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New legislation brings order to digital markets

The European Commission submitted new legislative proposals in December 2020 that aim at fairer digital practices and services for businesses and consumers. The proposals are based on European values: human rights, personal freedom and data protection, liberty, democracy, equality and the rule of law. While legislation can lay a solid foundation, its successful implementation will take substantial effort.

Sitra. Kuva: Miikka Pirinen / SITRA

Writer

Laura Halenius

Leading specialist, Fair data economy, Sitra

Published

Sitra. Kuva: Miikka Pirinen / SITRA

Writer

Laura Halenius

Leading specialist, Fair data economy, Sitra

Published

With the new legislation, the European Commission aims to ensure that consumers have access to a wide selection of safe products and services. In other words, what is currently illegal outside the internet will also be illegal on the internet. For example, selling stolen goods online is just as illegal as offering them to a passer-by on the street.

The new legislation also aims to secure a free and equal playing field for European businesses when competing in digital markets, just as it does in conventional markets, and prescribes that illegal content be removed from services.

The regulation of the digital markets is value-based

The purpose of the Digital Markets Act is to prevent tech giants from abusing their position as the gatekeepers of the single market. The best-known of these big tech companies are Google, Amazon, Facebook and Apple, whose market dominance is currently so formidable that, according to a risk analysis from the European Commission, they could potentially stop or at least substantially delay business users and their competitors from offering their services to consumers.

A good example of wielding power over competitors is the battle between Apple and Epic Games that flared up last year. Epic Games added an option in its popular Fortnite game that allowed players to make in-app purchases without using Apple’s App Store.

The reason for this move was Apple’s policy of taking a 30 per cent cut of each in-app purchase, which Epic Games considered unreasonable. Apple retaliated by banning Fortnite completely from the App Store. The new regulation now seeks to eliminate the abuse of a dominant market position as currently exercised by tech giants and thereby to support the growth of small tech companies, SMEs and start-ups.

On the other hand, the legislative proposal for the Digital Services Act aims to shift significantly more responsibility onto tech giants such as Facebook and Amazon for the content marketed and sold on their platforms.

According to the proposal, digital services that offer products, services or content to consumers should in the future be subject to binding EU regulations in which the rights and responsibilities of platform users, tech companies and authorities are defined and apportioned.

Under the legislative proposal, tech companies would also be obliged to disclose how they use algorithms to select content for individual users. These changes would give researchers access to more extensive data and, with that, better opportunities to evaluate the ethical conduct of tech companies.

The questions around digitisation are the same as they were with traffic 150 years ago

The timing of the new legislative proposals could not be more opportune as the global pandemic has opened the floodgates of a digital transition that concerns every single European: online retail sales have exploded, video and audio meetings have become a primary channel of communication in business, friends and families have learned to rely on social media to keep in touch and transactions with authorities take place online whenever possible.

In her speech in December 2020, Margrethe Vestager, European Commission executive vice-president for a Europe fit for the digital age, compared the new legislative proposals to the introduction of traffic lights 150 ago, when automobiles began to replace horse-drawn carriages.

The analogy between digital services and traffic is excellent. In today’s society, data is the basis of our society that needs to serve its purpose without monopolisation and without algorithm-based systems creating discriminatory practices and inequality.

Digital responsibility must be widely discussed

There is still a long way to go from legislative proposals to implementation, and the chances are that the companies affected by the proposals will continue their forceful lobbying against them. There are, however, positive signs that would suggest that the digital landscape will look different in the future.

Legislation speeds up development, but it can only serve as a signpost and necessarily leaves plenty of practical questions unanswered. In fact, companies and the government should embrace digital responsibility even more extensively than the laws require in order to maintain the trust of citizens and customers. Building trust is a long process but destroying it takes seconds.

Trust is the fuel that keeps data moving in the digital society and new digital services emerging to make our day-to-day lives easier. The current framework of digital responsibility must be expanded and it takes completely new tools and reporting practices to make sure that we don’t lose the all-important trust of the people.

The article was published on 12 January 2021 in the Brussels Morning.

Topic

Fair data economy

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