EU plans changes to e-commerce and competition law

We recently reported on the ASAI's publication of its annual report, in which it said that at a time when online shopping and digital commerce are experiencing exponential growth and have played a key role during the pandemic, it wants digital platforms to engage significantly from both compliance and funding perspectives.

It highlighted just some of the concerns that exist about the role of large online service providers.

The European Commission has now published a series of consultations, roadmaps and impact assessments on a replacement to the e-commerce directive and changes to competition law regulation as part of its plans to introduce a new Digital Services Act. The plans are likely to have a significant impact on both EU and non-EU companies trading within the EU and with EU consumers.

The Digital Services Act package and consultation has two main strands:

New and updated rules to improve the single market for digital services, by increasing and harmonising the responsibilities of online platforms and information service providers and reinforcing the oversight over platforms’ content policies in the EU.

Ex ante rules to ensure that markets characterised by large platforms with significant network effects acting as gatekeepers, remain fair.

Digital services

The consultation covers issues such as safety online, freedom of expression, fairness and a level-playing field in the digital economy. The current regulatory framework for digital services dates back twenty years. Therefore, a modernised regulatory framework is needed to reduce the ever increasing regulatory fragmentation across member states, to better ensure people are protected online and to offer a level playing field for businesses to innovate, grow and compete globally. Users' safety as well as the respect of their fundamental rights, in particular their freedom of expression, must be systematically guaranteed.

The first aspect of the consultation covers the fundamentals of the e-commerce directive, in particular the freedom to provide digital services across the EU single market under the rules of the place of establishment and a broad limitation of liability for content created by users. The Commission seeks to build on these principles with the aim of establishing clearer and modern rules concerning the role and obligations of online intermediaries as well as a more effective governance system.

The second aspect relates to the level playing field in European digital markets, where a few large online platforms currently act as gatekeepers. The Commission wants to explore rules to address these market imbalances, to ensure that consumers have the widest choice and that the EU single market for digital services remains competitive and open to innovation. This could be through additional general rules for all platforms of a certain scale, such as rules on self-preferencing, and/or through tailored regulatory obligations for specific gatekeepers, such as non-personal data access obligations, specific requirements regarding personal data portability, or interoperability requirements.

In addition, the Commission is consulting on other emerging issues related to online platforms, such as the opportunities and challenges that self-employed people face in providing services through online platforms.

Vertical competition law tool

The Commission has also published an inception impact assessment and consultation on a possible new competition tool that would allow addressing structural competition problems in a timely and effective manner. This is against the background of a fast-changing and increasingly digital and globalised world and is part of a broader policy debate about the need for changes to the current competition law framework so that the competitiveness of markets can be preserved.

The Commission has concluded that ensuring the contestability and fair functioning of markets across the economy is likely to require a holistic and comprehensive approach, with an emphasis on the following three issues:

enforcement of the existing competition rules under Articles 101 and 102 of the Treaty on the Functioning of the European Union including the use of interim measures and restorative remedies, where appropriate;

possible ex-ante regulation of digital platforms, including additional requirements for those that play a gatekeeper role; and

a possible new competition tool to deal with structural competition problems across markets which cannot be tackled or addressed in the most effective manner on the basis of the current competition rules (e.g. preventing markets from tipping).

There are certain structural competition problems that the current rules cannot tackle or cannot address in the most effective manner. A new competition tool should enable the Commission to address gaps in the current competition rules and to intervene against structural competition problems across markets in a timely and effective manner.

The aim of the new tool would be for the Commission to impose behavioural and where appropriate, structural remedies after an investigation. However, there would be no finding of an infringement, nor would any fines be imposed on the market participants.

Next steps

Views are sought on the inception impact assessment by 30 June 2020 and the consultations end on 8 September 2020.

Subject to the outcome of the impact assessment, a legislative proposal is scheduled for Q4/2020.

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