Digital Single Market Strategy advances with nine major EU Consultations

Since the European Commission (the Commission) published its Communication on a digital single market (DSM) strategy for Europe in May 2015, the Commission has taken significant steps towards making its strategy a reality. The Commission has nine consultations open or about to be launched on key elements of the DSM programme.

The Commission’s DSM consultations offer critical insights into the Commission’s plans for legislation and other initiatives that will affect virtually all businesses operating in Europe. For example, the Commission is specifically targeting such activities and sectors as online platforms (broadly defined), the Internet of things, cyber-security, eHealth, smart cities and vehicles, intelligent transfer systems, energy efficiency and restrictions on cross-border commerce in virtually all types of goods and services. Although at this stage Commission is only collecting input from stakeholders, in many cases the Commission has made its policy objectives clear, and it plans to make significant legislative and policy proposals beginning in 2016.

The DSM initiative is not an isolated legislative programme, but rather overlaps with other initiatives at the EU and national levels, for example separate initiatives on cyber-security, data protection, energy union, network infrastructures and telecommunications regulations. Separately, the UK House of Lords Select Committee on the European Union is conducting a parallel consultation on online platforms and the EU DSM. The policy concerns underlying the DSM initiative also overlap with issues being addressed in individual antitrust enforcement actions pursued by the Commission and Member State authorities. Unlike competition enforcement actions, however, which proceed on a case-by-case basis with months or years of detailed analysis of specific situations, the DSM initiative calls for a wide range of horizontal legislative and other policy measures that (given their complexity) seem likely to have unforeseen consequences.

Companies have an opportunity to influence the Commission’s thinking before it finalizes its legislative and policy proposals. Given the complexity of the Commission’s initiatives and the connections with other initiatives, however, the full implications of specific proposals can be difficult to determine in some cases.

This briefing provides background on the DSM initiative before briefly describing key aspects of the Commission’s consultations. More information on the DSM initiative can be found in the May briefing. In a related development, also in May, the Commission launched a competition inquiry into the e-commerce sector, focusing on antitrust issues relating to geo-blocking. The Commission plans to publish a report on the results of its inquiry in mid-2016.

The DSM is a key priority for the Juncker Commission, which sees it as a means to close the gap between the EU and the US in relation to productivity due to information and communications technology (ICT). The DSM focusses on three “pillars”: better access for consumers and businesses to on-line goods and services; creating the right conditions for digital networks and services to flourish; and maximising the growth potential of the European digital economy.

As regards consumers’ access to digital goods and services, the Commission’s proposals include introducing legislative proposals to harmonise cross-border contract rules, establishing an on-line dispute resolution platform, improving price transparency and regulatory oversight of parcel delivery, addressing unjustified Geo-blocking, reforming EU copyright law, amending the Satellite and Cable Directive (Directive 98/83) to include online transmissions and reducing administrative burdens arising from different VAT regimes.

As regards the conditions for digital networks and services, the Commission proposes to reform the current telecoms rules, to analyse the role of platforms and online intermediaries, to review the e-Privacy Directive and to establish a cybersecurity contractual public-private partnership.

As regards the growth potential of the digital economy, the Commission plans to take initiatives in the areas of data ownership, including a European “free flow of data” initiative and a “European Cloud” initiative, to adopt a priority ICT standards plan to identify and define key priorities for standardisation, and to introduce a new e-Government Action Plan.

As mentioned, the Commission currently has open or is about to launch nine major consultations in the context of the DSM initiative, on: the Satellite and Cable Directive (open until 16 November 2015); the regulatory framework for electronic communications networks and services (open until 7 December 2015); the needs for Internet speed and quality beyond 2020 (open until 7 December 2015); ICT standards (open until 4 January 2016); online platforms, the cloud and data, liability of intermediaries, and the collaborative economy (open until 30 December 2015); geo-blocking (open until 28 December 2015); administrative burdens from different VAT regimes (open until 18 December 2015); e-Government (open until 22 January 2016); and a public-private partnership on cybersecurity (to be launched in November 2015).

Although all of these consultations are potentially significant, a full description of all nine consultations is outside the scope of this briefing. Instead, this briefing summarises key elements of three of the most important consultations, those on (i) online platforms, the cloud and data, liability of intermediaries, and the collaborative economy (the Platform Consultation); (ii) ICT standards (the Standards Consultation); and (iii) geo-blocking (the Geo-blocking Consultation).

The Platform Consultation

The Platform Consultation covers a huge variety of issues and signals some of the Commission’s most serious policy concerns. The Commission’s questions fall under four main headings: online platforms; illegal content and associated duties and liability; data and the cloud; and the collaborative economy. These are summarized briefly below.

Online platforms

The Commission proposes a broad definition of an “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 independent groups of users so as to generate value for at least one of the groups”. The Commission notes that the definition is intended to include not only online marketplaces and app stores, but also search engines and tools; directories and some maps; news aggregators; audio-visual, music and video-sharing platforms; payment systems; social networks; and collaborative economy platforms. The Commission’s definition is extremely broad, in part though not only because of the vagueness of the concept of “generating value.”

The Commission raises a number of concerns about platforms’ activities and considers various measures to address them. These concerns include platforms’ transparency (e.g., minimum information requirements on information displayed); platforms’ use of information (e.g., trading personal and non-personal data and using such data to adapt prices); relations between platforms and suppliers, traders, application developers and rightholders (e.g., exclusive dealing requirements; “parity clauses”; non-transparent or unfair fees or other terms and conditions; and limits or biases on how goods or services are presented); constraints on consumers and traders moving from one platform to another; and consumers’ and traders’ access to data.

The issues highlighted in the Platform Consultation thus overlap with issues the Commission and others are also addressing through other means, including antitrust enforcement and data protection rules (although the Platform Consultation’s questions are not limited to personal data). Although the Commission has not said what form its proposals may take, in the past the Commission has worked extensively on the design of a possible new regulatory framework especially designed for online platforms.

Illegal content and liability

The Commission notes that the EU E-Commerce Directive principle that internet intermediary service providers should not be liable for content that they transmit, store or host, as long as they act in a strictly passive manner may need to be revised in light of evolving business models. In particular, the Commission asks about the fitness of the existing liability regime for the transmission and temporary or permanent storage of infringing information; the need for European-wide notice and action procedures; the design of such systems; and the need for a duty of care for certain online intermediaries.

Data and the cloud

In connection with its “free flow of data” and “European cloud” initiatives, the Commission asks about data location restrictions, data access and transfer, elements needed to ensure trust in the “European cloud”, transparency of cloud providers, interoperability of cloud providers, and portability of data between cloud providers.

Collaborative economy

In this section, the Commission seeks information on the collaborative economy for purposes of a future internal market strategy initiative. Among other things, the Commission asks about authorization and licensing agreements to which providers are subject; dependencies on online platforms; availability of insurance, and competition between collaborative economy providers and traditional providers.

Although the Commission does not prejudge the contents of its future proposals, the Commission’s questions relating to the collaborative economy seem to focus less on risks posed by such platforms’ practices (as in the case of the questions summarized above) and more on regulatory and other obstacles that may hinder the growth of collaborative economy offerings.

The Standards Consultation

In the Standards Consultation, the Commission considers the introduction of an EU-level “priority ICT standards plan” to pursue EU leadership in global standard-setting, among other things to help European companies capture new global market opportunities. In the Commission’s view, such a plan should lead to the production of technical specifications, standards or architectures where there is a need, but also propose actions such as landscape analysis, gap finding, and roadmap and ecosystem building.

The Commission identifies a number of potential priority domains for standardisation, including communications; cloud computing; cybersecurity; data-driven services and applications; digitisation of industry; e-Health and aging; intelligent transport systems; Internet of things; smart cities; and smart and efficient energy use. More specifically, the Commission asks for input on the development of an EU action plan for standards in the following areas:

Cloud computing: application portability; service solutions including IaaS, PaaS, SaaS; networking infrastructures; cloud platforms; moving non-personal data; service level agreements; and process computation integrity.

Cybersecurity: design requirements; process standards for incident reporting, cyber risk management and vulnerability disclosure; and technical standards for encryption, public key infrastructure, and security and privacy by design.

Data-driven services and applications: APIs for data sharing and reuse; big data technologies, including interoperability; data licensing conditions; data related processes; data representation formats; entity identifiers; and metadata schemata.

Digitisation of European industry: product planning, design, identification, tracing and lifecycle management; manufacturing equipment and production processes; human-machine interfaces and interaction; modelling, simulation, testing and verification; value chain integration; models, terminology, reference architectures, use cases and interoperability profiles; IT and information security; safety; system reliability and robustness; and communication platforms.

e-Health and aging: drug identifiers; ICT infrastructure; interoperability profiles for independent living; quality criteria for health and wellness apps; security and safety of mHealth apps; interoperability of electronic health records; and telemedicine.

Intelligent transport systems: access to in-vehicle resources and data; connected and/or automated vehicles and applications; e-Freight; services platforms; multimodal transport systems; and electronic toll systems.

Internet of things: advanced manufacturing/M2M; building and home automation; energy and environment monitoring; medical and healthcare systems; reference architectures and related interfaces; smart cities and communities; smart living environments for ageing; smart farming and food security; transportation and wearables.

Smart cities: APIs for urban platforms; urban indicators; urban management systems; urban ontologies; urban platforms; and urban transactions (payments, identification etc.).

Smart and efficient energy use: building information modelling; building automation and smart appliances; integration of smart vehicles, smart grids and home management systems; energy efficiency indicators; heating/cooling networks, including heat supply from waste; interconnections of electricity, gas and heating networks; interfaces to storage systems; lighting; power electronics; and smart grids and metering.

The Geo-blocking Consultation

The Geo-blocking Consultation is more narrowly focused in some ways than the Platform Consultation or the Standards Consultation, but the issues addressed in this consultation once again could have far-reaching implications. The Commission believes that a wide range of industry practices have the potential to create obstacles to the single market, and it plans to follow up on the consultation with specific legislative proposals.

More specifically, the Geo-blocking Consultation calls for input on the following practices: blocking acess to websites across borders; allowing access to websites across borders but denying the possibility to complete orders or to download digital products; allowing access and offers across borders but denying the possibility to pick up, deliver or ship goods across borders; differentiating prices or other conditions based on nationality, country of residence or location of order; and denying access to additional services (e.g., loyalty cards, discounts and reduction vouchers or after-sales services) across borders.

The consultation further calls for input on technical means by which different forms of geo-blocking can be implemented (e.g., rerouting to another website or refusing foreign credit cards) and a list of conditions under which such forms of geo-blocking should be considered unjustified. In its questions, the Commission distinguishes the views of customers and traders, suggesting ways in which different follow-up measures may be structured.

The geo-blocking consultation overlaps with DG COMPETITION’s sector inquiry on e-commerce, and the results of that inquiry, not yet announced, are also likely to be important in the design of policy proposals building on the Geo-blocking consultation.

The DSM is a key priority for the Juncker Commission. The Commission’s proposals are ambitious, involving important legislative changes in a wide range of areas, including the regulation of the telecommunications and media sectors, intellectual property, contract law, consumer protection and tax law, as well as important non-legislative initiatives, including notably DG COMPETITION’s e-commerce sectoral inquiry.

The sheer number and breadth of the consultations already launched or about to be launched reflect the substantial resources the Commission is investing in the DSM initiative. These consultations will be followed by significant legislative and other policy proposals. These consultations and proposals are relevant to companies operating in virtually all sectors of the economy, not only to companies in the ICT sector. The challenge for companies and their advisors in such a complex policy landscape, however, will be to understand the implications of diverse initiatives in very specialised sectors across a range of industries and to help the Commission avoid unintended and undesirable consequences as it pursues this very ambitious agenda.