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In a move that’s already being criticized as “illusive” by some, the European Commission has announced a plan to change how it regulates digital markets within the European Union.
The central theme of the announced changes to the Digital Single Market Strategy (DSMS) centers on what the EC calls Audiovisual Media Services, which includes services such as NetFlix and Amazon Prime Video.
However, the provisions of the proposed directive go far beyond what people watch on television into the entire realm of e-commerce. For example, a major impediment to e-commerce in Europe is a problem with geoblocking, in which people in one member state of the EU frequently can’t conduct commerce across the borders of other member states.
In many cases, geoblocking is preventing commerce in both physical items as well as in digital material such as music or television shows.
The difficulty in conducting data flows of all types within Europe as well as in and out of the EU are blamed for some of economic stagnation that currently exists there.
A study by Stuart Brotman at the Brookings Institution asserts there is “a palpable sense that Europe is slipping behind economically because of its digital reticence. The eurozone’s GDP is set to shrink 0.4 percent this year, which is a sign that some significant EU intervention may be necessary if Europe is to become internationally competitive in the digital domain.”
Rather than looking at the slow economy as a reason to encourage companies to innovate, the approach of the EC right now is to add even more regulation to what already is in place. This means that if the EC’s plans are adopted, there will be a new layer of regulation added to the rules that already exist.
At this point, however, it’s still not clear just how much of this regulation actually will go into effect once the rules are adopted and approved in a couple of years. In addition, the EC has stated as its goal that the level of regulation should be reduced. Half of the member nations of the EU already have gone on record as opposing increased regulations.
Some of the changes outlined in the EC-proposed directive include a new set of rules for comparable digital services. The primary focus in this area is in regard to telecommunications legislation, in which services that perform the same function would have the same rules—for example, VOIP services would be under the same rules as landline and cellular telephones. The EC already has launched a series of public hearings on the telecom legislation and on electronic-privacy, both of which would fall under those rules.
It’s worth noting that the EC has recognized that some regulatory actions are having a negative impact on the European economy, and for that reason, the EC also announced that it is working on ways to improve trust in e-commerce—such as allowing clearly sponsored search results, encouraging electronic identification and electronic payments that can function across borders—to free up commerce in Europe.
Europe Announces New Regulations for Digital Markets, Services
The EC also is promoting an open market and free data flow initiative that the EC announcement says will facilitate moving data between online platforms and cloud computing services.
Finally, in its announcement, the EC said it was working to adopt a fair and innovation-friendly business environment. “The Commission will carry out a fact-finding exercise into issues raised in the public consultation by businesses and suppliers who directly interact with platforms,” the announcement said. “These include, for example, concerns over unfair terms and conditions, in particular for access to important databases, market access and general lack of transparency.”
The platforms referred to by the EC essentially are all sorts of online commerce data and services. And while they’re not mentioned specifically by name, they appear to include everything from Amazon to credit bureaus. This could be an opportunity for U.S. companies to engage European customers and business in a wider manner than they do today, although the final form of any such action by the EC remains unclear as well.
What is clear is that U.S. businesses will have a significant period of uncertainty in dealing with Europe. For the next year or so, regulations will be the subject of hearings and compromises with little indication of how things finally will fall out. Much of the uncertainty seems to be based on what the EC views as an attempt to take the future of ecommerce and the digital marketplace into account before implementing new regulations.
“The EU believes that it can be both comprehensive and incremental in its DSMS. This approach may be too ambitious and too minimal in its impact. Given the rapid development of continuing the digital marketplace, the EU’s commitment to ‘future proofing’ seems likely to continue as an elusive goal,” the Brookings study concludes.
“Perhaps a better approach would be for the EC to develop aspirational goals and metrics that can help the EU and its member states assess the effectiveness of policies based on the DSMS.”
Brotman points out in his study that the business of technology does not proceed at the slow and deliberate pace currently in use in Europe, but instead uses an entirely different approach of fast development and, sometimes, fast failing. But, he noted, this doesn’t seem to be something the EC is prepared to do.
“The DSMS illustrates that the EU is not yet ready to move in this direction. It seems committed to emphasizing top-down government control in shaping the future of the digital marketplace in Europe,” Brotman wrote.
“On balance, the better approach of a DSMS may be a recognition that digital policymaking needs to operate in a more digital context—always evolving, never certain, and ready to change direction whenever significant shifts in marketplace supply and demand forces occur.”