Skip to main content

Regulating the Digital Sector: Together in Perfect Harmony?

In the age of a digital revolution, competition authorities far and wide are calling for new mechanisms to regulate the digital sector, especially large online platforms such as social networks. 
Competition authorities in Europe - and globally - share concerns that the existing competition rules are insufficient to tackle the complex legal issues stemming from the development of digital markets.

This includes new commercial practices present in digital markets, the commoditisation of consumers’ attention and Big Data (referring to the analysis of very large datasets to derive insights from that data). In fact, many competition authorities have conducted their own investigations as to how competition rules should be applied to the digital sector.

There appears to be a strong consensus in favour of refining competition authorities’ regulatory “toolboxes” in relation to digital markets. This has also been influenced by the COVID-19 pandemic, which has resulted in smaller businesses becoming increasingly reliant on large online platforms to preserve trading levels and a visible presence in online markets. 

The conversation has moved on from whether the digital sector should be regulated, to how should the digital sector be regulated? 

Recent developments in Europe

Although at EU level, the Platform to Business Regulation has been enacted in an effort to establish a fair and transparent commercial relationship between business users and online platforms, the current regulatory framework in the EU and the UK falls short of addressing the potentially unfair and harmful commercial practices of certain online platforms (1). The European Commission (Commission) has put forward various proposals to modernise the regulatory framework in the digital sector at EU level, including a new Digital Services Act package, which involves “ex ante regulation” aimed at  conferring increased powers on national competition authorities to examine structural problems in markets. 

Separately, some national competition authorities have set up specialist taskforces to consider and take forward proposals to address some of the issues posed by Big Tech, for example the Task Force for Internet Platforms in Germany and the Digital Markets Taskforce in the UK, to name a few. France and Germany have initiated legislative changes at national level (albeit following different approaches).

Can Europe live together in digital harmony?

That depends. 

If some jurisdictions decide to “go it alone”, there is a danger that market participants who operate on a global basis could face complex and contradictory obligations in different jurisdictions.
In a joint memorandum on digital platforms and the possible changes to competition law at the European level, the Nordic competition authorities have recognised this: they  encourage “a harmonised approach to any regulatory efforts to avoid fragmentation and safeguard the effective functioning of digital markets”. (2)

Similar calls for harmonisation are echoed by the Bundeskartellamt, the German competition authority (BkA). Andreas Mundt, President of the BkA, recently suggested that harmonisation of Europe’s various digital rules “will be a great big challenge”, and offered an interesting viewpoint that the European competition authorities have been successful “maybe not at harmonising [national] law, but [building] up a legal framework that is quite coherent”. (3) 

What’s next? 

Following its public consultation on the Digital Services Act package, the Commission’s proposal for a regulation is planned for the fourth quarter of 2020. The detail of the package will be important, not least on fundamental questions such as how the Digital Services Act package interfaces with the current competition framework under Articles 101 and 102 TFEU, i.e. what “tool” should be used by competition authorities and in which circumstances?

In the UK, the Competition and Markets Authority, supported by Ofcom and the ICO, is working towards the establishment of a Digital Markets Unit and to enact a code of conduct to regulate platforms with strategic market status (SMS Firms). The code is intended to be a flexible tool to regulate SMS firms with the aim of reaching negotiated pragmatic outcomes but retaining the power to fine egregious conduct.
 
It is evident that governments and competition authorities recognise the need for further regulation of the digital sector. We should expect to see some significant developments over the next year or two in terms of setting out a new regulatory framework(s) for the digital sector in the UK and EU. Whether those frameworks operate in perfect or partial harmony remains to be seen. 

Previous Perspectives on this topic: 
Conclusions From the CMAs Market Study Into Online Platforms and Digital Advertising: Google and Facebook's Respective Market Dominance is Causing Harm
New Competition Tool: A Road Towards a More Proactive Approach 
 

Footnotes

(1) Regulation (EU) 2019/1150 of the European Parliament and of the Council of 20 June 2019 on promoting fairness and transparency for business users of online intermediation services.
(2) “Digital platforms and the potential changes to competition law at the European level – the view of the Nordic competition authorities”, September 2020, page 16.
(3) Global Enforcers Panel, Georgetown Law’s “14th Annual Global Antitrust Enforcement Symposium”, 5 October 2020.

Related Lawyers: Natalie Jukes, Lesley Hannah
Related Practice Areas: Antitrust / Competition, Antitrust Counseling and Compliance

Related Lawyers