Competition

From ex-post to ex-ante: does European Internet regulation go telecom-style?

 

make internet great again

3 new consultations opened

Today the European Commission published its well-awaited public consultation on the Digital Services Package. The deadline to respond is 8 September 2020. The consultation revolves around the following topics:

– How to effectively keep users safer online?
– Reviewing the liability regime of digital services acting as intermediaries?
– What issues derive from the gatekeeper power of digital platforms?
– Other emerging issues and opportunities, including online advertising and smart contracts
– How to address challenges around the situation of self-employed individuals offering services through online platforms?
– What governance to reinforce or to complete the Single Market for digital services?

Internal Market Commissioner Thierry Breton explains that the Commission: “want[s] to propose clear rules before the end of the year to define the responsibilities of platforms in protecting our citizens and values, without making them liable for all content. Certain fundamental rules must apply to everyone, from the smallest online shop to the major platforms. We are also thinking about specific rules for gatekeeper platforms.

Platform regulation: from ex-post to ex-ante?

Remarkably, the European Commission also asks for feedback on its policy options on (i) ex ante regulatory instrument of very large online platforms acting as gatekeepers and (ii) deepening the Internal Market and clarifying responsibilities for digital services. Both “roadmap consultations” are open until 30 June.

The policy options (i) and (ii) are particularly relevant because, for the first time from years 2000, the European Commission is now seriously considering to envisage ex-ante regulation over dominant online platforms. In the EU economic power in the Internet has never been regulated so far, on the assumption that the digital economy started from scratch and therefore new operators should be simply encouraged and facilitated, without the need to tackle (pre-existing) dominant position or essential facilities which could prevent competition from flourishing. Therefore, ex ante competition rules have never be considered fit for the Internet, unlike telecoms, where, by contrast,  ex ante regulation has been regularly applied to challenge the economic power exercised by European incumbents (such as Deutsche Telekom Orange, Telefonica ecc.) which were still holding their legacy telephony networks.

The discrepancy  between Internet and telecom economic power regulation has been challenged at a given time, when Internet operators have started to compete with telecoms on the same markets of the latter such as calls and messages, and some OTT have even become, at global level, truly giants.

Thus, if the envisaged reform goes through,  European Internet regulation may become now more similar to the telecom framework, confirming a trend which was advocated by European telecom operators, which frequently complained about the lack a playing level field with Internet giants.

The similarity with telecom is correct as a matter of principle, however regulating dominant online platforms with ex ante rules will be a much more complicated task.

Firstly, unlike telecoms, Internet giants are truly global operators and therefore they are used and expert in escaping national jurisdictions. Therefore, creating new remedies over online platforms would require an ad hoc enforcement system, possibly centralized with the European Commission or a new European agency. The disappointing experience gathered with the GDPR decentralized enforcement system may be worth.

Secondly, while dominance in the telecom sector has been normally founded on the legacy telephony network, in the online market dominance is much more sophisticated: it is about network effects, lock-in behaviours, data possession and, to some aspect, pure market and financial size. Economic analysis will be much more difficult than for telecom practice then.

Platform liability regime also to be investigated

The investigation of the Commission will also concern platform liability: while the 2000 regime (dictated by Directive 2000/31) recognized immunity to platforms vis-à-vis the actions of third parties, the new framework could create a distinction between:

– pure hosting providers, for which the original immunity regime will be maintained; and
– large platform offering content hosting + content presentation applications + generalized profile tracking + horizontal integration between different services, which brings them well beyond pure hosting. A new special responsibility for such operators may stem mainly from such complex business model.

 

 

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