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EU digital strategy does not help businesses respond to digital disruption now, say experts

Measures outlined by the European Commission to promote online cross-border trade in the EU will not help businesses respond to the digital disruption affecting them now, experts have said.06 May 2015

The Commission has published a new digital single market strategy (20-page / 373KB PDF) that details plans to change EU laws and implement other policies to support trade in the digital economy. It intends to reform copyright laws, review and update telecoms regulations, create a new system of online dispute resolution and tackle contractual barriers to switching between cloud providers, among other things.

IT contracts specialist Clare Murray of Pinsent Masons, the law firm behind Out-Law.com, said that she has sympathy with the challenge the Commission faces in harmonising rules relevant to the digital economy in the EU. She said the supporting documents published by the Commission alongside its strategy show there is "significant disparity in the digital performance of the individual member states". However, she said EU law is "behind the technological curve" and that more needs to be done at a macro-level if the EU is to remove the barriers to business and support growth and innovation. 

"The European Commission's strategy looks to address fundamental issues such as encouraging investment in the telecoms infrastructure that underpins the digital economy, as well as reforms to the copyright framework," Murray said. "However, reforms in these areas will take time to implement. There is a real danger that technology will have moved on again by the time the reforms identified by the Commission in its strategy are implemented."

"At the same time, the global phenomenon of digital disruption is continuing apace. Businesses face increasing pressure to adopt new technologies like big data analytics and cloud computing to compete with nimble new entrants to their traditional markets," she said. "Those new entrants are threatening incumbent companies by operating on new business models. There is a risk that the measures outlined by the Commission will not address important barriers to the use of digital technology and the expansion of online trade in a sufficiently timely fashion, placing EU businesses at a competitive disadvantage with rivals based elsewhere in the world."

According to the strategy, the Commission will also launch "a comprehensive assessment" of the role of platforms and intermediaries in the digital economy before the end of this year.

The review will cover issues such as transparency in search results, the way platforms use information they collect and the relationship between platforms and their suppliers. It will also look to gauge what constraints individuals and businesses face in moving between different platforms and could result in new measures being outlined to improve existing 'notice and take down' procedures relevant to illegal content online, the Commission said.

Competition law experts Guy Lougher and Sammy Kalmanowicz of Pinsent Masons said that the role of internet intermediaries will also be assessed in the European Commission's e-commerce sector inquiry, which was first announced in March but only officially launched on Wednesday.

"The digital single market strategy brings together the evolutionary thinking of the Commission’s digital agenda which we have seen developing over recent months and years," Lougher said. "The recent launch of DG Competition’s e-commerce sector inquiry has already been earmarked for identifying barriers to cross border online commerce including unjustified geo-blocking and the role of internet intermediaries. Indeed, whilst it can be expected that the e-commerce sector inquiry will lead to subsequent antitrust enforcement actions, competition authorities throughout Europe have already begun to investigate the conduct of certain companies on these grounds."

"Similar investigations into price comparison websites by the UK’s Competition and Market Authority, have, however, shown that competition assessments in this sector are highly fact-specific, in particular due to the fast-paced dynamics of online markets," he said.

Kalmanowicz said that it would be a challenge for the competition authorities to address cross-border content licensing issues and restrictions placed on 'geo-blocking' which the Commission is looking to tackle. Geo-blocking refers to restrictions placed on access to online services and content on a geographic basis.

"The Commission noted that only 'unjustified' geo-blocking would be prohibited, but as experience with previous media-related cases such as those involving authors and composers body CISAC and Sky has shown, it may not be easy to ascertain which restrictions are justified and which ones are not," Kalmanowicz said. "It will be a rocky road for the Commission’s competition arm."

Technology law expert Luke Scanlon of Pinsent Masons said the Commission's strategy focuses too much on business-to-consumer issues.

"Whilst consumers will no doubt be frustrated at issues such as the nature of charges for cross-border parcel deliveries, and the Commission is right to look at this area, it should not do so at the expense of more substantial issues that ultimately affect consumers which manifest themselves in a business-to-business context," Scanlon said. "The Commission should be looking for consistency in business-to-business contracts and address barriers within the contractual framework in the supply chain for goods and services across Europe. By focusing solely on the end contact with consumers, the Commission is not wholly addressing the issue."