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Online platforms are one of the biggest regulatory challenges for the EU’s digital single market

  • Poland
  • Competition, EU and Trade

10-02-2017

The role of online platforms is growing and will continue to grow, changing the face of many sectors of the global economy. They have thrown down the gauntlet to traditional business models in retail, transport, tourism, financial services, advertising, the music and film industries, and many other sectors. 
Online platforms take various forms: internet search engines, purchasing platforms, platforms for cooperation or sharing of certain goods, as well as social media sites. Thus they resist easy distinctions and classifications. The best-known include such names as eBay, Amazon, Zalando, Google, Facebook, YouTube, Play and the App Store, and various tools for comparing prices of goods and services. Sharing economy platforms, the most prominent of which include Uber, BlaBlaCar and Airbnb, continue to gain popularity. 
Despite the diversity of business models, online platforms share certain common characteristics. They typically operate on international markets, bringing together professional users and consumers (B2B, B2C, C2C). They exploit “network effects,” i.e. the value of their services increases as the number of users increases, and ultimately their operations rely on collecting and processing large quantities of data. By gathering unique data sets, it is easier for them to identify strategic links and undertake new business ventures. 
Online platforms currently represent one of the biggest regulatory challenges for the EU’s digital single market. They are not yet subject to any comprehensive, uniform legal regulation, but fall under existing EU regulations governing such fields as consumer protection, competition, data protection, and e-commerce. 
Giving their growing role, the question arises whether current legal mechanisms can keep up with the rapid development of the digital economy, and in particular whether they are suited to the sharing economy or existing online intermediaries. The answer to this question is important for platforms and their growth, but also for other enterprises, which are often dependent on platforms—or conversely regard the growth of online platforms as a threat to their business.
In May 2016 the European Commission issued a communication entitled “Online Platforms and the Digital Single Market: Opportunities and Challenges for Europe” (COM(2016) 288 final), addressing issues of innovation and growth as well as regulatory problems. At the current stage the Commission assumes that future regulatory measures proposed at the EU level should address only clearly defined issues connected with specific types of online platforms or types of activity they conduct. 
For example, traditional regulations governing bilateral contractual relations are ill-suited to sharing platforms or even purchasing platforms, where the relations are typically trilateral: platform operator/seller/consumer. The issues arising here mainly apply to the role of the operator of the platform (whether a contract party or an intermediary), and consequently the operator’s duties, including responsibility for performance of the contract by the seller, as well as informational obligations. Concentration at the EU level is also focused around various unscrupulous business practices on the part of online platforms, such as imposing unfair terms for access to their databases, unfair promotion by platforms of their own services at the cost of offers by other suppliers, and a lack of transparency in the use of data and search results.
We recommend closely following the work of the Commission, as the results of these studies may have a real and fundamental impact on the functioning of the entire digital economy.

The role of online platforms is growing and will continue to grow, changing the face of many sectors of the global economy. They have thrown down the gauntlet to traditional business models in retail, transport, tourism, financial services, advertising, the music and film industries, and many other sectors. 

Online platforms take various forms: internet search engines, purchasing platforms, platforms for cooperation or sharing of certain goods, as well as social media sites. Thus they resist easy distinctions and classifications. The best-known include such names as eBay, Amazon, Zalando, Google, Facebook, YouTube, Play and the App Store, and various tools for comparing prices of goods and services. Sharing economy platforms, the most prominent of which include Uber, BlaBlaCar and Airbnb, continue to gain popularity. 

Despite the diversity of business models, online platforms share certain common characteristics. They typically operate on international markets, bringing together professional users and consumers (B2B, B2C, C2C). They exploit “network effects,” i.e. the value of their services increases as the number of users increases, and ultimately their operations rely on collecting and processing large quantities of data. By gathering unique data sets, it is easier for them to identify strategic links and undertake new business ventures. 

Online platforms currently represent one of the biggest regulatory challenges for the EU’s digital single market. They are not yet subject to any comprehensive, uniform legal regulation, but fall under existing EU regulations governing such fields as consumer protection, competition, data protection, and e-commerce. 

Giving their growing role, the question arises whether current legal mechanisms can keep up with the rapid development of the digital economy, and in particular whether they are suited to the sharing economy or existing online intermediaries. The answer to this question is important for platforms and their growth, but also for other enterprises, which are often dependent on platforms—or conversely regard the growth of online platforms as a threat to their business.

In May 2016 the European Commission issued a communication entitled “Online Platforms and the Digital Single Market: Opportunities and Challenges for Europe” (COM(2016) 288 final), addressing issues of innovation and growth as well as regulatory problems. At the current stage the Commission assumes that future regulatory measures proposed at the EU level should address only clearly defined issues connected with specific types of online platforms or types of activity they conduct. 

For example, traditional regulations governing bilateral contractual relations are ill-suited to sharing platforms or even purchasing platforms, where the relations are typically trilateral: platform operator/seller/consumer. The issues arising here mainly apply to the role of the operator of the platform (whether a contract party or an intermediary), and consequently the operator’s duties, including responsibility for performance of the contract by the seller, as well as informational obligations. Concentration at the EU level is also focused around various unscrupulous business practices on the part of online platforms, such as imposing unfair terms for access to their databases, unfair promotion by platforms of their own services at the cost of offers by other suppliers, and a lack of transparency in the use of data and search results.

We recommend closely following the work of the Commission, as the results of these studies may have a real and fundamental impact on the functioning of the entire digital economy.


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