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The Global Tech Sector’s Perspectives on the EU’s Digital Single Market Strategy

The European Union (EU) and United States have the deepest and most integrated economic relationship in the world, a relationship to which the information and communications technology (ICT) sector is central. The EU’s Digital Single Market (DSM) initiative has the potential to significantly advance this story of transatlantic integration. By reducing regulatory fragmentation and creating a truly single market for digital commerce in Europe, a DSM would stimulate innovation, trade, investment and economic growth, both within Europe and between Europe and the United States.

The global tech sector recognizes that, in pursuing this historic initiative, the EU must carefully consider how to advance important public interests, whether that involves protecting the personal information of individuals, shielding young people from inappropriate content, or preventing anti-competitive market behavior. We have been encouraged by the efforts of key European Commission leaders, including Vice-President Andrus Ansip and Commissioner Günther Oettinger, to pursue European public interests in a manner that maintains openness to cross-border data flows and a non-discriminatory approach to digital commerce and innovation.

It was against this backdrop that we anticipated the European Commission’s consultation on “online platforms” in September 2015. Our views on the ideas raised in that consultation — like our views on regulatory measures affecting the ICT sector generally — reflected our assessment of how those ideas could affect the ability of ICT firms to innovate, support growth, create jobs, increase consumer choice, and otherwise improve living standards around the world. Seen through that lens, as we conveyed in our December 2015comments, we grew concerned that the Commission’s consideration of regulatory approaches to “online platforms” could be seriously misguided. We identified four key concerns:

· First, we believe that the Commission has chosen the wrong subject for its assessment. To ensure that regulations address actual harms and do not produce unintended consequences, it is critically important to address what people or organizations do, rather than who or what they are. The consultation, however, focuses on actors rather than actions, assuming that there is an identifiable category of “online platforms” about which it is possible to generalize in assessing the need for regulation. The result, in our view, could be to stigmatize certain types of firms without meaningfully isolating the kinds of market behaviors that may be appropriate for regulation.

· Second, we found the Commission’s approach to defining “online platforms” to be so broad and vague as to be of limited helpfulness. In particular, the consultation defines “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 interdependent groups of users so as to generate value for at least one of the groups.” As we indicated in our response, countless types of economic actors operate in multi-sided markets and use the Internet to allow groups of users to generate value. The list is not limited to search engines and the other categories of actors identified in the definition, but also includes newspaper and other media companies, automotive companies, shopping centers, real estate companies, credit card companies and other electronic payments firms, among others. In many ways, the Internet itself is a multi-sided market that allows multiple parties to interact in a way that creates value for all of them.

· Third, we were troubled by the suggestion that doing business “online” is somehow distinct from doing business “offline” in a manner that increases the need for regulation. We do not see why this should be. The mere fact that a platform has an “online” character says nothing about whether it is more likely to produce the kinds of harms that society ought to regulate. Indeed, a significant amount of the business taking place on the Internet today involves companies moving longstanding physical operations online (e.g., newspapers, travel agencies, and supermarkets). Moreover, the concept of a platform — where intermediaries bring together buyers and sellers to exchange goods and services — is as old as commerce. Given the fact that businesses of all sizes, and across all sectors, connect to the Internet, applying a bright line standard rooted in a distinction between online and offline activity is a flawed approach.

· Fourth, in our view, the Commission has not shown evidence of a harm that is not already addressed by existing regulatory tools or frameworks. As far as we can tell, to the extent that the consultation actually raises concrete concerns about the market behavior of “online platforms,” there are laws and regulations that squarely address them. And neither the Commission nor the Member States have been shy about using these tools, including in the technology space. They have pursued data protection cases, competition investigations and tax proceedings against various technology companies, for example.

These four issues are reflective of our broader concern over the signal that the Commission is sending to the global ICT industry, and to markets more generally, through the consultation. Instead of collecting evidence and then assessing whether a problem exists, the Commission appears to have assumed from the beginning that “online platforms” may create harms that need to be addressed through regulation. This approach, in effect, creates a solution in search of a problem. Given the significant contributions that global tech firms have made to the economies of both Europe and the United States, we are concerned that such an approach could threaten the innovation and growth on which both sides depend.

To be sure, ITI takes the concerns identified by the Commission seriously and, where they are supported by evidence, would be eager to work with the Commission and other EU institutions to address them. ITI and its member companies are committed to the success of the EU digital market and, while we may have different views regarding the need for platform regulation, we will always interact in a spirit of partnership to resolve whatever concerns the EU may have.

Note:This post originally appeared in Medium on February 17, 2016

Public Policy Tags: Trade & Investment