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MEF regulatory advisor Serafino Abate shares a recent briefing with MEF members about platform regulation, where he took stock of where we are in Europe with platform regulation.

Some MEF webinar attendees initially wondered what platform regulation is exactly. The term “platform regulation” has come into the common parlance of public policy wonks, academics and regulatory institutions in the past seven years. It sometimes means different things to different people, and this at times had generated confusion.

Today, it is commonly understood to refer to the different rules and proposals for regulations that should control the behavior of digital platforms vis a vis the users (protection of personal data and consumer protection), businesses (“on platform” trading conditions, online advertising) and competitors, current and future (antitrust and market power).

Europe started to focus on the regulation of digital platforms back in 2015/16, with the review of the e-commerce directive and other existing rules on platforms mainly concerned with transparency and users’ empowerment. But the real debate started with the GDPR – which for the first time set rules designed to protect consumers’ personal data when using digital platforms and services. GDPR brought also into focus the relationship between data collection and digital business models. More people, including among those in the regulatory institutions, have a better understanding of how personal data supports different services and business models. What is clear is that the current digital world relies heavily on personal data collection to support “freemium” services for users via digital advertising.

Following the introduction of the GDPR we have seen a string of national data protection intervention in Europe, but there remains a paucity of significant “lighthouse” cases – i.e. cases that can provide a reliable legal precedent and an effective blueprint for intervention. At the same time, some national authorities in Europe have started their own investigations into digital platforms and market power. However, few have led to concrete new rules. Rather, a consensus started forming that some changes to competition rules were required to adapt it to the new challenges posed by the digital economy – not least the way personal data collection relates to market power. In some cases, like in Germany[1], these reviews are morphing into new rules. In most cases, however, the consensus also emerged that, given the global nature of most platforms, at the very least a pan European approach is needed. This would be good for both users and businesses – and the digital platforms themselves, who dread having to deal with different rules in 27 different countries.

Whichever the form chosen, it must be transparent, meaningful and goal-oriented. It must also be open and inclusive – and ensure proper gender, age and racial representation. We want rules that represent our modern, diverse and vibrant societies.

Which brings us to the final part of the discussion – what can we expect next? The European Commission’s flagship initiative today is the proposed Digital Services Act[2], which, combined with a review of competition rules, and some adjustments to other existing rules, it sees as providing the right approach for the future. What the Commission has in mind seem to be a set of ex ante rules that apply to all digital platforms (on things like digital content; data access; and consumer protection) – and some special rules for so-called “gatekeepers” platforms, which aim to recreate a Framework similar to the telecom one where market power is regularly assessed, and where it is found special remedies are put in place to support potential competitors.

What to make of all this? In some respect, the European commission has showed with the GDPR that it can set a global standard for some specific issues arising particularly in the digital economy due to the prevalence of the “freemium” business models.

However, this is going to be different, for three reasons. For a start, there’s such a heterogeneity of digital platforms that blanket approaches are likely to be ineffective, and risks imposing more regulation than necessary. A continued failure to recognize the different models and operating conditions of different platforms risks bearing bad rules for both consumers and businesses. Secondly, the comparison with the telecom framework seems to be borne more out of a lack of alternative ideas than out of a proper analysis of the issues at hand.

The telecom rules were designed to transit form state monopolies to competitive markets via privatization and open networks provision. Before that, the market for telecom services was low on innovation, struggled to generate the require investments, and provided poor services at uncompetitive prices (when not subsidized by public money). Today, digital markets are highly innovative, consumer outcomes are good, and generally the sector has expanded and is well funded. See the similarities there? No? Me neither…

The truth is that, at least in the short-term, the most effective solutions lie in some form of co-regulatory or self-regulatory approach, provided there are effective backstop power to intervene when these fail. This could cover things like data access and consumer protection for specific digital services. A well-designed, effective framework for digital platforms should take those three issues in considerations and avoid imposing blanket ex ante rules modelled on the telecom framework (now EECC[3]).

Serafino Abate

Regulatory Advisor, MEF