The European Commission is moving ahead with plans to reform regulation of digital service providers, with the start of two public consultations. The first covers the proposed Digital Services Act, which would update the eCommerce directive of 2000, and the second proposes new competition regulation that would allow the Commission to impose remedies on large players if it finds structural problems in the market.
The Commission outlined its vision for updating digital regulations in February. The biggest change is a proposal to allow ex ante regulation of large online platforms, rather than relying on ex post competition investigations or legal proceedings, which often take several years to complete. The big platforms act as 'gatekeepers', setting the rules of the market for their users and their competitors, the Commission said. "The initiative should ensure that those platforms behave fairly and can be challenged by new entrants and existing competitors, so that consumers have the widest choice and the Single Market remains competitive and open to innovations."
The consultation on the Digital Services Act seeks public input and evidence on areas where the new regulation may be needed. The legislation would include both general legal obligations for all providers of digital services, to address the risks faced by their users and protect end-user rights, as well as the possibility for regulators to impose more stringent obligations on large platforms. Comments can be submitted until 08 September.
New tools to fight market 'tipping'
The second consultation is focused on an update to existing competition law. The Commission said it has found existing tools are not able to address effectively some of the structural problems it's identified in the market. In particular it's concerned about market 'tipping', where network and scale effects give certain companies a high degree of customer lock-in and a near-monopoly position in a market, with little possibility of competitors emerging.
Under current competition law, the Commission is unable to act in such markets if it does not find any evidence of the large players abusing their dominant position. It wants to be able to intervene if its market analysis shows a structural lack of competition, even without companies acting anti-competitively. For example, markets may display systemic failures due to high entry barriers, consumer lock-in, lack of access to data or data accumulation. This may lead to tacit collusion by oligopolistic players, especially when they are able to adapt behaviour using algorithms, the Commission said.
Under the proposal, the Commission would be able to impose behavioural and structural remedies if its investigations show structural competition problems. Market participants would have a full right of reply in the investigations. To soften the impact, there would be no finding of any infringements, nor would any fines be imposed.
The Commission's impact assessment on the new tool is open for public comment until 30 June. A wider public consultation on the plans runs until 08 September. The Commission aims to introduce the required legislation in Q4.
