Platforms consultation could lead to new norms for data handling, says expert

Out-Law News | 29 Sep 2015 | 10:56 am | 3 min. read

New norms for data handling by online platforms could emerge from a new consultation exercise launched by the European Commission, an expert has said.

The Commission has opened a new consultation into "the economic role of online platforms". Businesses, consumers and other stakeholders have been asked for their views on a range of issues, including on whether they think platforms should make it easier for users to switch their data, including personal data, to rival service providers.

Financial services expert John Salmon of Pinsent Masons, the law firm behind Out-Law.com, said "This is an ambitious undertaking. In looking at the role of online platforms, the Commission is hoping to gain insight into whether the kinds of commercial relationships that have only been made possible by the digital economy over the last 20 years need more or better regulation. This covers a very wide range of areas of regulation and consumer protection”.

“Search services, social networks, online market places and collaborative platforms have all created global businesses like Google, Facebook, Amazon and Uber, as well as their counterparts in China and other parts of the world. But laws and regulation have failed to keep up with the dramatic changes which these businesses have introduced”, he said.

“Regulators see a number of social benefits that need to be addressed in the context of digital commercial dealings. Greater transparency is needed and online platforms need to achieve a greater level of trust both in terms of how they use data and in terms of how they build reputations and interact with customers," said Salmon.

“Personalised pricing, contractual tie-ins and the impact of reputation systems, from user reviews to third party certifications, are all matters that are largely subject only to high-level legal principles or laws that do not quite address the unique aspects of online engagement. When engaging in legislative reform the Commission and others need to think carefully about the extent to which these aspects of online engagement should be regulated and, if they are, the form that regulation should take.”

The Commission’s will look again at whether online platforms should be held responsible for the illegal activities of their users.

“Regulators across the world are looking for ways to encourage an environment in which consumers can trust that their rights are being respected while at the same time being careful not to dis-incentivise competition and innovation," said Salmon. "It is in this context that the extent to which platforms should be considered to owe a duty of care to consumers and other businesses which use their technology is likely to be addressed."

A separate consultation on 'geo-blocking' has also been launched by the Commission. Geo-blocking refers to restrictions placed on access to online services and content on a geographic basis. The Commission said it wants to see whether geo-blocking leads to "unjustified commercial barriers" which prevent trade of products and services within the EU.

"Platforms play an increasingly important role in our lives," EU commissioner for the digital single market Andrus Ansip said. "Platforms are part of a thriving digital economy but questions are also raised about their transparency and use of content. Geo-blocking too often reroutes or blocks consumers based on their nationality or place of residence; this is not helpful for fostering e-commerce since it frustrates the consumers, and it is even less helpful for increasing cross-border e-commerce which is to the benefit of both consumers and businesses. We will now embark on an evidence gathering exercise for both these important issues for a well-functioning digital single market."

These consultations take place in parallel with the UK House of Lords' EU Internal Market Sub-Committee consultation on similar issues. The deadline for written evidence is 16 October with hearings expected through to the end of the year. The Committee's report is expected to be published in spring 2016.

Alongside both of these is the European Commission's competition directorate'songoing e-commerce sector inquiry which was launched last May. A preliminary report is expected in mid-2016.

"From a competition law perspective too, platforms are playing an increasingly important role in online markets," said Pinsent Masons competition law expert Sammy Kalmanowicz. "Control of data is pivotal for exercising the platform’s intermediation function and greatly influences competitive dynamics on the platform market, as well as the related markets on which the platforms’ business customers are active. Hence the Commission's wide-ranging overview of the dynamics of competition, law and regulation as well as the prevalence of active competition cases in this area."

"The Commission already has competition law tools available to regulate competition in markets in which platforms operate, including via its merger control regime, but tackling the particular issues raised in the online environment is not straightforward," he said.

"Data ownership and big data are increasingly vital parameters of competition on many markets. Therefore a data aggregator could become concerned with dominance related competition concerns where it holds a valuable data portfolio. We may see measures suggested following these most recent consultations which go some way to addressing these issues also from a regulatory perspective. So, rather than addressing data portability matters, for example, simply on an ad-hoc basis through the merger control regime or antitrust cases, the Commission may use its platforms consultation exercise to develop a new framework setting out its expectations on the way data should be used by platforms on a market-wide level," Kalmanowicz said.