Technological developments in the last decades, especially the internet, brought fundamental changes to society. New ways of communicating and marketing opened ways for new business models, connected the consumers with providers and changed the meaning of terms themselves. During this era of rapid development and connection, the European Union couldn’t just stand by. In 2014 Jean-Claude Juncker had announced that creation of a Digital Single European Market was to be one of his top priorities and this Project was launched in 2015.
What is Digital Single Market?

What is Digital Single Market?

 Eu Commission Communication in 2015 had explained the Digital Single Market as:

‘’ A Digital Single Market is one in which the free movement of goods, persons, services, and capital is ensured and where individuals and businesses can seamlessly access and exercise online activities under conditions of fair competition, and a high level of consumer and personal data protection, irrespective of their nationality or place of residence.’’  

The need for an optimal framework of legislation for changing markets, to benefit from an evergrowing way of business and to achieve EU objective of creating an internal market across the Union led to the creation of Digital Single Market strategy, which is created on 3 pillars:

  • Better access for consumers and businesses to online goods and services across Europe – contains the creation of cross-border legislation, copyright protection and prevention of geo-blocking
  • Creating the right conditions for digital networks and services to flourish – including upgrading the telecommunication and media infrastructure, more data protection and legislation for online platforms
  • Maximizing the growth potential of our European Digital Economy – Investment in data technology and efforts to further enhance innovativeness

Today, 28 of 30 planned legislation has been enacted, abolished roaming charges inside EU adopted first Cybersecurity regulation and planned free and universal internet Access for its citizens.  

This process is, however, not without its own challenges. Questions arise for new and changing concepts and how to deal with them .

Challenges of the EU Digital Single Market:

Disruptive technology or disruptive innovation is a term used for innovations that not only improve the existing products but creating a new product, creating new needs and markets that didn’t exist before. Today, internet technology opened immense new services and opportunities, also created new challenges and risks for society. To maximize the benefits and minimize the risks of progress, the law itself should be able to interpret new situations, create new legislation to cover status or, if the disruption is severe enough, reconsider it’s a fundamental perspective on existing concepts.

Challenges for an Efficient Market Integration:

One of the main issues related to DGM is the disruptive nature of the Digital Business Models towards the traditional markets of the states. These companies, usually multinational, are threatening the local businesses, which some states, as seen in the conflict between Amazon Express Service and Paris authorities, consider these enterprises as a threat, not only economically but also culturally to the local business. One other serious claim is that this new business model creates unfair competition, being exempt from various constraints. This creates a serious challenge for legislators as state’s attitudes differ towards these new models and the adopted provisions create their own dilemmas, both for the states and the companies themselves, thus complicating the harmonization process.

 Article 26 of Treaty on the Functioning of the European Union sets the goal for a common European Market and Article 114 alongside with the Principles set by the ECJ on the Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein  forms the uniform measures on this goal in order to mitigate the internalization process. Under these provisions, several legislations had been enacted even prior to the launch of the DSM Strategy. One of the first one, the E-Commerce Directive enacted in 2000, sets the base for a digital market, regulating online contracts, setting liability provisions and banning prior authorization.

Effects of Geo-Blocking Restriction Regulations:

Geo-Blocking is the practice that prevents a customer from accessing or purchasing products or services from another country. The EU is determined to end this practice in order to create a single digital market, thus enacted the Regulation 2018/302. This regulation bans discrimination on Access or selling of services and products, transaction methods and Access to online content based on location.

 Contrary to the Union’s enthusiastic approach, several concerns were raised towards the success of the regulation. The first concern is the exemptions of the provisions related to Copyright-protected content, alongside financial, audio-visual, transport, healthcare and social services, which shrinks the scope of the application. Furthermore, it is also argued that recent provisions are somewhat ineffective, article 4 of the regulation allows traders to apply different conditions on a non-discriminatory bases ( such as differences between purchase power ), motive 27 extends this to allow traders to withhold from selling products on issues of delivery location or allows them to sell specific items on specific locations if it is not discriminatory. The term ‘’non-discriminatory’’ is left in a somewhat blur state, needed to be clarified.

  On the other hand, applying more aggressive open market policies has it’s own problems. First one is the impact on the national business. As mentioned before, allowing multinational corporations, who has less fiscal obligations and much-advanced technology and marketing opportunities might hamper the smaller local enterprises. This approach has it’s own problems regarding Digital Business as well. A company may not want to be sell its products where it cannot provide support, where it isn’t familiar with the law or doesn’t have the necessary infrastructure to deliver its products. Another concern is the Territoriality of IP Law. In a market where each state has, it’s own IP regulations, sellers may be reluctant to sell in a location, where they may not be familiar with the local legislation. To remedy this, EU Council is working on a draft directive, aiming to create a suitable legal framework for IP law, suited to achieve a real DSM, removing obstacles regarding different regimes of IP Law.

Challenges Emerging from New Business Models: Collaborative Economy

 The Internet has opened new ways of doing business, new ways of accessing services, products and customers who are willing to buy them. This new way of doing business has been growing exponentially and covers a huge chunk of DSM strategy, both as an opportunity and a challenge to overcome.

 EU Commission defines Collaborative Economy as‘’ business models where activities are facilitated by collaborative platforms that create an open marketplace for the temporary usage of goods or services often provided by private individuals. The collaborative economy involves three categories of actors: (i) service providers who share assets, resources, time and/or skills — these can be private individuals offering services on an occasional basis (‘peers’) or service providers acting in their professional capacity (“professional services providers”); (ii) users of these; and (iii) intermediaries that connect — via an online platform — providers with users and that facilitate transactions between them (‘collaborative platforms’). Collaborative economy transactions generally do not involve a change of ownership and can be carried out for profit or not-for-profit’’

 Collaborative Economy falls under the category of ‘internal market’ therefore EU and the Member States have shared competence while legislating its content. All member states have explicit provisions regulating aspects of a business; labor, contract, consumer protection, taxation, etc. In order to achieve a truly single digital market, these provisions are needed to be harmonized. Commission Communication in 2016 set an agenda for the necessary actions and designated certain issues that needed to be overcome.

Collaborative Platforms:

Perhaps the biggest challenge that EU and Member State legislators facing is how to legislate Collaborative platforms. These platforms are in the digital area, providing P2P or B2P business on almost every area of the market and their varying degree of participation in the transactions puts them in an uncertain legal status.

The first challenge that legislators have faced is the extreme variety of these services, making it impossible to create an inclusive definition. EU Institutions themselves cannot agree on a definition for these platforms.

This definitive uncertainty raises several questions for National Legislators and authorities, should these platforms be subject to market Access requirements as their older counterparts? EU Commission approached this topic on a somewhat relaxed attitude, leaving national authorities to determine under the scope of Services Directive. In the aforementioned communication, Commission also determined the case of Collaborative Platforms stating that if these platforms operate as an ‘’information society service’’ stated in the e-commerce directive, cannot be subjected to prior authorization. The distinction between intermediary services, which are subject to authorization falling outside the scope of e-commerce directive, have determined by the same communication on 3 criteria:

  • Does the platform set the final price that the customer pays?
  • Does the platform set the terms and conditions of the contract?
  • Does platform own the assets necessary to provide services?

This criterion is ratified by a Preliminary Ruling by ECJ requested by tribunal de grande instance de Lille. On the judgment, ECJ had indicated that:

‘’ In that regard, the Court found that the intermediation service provided by the company concerned was inherently linked to the offer by that company of non-public urban transport services, in view of the fact that, in the first place, that company provided an application without which those drivers would not have been led to provide transport services, and the persons who wished to make an urban journey would not have used the services provided by those drivers and, in the second place, that company exercised decisive influence over the conditions under which services were provided by those drivers, inter alia by determining the maximum fare, by collecting that fare from the customer before paying part of it to the non-professional driver of the vehicle, and by exercising a certain control over the quality of the vehicles, the drivers and their conduct, which could, in some circumstances, result in their exclusion (see, to that effect, judgment of 20 December 2017, Asociación Profesional Elite Taxi, C‑434/15, EU:C:2017:981, paragraphs 38 and 39).’’

Consumer Protection in Collaborative Economy:

 Current consumer protection legislation is based on dipolar interactions with the customer as the weaker party, needing protection whereas the trader is the stronger party. This concept is completely outdated in 2 aspects: 1. Collaborative economy redefined the traditional weaker party approach by opening new ways to P2P transactions and the term trader is no longer applicable; 2. Current law overlooks 3-way transactions.

 A Commission Staff Working Document was published in 2016 to interpret the Unfair Commercial Practices Directive according to the new necessities. According to the paper, the term trader depends on:

  • whether the seller has a profit-seeking motive, including the fact that he/she might have received remuneration or other compensation for acting on behalf of a given trader;
  • the number, amount and frequency of transactions;
  • the seller’s sales turnover;
  • whether the seller purchases products in order to resell them;

therefore concluding that the UCPD provisions will apply to the traders. In P2P transactions, the paper uses the same criteria of applicability to the supplier of the content. Some more minor improvements including accepting user reviews written by the platform itself as misleading commercial practices were also made but overall, EU stance is still based on a trader-consumer dichotomy.

On the second part of the issue, a proposal was made to improve fairness and transparency between platform and business. This proposal though, only solves one side of the issue, away from creating a comprehensive framework for new 3-way nature.

New Types of Employment and Labor Law:

Collaborative economy and platforms created a new kind of working man, without set wages or working hours, working on demand and legal status of these new employees are in legal uncertainty. Currently, for a person to benefic from social rights of workers such as minimum wage, overtime, non-discrimination, he or she has to be defined as a worker. EU definition is:  

’ the essential feature of an employment relationship is that for a certain period of time a person performs services for and under the direction of another person in return for which he receives remuneration’’

Definition points out 3 criteria:

  • Subordination: Service provider shall act under directives of the platform, shall not have the ability to determine the type of work, conditions or remuneration. These conditions do not apply if the platform only takes payment and gives information about potential customers, creating a connection
  • Nature of the work: The service provided by the provider shall have an economic value that is effective and genuine. Evaluation is made on the case.
  • Remuneration: Divides Voluntary work from employment.

The subordination criteria leave some self-employed workers in a precarious situation. Lack of adequate regulations, some workers are self-employed on paper but suffers from other types of control mechanisms from the platforms. A most notable example is Uber’s rating review and condition to accept offers. A Uber drives leaves in a situation where he is classified as self-employed, devoid of social protection while having obligations and subordination of an actual employer.

 This terminological ambiguity has problems also in the area of Competition. On a Preliminary Ruling, ECJ concluded that self-employed service providers are counted as an enterprise, banned from negotiating Union agreement such as normal workers. This means that any attempt from the self-employed service provider, like Uber drivers, to organize and set a market price will be regarded as a cartel, therefore banned according to the Competition Law. Given the status of the Uber workers, this is prone to create more unfair situations.

 The Preliminary Ruling on Asociación Profesional Élite Taxi created new questions in the area of competition. In the mentioned case, ECJ concluded that Uber cannot be identified as an information society service but as a transport service, therefore cannot be subjected to E-commerce and Service Directives. Uber, as a transport service, does not comply with the national restrictions which are existing on national transport services, taxis. In earlier cases, Italian Courts gave not one but two different decisions on the subject, concluding that Uber is a transport service.

Efficiency of Commission’s Current Legislation Policy

 As mentioned before, the EU Commission published an agenda to overcome these challenges to achieve a DSM. The fact that the Commission prefers a co-regulation with member states can be understood from the publication of an agenda, rather than outright regulations. The rationale behind this choice can be the novelty of the subject and diversity of the regulations among the Member States. This approach is however questioned by a simple statement: ‘’ ‘there cannot be 28 different sets of rules for the online platform in a single market’’

 It can be argued that a strict regulatory practice can be more desirable to achieve the objective of a true DSM.  As seen in the case law, national legislations vary greatly and not always welcoming to this new business type. However, given the nature of these innovative practices, a strict top-down approach may hamper the innovation of this Market and expel some business from the market. Also, the problem of legislative fragmentation hampers this idea, given the lack of knowledge and speed of process makes it an extreme task to fit all regulations to one size.

 A self-regulatory approach has it’s own benefits, allowing the market to create its own rules over time. This approach is praised for its an advantage for market Access. It is also argued that new forms of trust enforcing mechanisms, such as peer review is more effective than traditional legislative intervention. However, it is also argued that this approach will prevent transparency and has the risk of creating a self-regulating oligopoly, only after it’s own interests. It is worth noticing that contrary to the Commission’s co-regulative approach, Parliament and Council is more inclined towards a regulative one. Time will tell the success of the Commission’s decision.

Copyright Related Liability Issues:

 E-Commerce Directive sets the Liability exemption provisions in order for Information Society Services to operate effectively, however, the recent expansion of Intermediate services and increased illegal content on the Internet had necessitated a new approach to the subject and creating a balance between copyrights and freedoms creates a challenge for legislators.

 The first issue comes from the fact that the term ‘’Intermediate Services’’ has become a blur after the expansion of the market and directive definition is somewhat inadequate. Each state defined this term differently, causing a difference in practice. This issue in transposition is relevant in a couple more terms in this directive.  Recital 42, 43 and 44 of the Directive gives a more clarified definition, however, due to the limited number of Cases, ECJ had limited opportunities for a more clear explanation. In the famous case of L’Orient v. eBay, ECJ indicated the areas where there is no liability exemption:

 “That is not the case where the service provider, instead of confining itself to providing that service neutrally by a merely technical and automatic processing of the data provided by its customers, plays an active role of such a kind as to give it knowledge of, or control over, those data (Google France and Google, paragraphs 114 and 120)”. (Paragraph 113) “(..) the mere fact that the operator of an online marketplace stores offers for sale on its server, sets the terms of its service, is remunerated for that service and provides general information to its customers cannot have the effect of denying it the exemptions from liability provided for by Directive 2000/31 (see, by analogy, Google France and Google, paragraph 116). Where, by contrast, the operator has provided assistance which entails, in particular, optimizing the presentation of the offers for sale in question or promoting those offers, it must be considered not to have taken a neutral position between the customer-seller concerned and potential buyers but to have played an active role of such a kind as to give it knowledge of, or control over, the data relating to those offers for sale. It cannot then rely, in the case of those data, on the exemption from liability referred to in Article 14(1) of Directive 2000/31”

Conclusion:

The approach of the Commission for the legislative strategy is somewhat praised but also criticized for compromising from a true single market solution. Also, some criticize the Commission’s overall attitude as unambitious and vague. It is early to determine which way will the EU take but the Commission but the Union keeps its faith on the benefits of a Digital Single Market and continues to put new goals to achieve.

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