Online Platform Regulation Debate Heats Up in Europe

Platform regulation is becoming a hot topic in Europe, with the European Commission and U.K. Parliament mulling possible action, France eyeing a "duty of loyalty" for platforms, and an Italian bill making its way through the legislature. The EC approach is so vague it's unclear what, if anything, will emerge, said a digital rights activist. That vagueness could mean the debate will remain theoretical for a long time, or it could be jump-started by other events, a telecom consultant said. One key question is whether there's a need for new laws, since platforms already are highly regulated, said an attorney who handles telecom and media cases.

The EC is running a survey until Dec. 30 on the regulatory environment for platforms and online intermediaries. It defines online platform as "an undertaking operating in two- (or multi-) sided markets, which uses the internet to enable interactions between two or more distinct but interdependent groups of users so as to generate value for at least one of the groups. Certain platforms also qualify as intermediary service providers."

The EC definition of "platform" is too broad to be meaningful, said European Digital Rights Executive Director Joe McNamee. It covers "fundamentally different types of compan[ies]," he emailed, including: (1) Transaction-based platform-to-consumer platforms such as Netflix or Spotify, where content is licensed to the intermediary by rights holders and transactions take place on both side of the platform. (2) Nontransaction-based platforms-to-consumers, such as Google News and other news aggregators, where the content is freely available online so there's no platform-to-business transaction. (3) No-consumer-value platforms-to-business services, such as promoted content on Google Search or Twitter. (4) Transaction-based consumer/business-to-consumer platforms such as Airbnb and eBay. (5) Nontransaction-based consumer-to-consumer platforms such as YouTube. The consultation is about data protection, hosting provider liability, sharing economy rules, transparency of online services and other issues, McNamee said. "Any number of different policies in any number of different sectors could emerge as a result."

The consultation document shows EC areas of concern -- dominance of platforms, use of personal data for commercial reasons, protections for users and suppliers acting over platforms, and portability -- but it doesn't signal any clear views on possible paths the EC might take, said telecom consultant Innocenzo Genna, who advises smaller players. "This means that the debate about platform regulation in the EU will remain theoretical for [a long time] and no concrete actions will be actually taken." That "wait-and-see" scenario could be changed by an event such as the proposed Italian measure, which could pressure the EC to do something, or by an EC antitrust decision against an over-the-top (OTT) player that would push the other Commission directorates to set out policy for platforms, he said.

Platforms aren't dangerous new entities but are already highly regulated under various laws in areas such as banking, consumer protection and competition, said Hogan Lovells media and telecom attorney Winston Maxwell. In a coming white paper, he and University of Rennes economics professor Thierry Pénard argue that because the concept of platforms covers such a broad range of services and business models with little in common, further work is needed to define exactly what services or activities any rules should cover.

The classic indicia of market power don't necessarily apply to multisided business models, the white paper said. "There is no consensus as to whether open or closed ecosystems maximize social welfare," so policymakers should be cautious about concluding that platforms create market failures requiring special regulation. "We have seen no evidence of harmful conduct by platforms that is not already covered by existing law," the authors said. They called for evidence-based analysis of any actual harms caused by platforms and of what legal tools are already available to deal with them.

The Italian proposal, sponsored by Stefano Quintarelli, a Scelta Civica party member in Italy's lower house (the Chamber of Deputies), is "nothing dramatic," he told us. It would give users the right to procure and install applications of their own choice and remove those they don't want, he said. "This is exactly the same behaviour we have and expect on computers and we can have on, say, android devices," he emailed. In the near term, more than 90 percent of the apps that users install will still come from the usual stores, but some players, which don't need the visibility or the billing facilities provided by those stores, might start promoting and billing for their software directly, he said. That will offer the chance to gradually introduce some competition in the market for the benefit of app developers and consumers, he said. The measure has won approval from a Chamber committee and Quintarelli said he doesn't expect any surprises in the Senate.

Platform regulation and net neutrality "are two aspects of the same issue which is non-discrimination by the stack of intermediaries in the communication of users holding social or economic relationships," Quintarelli emailed. Telecom rules are based on maximizing consumer choice, but the OTT model has no similar provisions and is largely based on the absence of interoperability to generate network effects and lock in users, he said. His proposal includes a net neutrality provision similar to the one recently adopted by the EU (see 1510270001).

France already has approved laws on price discrimination on hotel reservation platforms and ordering platforms that provide marketplace services to notify users about whether certain recommendations on their sites have been paid for by the merchants, said Maxwell. Now the government wants to impose a "duty of loyalty" on all platforms despite that such responsibility already exists under the consumer protection code, he said.

The U.K. Parliament EU Internal Market Sub-Committee is investigating online platforms in the context of the EU digital single market. "The issue of regulation, and the effects it could have on areas such as competition, market dominance, and transparency around data, is a key part of our investigation," emailed Chairman John Whitty. Given that online regulation is one of the most important aspects of the digital single market strategy, "we have been especially keen to ask witnesses whether regulatory change is needed, and what form it would take," he said.