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Finally, some certainty around Europe's Single Digital Market Strategy

Mark Webber
If you haven't already spotted it among the leaks, tweets and general pre-announcement noise, today the EU released its Digital Single Market Strategy. In an orchestrated tweet-fest the clunky machine If you haven't already spotted it among the leaks, tweets and general pre-announcement noise, today the EU released its Digital Single Market Strategy. In an orchestrated tweet-fest the clunky machine of the EU ventured online endlessly pronouncing "let's go digital with European #DigitalSingleMarket". All the fanfare and hype was for a new Strategy "A Digital Single Market for Europe".

The back-drop; a fear Europe is falling behind, a slow awakening to the inevitable truth – the Internet and digital technologies are transforming our world. Dealing with such technologies across 28 different Member States is at best extremely complex and frequently simply impossible. And yes, perhaps sometimes, the humble consumer is overwhelmed and exploited in order to deliver online gains for others.

With the inevitable echo of previous proposals and consultations there are some new ideas within this Strategy. However, there are no immediate actions and the often the decisions or actual details remain some way off. What's clear is an aim to agree proposals this year. Of course, proposals are not law, and any new online laws remain years away. However, it's indicative of a focus and direction for EU digital regulation and anyone with an interest in the EU's online environment has to start paying attention.

The EU alive to new concerns

The steady progress and growth in the digital economy, notably from the US, keeps the EU policy makers awake at night. The Commission sees the value of digital and technology but not yet a sustainable internal market to foster its adoption. Just what can be done to claw-back this US lead and to foster more digital innovation? Where's our EU-bred eBay or Amazon or at least a sharing economy giant, must we search and interact only via US platforms and is there a way to foster an EU-cloud and greater fairness for rights-holders? Does the EU's market fragmentation inhibit growth in Europe in comparison to the single markets on offer in the USA or China? Or are there other reasons for all the US online success?

The EU's concept for the #DigitalSingleMarket is not new but this May 6th 2015 communication sets out a wide ranging agenda for change across issues such as copyright, e-commerce, telecoms regulation and, of course, data.

Three Pillars of Wisdom: the Commission sets out 16 initiatives to make it happen

Hats off to #TeamJunkerEU they've planned the Strategy launch well. Video, infographics, commentary and carefully crafted press-releases each provide their overview of why "Europe must embrace the digital revolution and open up digital opportunities for people and businesses". They have one pre-exiting policy tool to achieve this for Europe: "By using the power of the EU's Single Market".

The Digital Single Market Strategy published today includes a set of targeted actions to be delivered by the end of next year. It is built upon three core pillars:

  1. better access for consumers and businesses to digital goods and services across Europe;

  2. creating the right conditions and a level playing field for digital networks and innovative services to flourish; and

  3. maximising the growth potential of the digital economy.

There are 16 key actions to be delivered by the end of 2016

The European Commission unveiled 16 key actions as a part of its Strategy to create a Digital Single Market. These 16 actions sit under the 3 pillars mentioned above and we're told comprise its "top priorities". According to these 6 May 2015 releases, the Commission's 16 key actions comprise:

PILLAR I: Better access for consumers and businesses to digital goods and services across Europe

  1. Rules to make cross-border e-commerce easier. This proposes harmonised EU rules on contracts and consumer protection when EU consumers buy online. As ever this is about the EU's long-running aim to boost online confidence. However, it feels like another layer of proposals in an already highly regulated area. EU rules demand simplicity, plain and intelligible language and then inundate the online world with volumes of mandatory disclosures (think last year's Consumer Rights Directive implementation). What's more, this could challenge the only recently adopted principles enshrined in the UK's Consumer Bill of Rights (not yet even in force but a great example of a Member State bucking the trend of harmonisation) and perhaps the lead to a rebirth of the single EU consumer contract law?

  2. To enforce consumer rules more rapidly and consistently. In this instance, they're proposing a review of the Regulation on Consumer Protection Cooperation. This Regulation already aims for cooperation between EU authorities (believed to be essential to ensure that consumer rights legislation is equally applied cross the internal market and to create a level playing field for businesses) but we all know there is far more risk of online enforcement in certain EU Member States than others. To be fair, if coupled with more uniformity around rules perhaps this will help an online player understand obligations and risks and effectively address the single market?

  3. More efficient and affordable parcel delivery. The Commission has made much of the fact that currently 62% of companies trying to sell online say that parcel delivery costs that are too-high are a genuine trade barrier. Another hint toward the need to unify Europe's fragmented national delivery networks – whether this is easy to achieve remains to be seen.

  4. To end unjustified geo-blocking. Geo-blocking is another one of those issues subject to a high volume of pre-briefing. So much so, the Fieldfisher team has previously explained the perceived concern around this issue. Equally the focus in the Strategy around territorial rights management and geo-blocking was anticipated and we've recently published some research into industries general perceptions in this area.This proposal is also a nod to what the EU sees as "discriminatory practice used for commercial reasons, when online sellers either deny consumers access to a website based on their location, or re-route them to a local store with different prices". This kind of blocking activity means that, for example, car rental customers in one particular Member State may end up paying more for an identical car rental in the same destination.

  5. To identify potential competition concerns affecting European e-commerce markets. Our anti-trust and competition team have also recently explored this issues and today the Commission launched an anti-trust/competition inquiry into the e-commerce sector in the European Union. "The sector inquiry will focus particularly on potential barriers erected by companies to cross-border online trade in goods and services where e-commerce is most widespread such as electronics, clothing and shoes, as well as digital content." More gloss is provided in this press-release but the information gathered as a result of these enquiries may well lead to better insights enabling the EU to take further actions.The problem identified is that, of those shopping online, only 15% of consumers reached across to an e-vendor in another Member State. Can currency and language differences account for all of this? What are the other inhibitors? As a next step questionnaires will be sent to companies ranging from content rights holders, broadcasters, and manufacturers to merchants of goods sold online and the companies that run online platforms such as price-comparison and marketplace websites. Please get in touch if you're the recipient of any such investigation.

  6. A modern, more European copyright law. Here we're told that legislative proposals will follow, before the end of 2015, these which will endeavour to reduce the differences between national copyright regimes and allow for wider online access to works across the EU, including through further harmonisation measures. The fact that wider international rules may also need agreement seems to be ignored.In particular, the Commission wants to ensure that users who buy films, music or articles at home can also enjoy them while travelling across Europe. The Commission will also look at the role of online intermediaries in relation to copyright-protected work. It will step up enforcement against commercial-scale infringements of intellectual property rights.The principle of "intermediary liability" (that online intermediary service provides should not be liable for the content they transmit, store or host) has become somewhat sacrosanct since introduced under the Ecommerce Directive (2000/31/EC). However, its application is not always clear, EU court cases within Member States have led to fragmented rules and, despite consultation in 2010 and some EU responses in 2012, the EU still does not have a consistent "notice and action" policy leaving rights holders and online intermediaries to juggle a variety of national approaches. Before the end of 2015, perhaps the EU's approach to the role of Internet platforms will be clearer? Perhaps it has wider plans for the intermediaries to have a more active role in respect of IPR online?

  7. A review of the Satellite and Cable Directive. In this instance, the review will assess if the existing Directive's scope needs to be enlarged to include broadcasters' online transmissions and to explore how to boost cross-border access to broadcasters' services in Europe.

  8. To reduce the administrative burden businesses face from different VAT regimes. To implement steps so that sellers of physical goods to other countries also benefit from single electronic registration and payment; and with a common VAT threshold to help smaller start-ups selling online. To be clear, these proposals do not seem to go as far as proposing a uniform VAT rate (even Europe couldn't reach that far into Member State's macro-economic policy).

PILLAR II: Creating the right conditions and a level playing field for digital networks and innovative services to flourish

  1. Present an ambitious overhaul of EU telecoms rules. These plans include the Commission's aspiration for more effective spectrum coordination (perhaps with an eye on the Internet of Things and spectrum allocation issues we've explored in the past, but also with recognition that these services are "the backbone for digital products and services").There is commentary around the need for a common EU-wide criteria for spectrum assignment at national level; creating incentives for investment in high-speed broadband; ensuring a level playing field for all market players, traditional and new; and creating an effective institutional framework.

  2. Review the audiovisual media framework to make it fit for the 21st century. Here the Commission are focusing on the roles of the different market players in the promotion of European works (TV broadcasters, on-demand audiovisual service providers, etc.). The strategy will also explore how to adapt existing rules (set out in the Audiovisual Media Services Directive) to new business models for content distribution.

  3. Comprehensively analyse the role of online platforms (search engines, social media, app stores, etc.) in the market. These investigations by the Commission will cover issues such as the non-transparency of search results and of pricing policies (or so called "search neutrality" or "pricing neutrality"), how the online platforms use the information they acquire, relationships between platforms and suppliers and the promotion of their own services to the disadvantage of competitors – to the extent these are not already covered by competition law.Related in part to the intermediary liability issues mentioned above, we're told this analysis will also look into how to best tackle illegal content on the Internet.

  4. Reinforce trust and security in digital services, notably concerning the handling of personal data. Of course, although painfully slow, privacy reform in the EU is already well underway and our privacy team is frequently providing updates on these developments. However, building on the new EU data protection rules (which they still claim are due to be adopted by the end of 2015 (?!)), the Commission will review the e-Privacy Directive (2002/58/EC). So cookies, e-marketing and online transparency rules may also get a review. And this just as many businesses had got to grips with the current regime and its demands.
    The full Strategy sets out new aspirations to move further towards "Building a data economy". It states "Big data, cloud services and the Internet of Things are central to the EU’s competitiveness. Data is often considered as a catalyst for economic growth, innovation and digitisation across all economic sectors, particularly for SMEs (and start-ups) and for society as a whole." Perhaps worryingly, there is more rhetoric about the lack of contractual protection in cloud relationships and cloud provides severely limiting liability and future portability of data. We can only assume the efforts to codify and standardised contracts and vendor behaviour within the "Cloud Agenda" will continue.We'll explore the potential impact for cloud in a later post.For now, if you detect a tone of cynicism, that's because I feel as if we've been here a number of times before. I became quite caught up in the EU's 2012 Cloud Agenda "Unleashing the Potential of Cloud Computing in Europe". Great aspiration from past leaders of the European Commission following their steady realisation that that, without public intervention, the EU's already endangered cloud industry would not reach its full potential. Launched in 2012, it's now mid-2015 and we've a lot of consultation and group break-out but still little concrete progress (and certainly no law). I've previously explained a little of the rhetoric and output of that Cloud Agenda during previous commentary on cloud SLA proposals.

  5. Propose a partnership with the industry on cybersecurity in the area of technologies and solutions for online network security. There is of course already an almost finalised draft of the Network and Information Security Directive but the Strategy also highlights the European Cybersecurity Strategy and plans to develop industrial and technological resources for cybersecurity. For a comparative commentary of the EU versus US approaches see this piece written earlier this year.

PILLAR III: Maximising the growth potential of the digital economy

  1. Propose a 'European free flow of data initiative' to promote the free movement of data in the European Union. The rhetoric here from the Commission is not necessarily new, it believes "new services are hampered by restrictions on where data is located or on data access – restrictions which often do not have anything to do with protecting personal data". This new initiative will tackle those restrictions and so encourage innovation.Apparently the Commission will also launch a European Cloud initiative covering certification of cloud services, the switching of cloud service providers and a "research cloud". Again, we'll share more here in due course.

  2. Define priorities for standards and interoperability in areas critical to the Digital Single Market: this apparently will include areas such as e-health, transport planning or energy (and notably smart metering).

And finally…..

  1. Support an inclusive digital society where citizens have the right skills to seize the opportunities of the Internet and boost their chances of getting a job. This appears to comprise a new e-government action plan will also connect business registers across Europe, Importantly perhaps for our readers; this may include an acceleration in the roll-out interoperable e-signatures.

More of the same?

The main take home, not least for the US based reader, is that this is not new law. It may, in time lead to new EU laws but they are a good way off for now. There are however clear proposals to investigate and potentially change things which already trouble the US business tackling the European markets: effective consumer terms and rights; rules and constraints for cloud contracts; reform of e-marketing; and changes to the rules around the use and processing of data. This is not really news and has been on the agenda in the past. There is inevitably uncertainty whether you can ever legislate an entire industry back into a competitive position.

And no super-regulator?

Much is made of the need for a single market and certain recent commentary speculated this may lead to the formation of a "super-regulator" tasked with EU-wide enforcement around telecoms, technology and online presence. Yet, it seems for now at least, this was perhaps a step too far. Only last week we learned that this "didn't get political backing". Whilst perhaps this is a piece of good news for certain US online behemoths, with the new competition enquiries the Strategy may yet lead to regulatory investigation. The absence of such proposals does however beg the obvious question: how do you actually ensure these aspirations are enforced and regulated? Particularly across borders (though see action point 2 for the Commission's hopes there).

Inappropriate focus on the US platforms

Inevitably this Strategy will draw criticism from some quarters that much is aimed squarely at US online platform dominance and inhibiting the ability of US online dominance. Of course the investigation into potential competition concerns affecting European e-commerce markets may draw such fire and potentially the intermediary liability (see below) and search neutrality investigations could create problems for the US players. More subtle perhaps is any changes in the cloud space and almost everything that attempts to regulate the movement or processing of online data. Europe clearly believes the US providers don't always play "fair" around practices relating to and their contracts with European customers. Time will tell us just how many of the day-to-day operations and practices of the US players will be impacted.

What about proposals for significant changes around online "duty of care"?

Perhaps the sea-change I see as the most significant is in relation to the proposals falling under priority number 6: i.e. those for "new measures to tackle illegal content on the Internet". Notice and Action reform has been long-promised. But how far will the new investigation into "whether to require intermediaries to exercise greater responsibility and due diligence in the way they manage their networks and systems – a duty of care" take us from the current regime of safe harbour defences under the Ecommerce Directive?

Is this a step towards pro-active monitoring, could the similarities with the US and the DMCA finally be eroded away? What may these enhanced responsibilities lead us towards? If only addressing issues of child pornography or terrorism, perhaps this can be understood – but are the online intermediaries going to be asked to police the Internet? This is an area where online platforms providers should maintain a keen eye.

Europe's inferiority complex

Some of the Strategy is about Europe's need to create jobs and the need to facilitate a market where Europe's businesses can compete on both the home (yes perhaps there is a whiff of protectionism) and global stage. There is inevitably the consequence that some things which online businesses have adapted to and learned to deal with will now change or evolve. There's likely to be more digital regulation not less in the coming years.

There is clearly appetite to move forward around the #SingleDigitalMarket and the next weeks and months will reveal just how much momentum these 16 policy objectives can gather.

One thing is clear; this is a new leadership team with strong views. The buy-in at Commission level comes right from the top. In fact the press-release quotes Commission President Jean-Claude Juncker who remarks:

"Today, we lay the groundwork for Europe’s digital future. I want to see pan-continental telecoms networks, digital services that cross borders and a wave of innovative European start-ups. I want to see every consumer getting the best deals and every business accessing the widest market – wherever they are in Europe. Exactly a year ago, I promised to make a fully Digital Single Market one of my top priorities. Today, we are making good on that promise. The 16 steps of our Digital Single Market Strategy will help make the Single Market fit for a digital age."

What now?

The Single Digital Market Strategy promises: "The Digital Single Market project team will deliver on these different actions by the end of 2016. With the backing of the European Parliament and the Council, the Digital Single Market should be completed as soon as possible." This will first be aired by the European Council in meetings on the 25th June 2015.

At the fore is a desire to champion and protect the consumer. As with the General Data Protection Regulation, perhaps underneath all this the US, Silicon Valley and the general success of its internet and online platforms in the EU markets is in the firing line. We all know these privacy law reform proposals have struggled to emerge and, even today, remain some way from agreement and becoming law. The constant leaking and previewing is over – will they now be able to deliver and advance any of these promises?

Perhaps the only certainty: this digital overhaul is likely to play out at analogue speed.

Mark Webber – Fieldfisher Silicon Valley Office

For further comment and insight follow me on twitter @digitechlaw


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