Interoperability, enforcement of data rights and strong protection of competition are essential for European digital welfare.
Twenty years ago the European Union introduced the E-Commerce Directive. Since then, the internet and the broader digital economy have undergone a revolution which dramatically altered market structures, business behaviors, and user vulnerability. In the early 2000s, digital markets were still highly fragmented and subject to dynamic fluxes, underlined by the dotcom bubble. Since then, ICT has become a general purpose technology, affecting all sectors of the economy and also, fundamentally, the fabric of our societies. The growing divide between slow-moving legislative and regulatory bodies and fast-paced technological innovation, combined with disruptive business models of the digital economy, have created an amalgamation of complex and interdependent problems.
Consequently, the European Digital Strategy is presently foremost, after the European Green Deal, on the European Commission’s policy agenda for a more integrated Europe.
Below we present Instrat’s and European Horizons’ joint contribution in two public consultations taking place in the EU:
- Digital Services Act package (DSA) and the ex ante regulatory instrument for large online companies acting as gatekaeepers;
- New Competition Tool (NXT) for the European market.
Instrat is a progressive think-tank focused on public policy advisory. We provide research and consult on digital economy, energy and environment, sustainable finance, labour market and inequalities. We act in the public interest, in our work we create and adapt open access & open source tools.
European Horizons is a global, student-led policy incubator committed to giving young people a voice in shaping the future of Europe and of transatlantic relations. Through our network of university chapters across the world, and in collaboration with our partner organizations, European Horizons devises, tests, and advocates for innovative policy ideas to advance European integration.
Digital Services Act and the ex ante regulatory instrument
- Based on our argumentation below, we believe that the European Commission should adopt a comprehensive framework with the overarching goal of establishing a fair and competitive digital market environment, thus increasing innovation and securing digital rights for European citizens.
- To level the playing field, it is necessary to rethink the fundamental aspects of the digital space and propose bold policy actions, such as defining the significant digital presence, implementing interoperability through vertical separation of platform utilities (decoupling), listing prohibited and unfair practices, analyzing social and economic impacts of algorithms, and strengthening data sharing.
- Proper enforcement of both GDPR and DSA requires enhanced reporting and intervening powers. Therefore, we propose a new European regulatory body equipped with the mandate to supervise the European Digital Single Market.
- Consequently, Instrat and European Horizons recommend that the European Commission choose Option 3 in conjunction with Option 2: ex-ante regulation for large online platforms with significant network effects acting as gatekeepers, which includes a horizontal framework empowering regulators to collect information from those platforms.
New Competition Tool (NCT)
- Based on our argumentation below, we believe that the European Commission should be empowered through the New Competition Tool to effectively address the structural risk for competition (a tipping market) as well as the structural lack of competition (a failing market) in a regulatory capacity.
- The New Competition Tool should allow the European Commission to impose behavioral, and where necessary, structural remedies in order to prevent digital service providers from becoming gatekeepers, ex ante. Therefore, we recommend a market structure-based competition tool, as it — unlike a dominance-based tool — would not be limited to companies which have already acquired market dominance.
- Online platforms oftentimes leverage network effects and strong positions in one area of the digital economy to aggressively scale up new digital and non-digital services in adjacent markets such as advertising, financial services, housing, and cloud computing. Therefore, we recommend that the European Commission implement an NCT which is applicable across sectors and prohibits companies from exploiting conglomerate and network effects. To achieve this, a competition tool with limited scope will not suffice. Instead, we recommend choosing a tool applying a horizontal scope.
- Consequently, Instrat and European Horizons strongly recommend implementing Option 3: a market structure-based competition tool with a horizontal scope.
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