind-set for the many decision makers who have been tempted to associate Europe’s digital prospects with doom and gloom.
It seems to be rejecting the politics of despair and defensive policy options that would simply guarantee Europe’s future as a consumer and importer of foreign digital services and technologies, rather than a producer and exporter – a follower rather than a leader.
Second, the Commission understands the barriers and challenges.
There has been a considerable amount of consultation, both formal and informal, and it looks like the Commission understands many of the key barriers to the digitalisation of the European economy.
It’s very important that the resulting policy initiatives stay focused on achieving the objectives of the DSM, rather than developing some kind of independent existence, or carrying on because they respond to political pressure from one or other interest group.
Just as importantly, it seems to be clear about the landscape of competing interests and to have an idea of where it wants to come out in terms of some of the big debates.
In other words, it looks like there is political will to tackle strong opposition from vested interests. It is to be hoped that this level of ambition can be matched by the Member States and the Parliament – no small challenge in a time of such economic uncertainty.
Third, the Commission understands the importance of evidence and problem definitions.
It’s too often been the case that the Commission has brought together stakeholders to discuss and find solutions to “problems” that are not clearly identified or proven.
This strategy has a welcome emphasis on tackling actual, rather than perceived, problems. It’s good to see that on some of the vaguer concepts like “platform regulation”, it is intending to deepen its understanding of the problems by consulting, and indeed via a sector enquiry.
This is obviously the direction that policy making must take. But it will not only be challenging for the policy makers. It will be just as tough for industry and civil society, which have relied on silver-tongued lobbyists in Brussels for decades.
Fourth, the Commission wants to integrate enforcement of existing rules with the development of new ones.
The launch of the DSM is an early test of the effectiveness of the new Commission structure and working method. Many of the key drivers in the policy debate on the DSM relate to competition and consumer protection.
In deliberately launching both open consultations and formal tools like the proposed e-commerce sector enquiry – policy responsibilities that are held by different Directorates-General, the Commission seems to be delivering on its promise to improve coordination in policy making. The debate on “platform regulation” is the best example.
Although there is considerable political pressure from Paris, Berlin, and Madrid to “do something” about “GAFA” (the playful French acronym for Google, Amazon, Facebook, and Apple), the Commission is rightly giving itself the chance to prove its executive and enforcement credentials, notably in the antitrust area.
Apart from the crucial tests that the Google cases constitute, DG COMP will be given an important opportunity to reinforce its position as the world’s leading antitrust regulator through the launch of a sector enquiry on e-commerce.
This position is one of the biggest achievements of the European Union writ large, and without it, the European project would lose a significant amount of respect among Europeans.
And of course, it’s very important to develop strong ex post enforcement capabilities if the Commission is serious about becoming a modern and digital-friendly government institution. This is because digital markets are so fast-moving that traditional, long-winded legislative processes will no longer be adequate to regulate with.
1. As noted above, the Commission’s starting point is excellent. However, it could go even further and embrace the concept of digital disruption and the value it provides, while noting some of the attendant challenges. The primary source of opposition to a pro-digital agenda like the DSM will come from disrupted industries, and it is important for the Commission to nail its colours to the mast from the start by laying down a challenge to them to modernise.
2. As it prepares a final version of the DSM strategy, we would urge the Commission to consider being explicit about which anti-competitive or anti-digital practices it is targeting, where these have been identified. One example would be some of the specific ways that big brands segment the Internal Market along national lines in order to control prices, to the detriment of SMEs, competition, consumer welfare, and the potential of the DSM. This is not to say that the Commission has to spell out all of its policy plans in detail, especially where these are not yet fully formed or where the evidence base is still missing (e.g. platform regulation). However, where the targets are already clearly defined, the pressure exerted by publicly “outing” them will go a long way. Another excellent reason to take this approach is that it will contribute to a more straight-talking tone. This is preferable to the usual euro-speak because it sounds more honest and dynamic, and because it’s obviously more measurable.
3. It would also be helpful to couple the regulatory agenda with a more explicit de-regulatory push. This is certainly present in the leaked draft, but could be emphasised more clearly. The benefit of emphasising the de-regulatory agenda is that it will provide the carrot that some industry actors need in order to engage more constructively than they might otherwise. Good examples that can be more explicitly enumerated could include the ePrivacy Directive and other rules that apply to the telecoms sector (on SMS, for example, since that will soon be completely overtaken by other messaging services), or aspects of the Audiovisual Media Services Directive, which also contains outdated provisions.
4. Linked to this is the need to take a much closer look at legislative initiatives that are already underway. In particular, versions of the Data Protection Regulation, the Network and Information Security Directive, and the Payments Services Directive being debated by the Parliament or the Council each contain provisions that could seriously undermine the objectives of the DSM. These could be addressed by carrying out impact assessments of texts adopted by one or both legislative institutions.
5. When promoting an investment agenda, the Commission would do well to ensure that investment is promoted up and down the value chain, and not just in infrastructure. This is important because applications and services drive the demand for capacity that is capable of raising consumers’ willingness to pay for Internet access. Too often, telecoms companies have been allowed to get away unchallenged with passing the message that net neutrality is somehow inimical to investment in infrastructure, when the opposite is likely to be the case.