Out-Law News | 21 Apr 2016 | 10:54 am | 3 min. read
In a new report (128-page / 1.43MB PDF) marking the end of its inquiry into online platforms and the digital single market, the House of Lords Select Committee on the EU said that "the flexible, principle-based framework of competition law" is "uniquely well-suited to dealing with the subtlety, complexity and variety of possible abuses that may arise" in online markets. It rejected the idea that "less flexible" regulation of online platforms would be "more effective", but said competition authorities do need to be "vigilant" to ensure dominant platforms do not abuse their "market power".
However, the Committee said that action needed to be taken to improve the regulatory response to competition issues in online markets as competition law is "perceived as being too slow to react to rapidly evolving digital markets".
"In order to speed up the enforcement of competition law, and in light of recent changes in UK legislation, we recommend that the Competition and Markets Authority (CMA) make greater use of interim measures," the Committee said. "[The European Commission's competition arm] DG Competition should also make greater use of interim measures by lowering the threshold for their use, bringing it into line with that of the UK Competition and Markets’ Authority."
The Committee said that the European Commission should be given new powers to "impose legally binding sector-wide remedies as a result of a sector inquiry", in consultation with national competition authorities. It further called on the CMA to open a market investigation into the online travel agent sector to look at concerns it has raised about "restrictive pricing practices".
"This investigation should consider the extent to which banning wide parity clauses has been effective, claims that online travel agents continue to prevent suppliers from offering other online travel agents a lower price, and other misleading practices alleged against online travel agents, including the creation of ‘shell websites’," the Committee said. "As this is a Europe-wide issue, we recommend that the Commission support this investigation and co-ordinate any related activity by other national competition authorities."
Merger control rules should also be updated to ensure that mergers and acquisitions involving large online platforms and "less established digital businesses" do not "escape scrutiny" by competition authorities, the Committee said. At the moment such deals might not satisfy the criteria for review "because the target company generates little or no revenue and so falls below the turnover threshold adopted by the European Commission’s Merger Regulation", it said.
"We recommend that the Commission amend the Merger Regulation to include additional thresholds that better reflect this dynamic, examples of which might include the price paid for the target or a version of the ‘share of supply’ test used in the UK," the Committee said.
Munich-based competition law specialist Michael Reich of Pinsent Masons, the law firm behind Out-Law.com, earlier this year said that plans to modernise competition rules in Germany could allow the Federal Cartel Office in the country to give closer scrutiny to mergers involving data-rich start-up businesses.
In its report the Committee recommended that a number of other steps be taken to address consumer protection issues in online markets. One measure it recommended was for EU laws to be updated to require online platforms that rank information and provide search and specialised results to "clearly explain on their website the basis upon which they rank search results". Online platforms should also have to "provide a clear explanation of their business models and relationships with suppliers" on their websites as part of a drive towards greater transparency, it said.
The Committee also said that the EU’s online dispute resolution platform should be extended to apply to disputes between businesses and that this "could help to address concerns about unfair trading practices by online platforms".
Data protection and privacy concerns were also highlighted in the report. The Committee said the European Commission should "reserve powers" to oblige online platforms that breach EU data protection laws to publicise that fact "through notifications on their web-sites and mobile applications". It also backed the creation of new privacy seals that businesses can certify against "to give consumers confidence that they comply with data protection rules".
The Committee said it is "concerned" that new rules on data portability contained within the newly finalised General Data Protection Regulation "may unravel in practice" and called on the European Commission to provide guidelines on how the requirements "apply to different types of online platform".
"If applied too rigidly, [the data portability requirements] could place onerous obligations on emerging businesses; however, unless it is more clearly defined, it is unlikely that it will be implemented by many online platforms," it said. "Guidelines should match data portability requirements to different types of online platform, adopting a proportionate approach depending on the essentiality of the service in question."