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The EU strategy for a digital single market

The business practices of online platforms under scrutiny of the EU

In the current proposal for a directive on copyright in the Digital Single Market the European Commission established new responsibilities of online platforms towards rights holders of online content. It remains to be seen, if further accountability of platform operators towards other market players will follow.

On September 14, 2016, the EU Commission published a number of drafts to advance the implementation of the strategy for a Digital Single Market ("DSM strategy"), which were issued on the occasion of Commission President Jean-Claude Juncker’s speech on the situation of the European Union in 2016. The DSM strategy officially comprises three fundamental, partly correlated objectives:

  1. Improving access to digital goods and services: Helping to make the EU's digital world a seamless and level marketplace to buy and sell.
  2. Creating an environment where digital networks and services can prosper: Designing rules which match the pace of technology and support infrastructure development.
  3. Utilizing Digital as a driver for growth: Ensuring that Europe's economy, industry and employment take full advantage of what digitalization offers.

After the Commission defined first principles on the role of online platforms in a future digital single market in May 2016 (COM [2016] 288 final), the current Commission's proposal for a directive on copyright in the digital single market (COM [2016] 593 final) implements a first broad outline for the regulation of online platforms offering “information society services” in the meaning of Article 1 para 2 of the Directive 98/48/EC (such as search engines, social media or e-commerce platforms, app stores, price comparison portals).

Provided that online platforms store large amounts user-generated content (including such not protectable by copyright) and make them publically available by means of providing online-retrieval, they shall meet the following obligations under the new Commission proposal:

  • Where online platforms do not merely store user-generated content but also make it available to the public, they shall be obliged to conclude license agreements with the rights holders of the concerned content and to implement appropriate measures to ensure that such contracts are actually duly fulfilled.
  • Online platforms should also implement suitable and appropriate measures to protect user-generated content. This particularly accounts for the protection against non-authorized retrieval and reproduction of such content via the services offered by online platforms (e.g. by means of technologies for the semantic recognition of user-generated content). In this respect, online platforms are also subject to a certain obligation of transparency, as they must disclose the use and functioning of technologies deployed for protection to users, as well as provide them with appropriate redress procedures.

In the overall context of the DSM strategy, however, this new copyright responsibility of content providers is only a single mosaic of the new regulatory overall picture, which is centered on the operators of online platforms. In view of the factual "gatekeeper" function of such platforms as regards the public access to digital information and online services, and considering their thus resulting outstanding importance for the digital single market, the Commission sees a need for potential regulatory action towards online platforms in order to safeguard the rights of consumers, business customers and competitors:

For instance, 90% of the EU-based companies questioned by the Commission stated that they were hampered in their businesses by unfair business practices of online platforms – the paramount issue mentioned in this context lies in the unilateral and non-negotiable dictation of contractual terms by major online platforms ("take it or leave it"). While companies of all industries and sizes depend upon access to new platforms and business models, access to online platforms apparently remains not negotiable for the overwhelming majority of these companies. In addition, many companies also complained about lacking transparency in pricing of and access to services offered by online platforms, oftentimes resulting in discriminatory business practices and issues regarding the processing and use of customers’ data provided by the business partners of online platforms. In this respect, the Commission has already announced in its communication to the European Parliament of 25 May 2016 that it shall be scrutinized whether and to what extent further regulatory measures are necessary in order to prevent shortcomings in the market conditions relevant for companies’ access to online platforms. First results will be presented in spring 2017.

Against this background, it will be equally worthwhile both for rights holders and companies engaging in e-commerce to closely monitor the further development of the DSM strategy in terms of the possible legal regulation of non-discriminatory and transparent access to the services of online platforms. We will keep you informed about the further developments and selected details of the DSM strategy.

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