2019 will be a critical year for online platforms in Europe

The coming year is set to be an important period for online platforms in Europe. Having previously paid little regard to online platforms, EU policymakers are now laying the foundations for a more definitive approach to regulating this growing sector of the economy.

This post provides an introduction to the emerging EU policies affecting platforms, from the proposed Platform-to-Business Regulation, through the work of the EU Observatory, to reform of competition law. It also identifies five key questions, the answers to which will emerge during the course of 2019.

A new EU Regulation for platforms

In April 2018 the European Commission proposed the Platforms-to-Business Regulation, targeting a number of concerns with how the platform economy operates. Intended as a starting point for future action, the proposal set out wide ranging transparency requirements for platforms and their unilaterally determined (i.e. non-negotiable) terms and conditions with business users. More specifically this included:

• Transparency requirements on ranking parameters, paid listings, levels of data collection, criteria for being delisted and the use of restrictive distribution clauses
• Complaints mechanisms allowing business users to lodge issues with a platform either internally, via a third party, or through representative legal action in a collective judicial proceeding

Where are we now?

The Council of the EU and the European Parliament have debated and adopted positions on the proposed Regulation, and they are now in negotiations with the European Commission in order to agree on a final text. These negotiations are expected to conclude by mid-February, but they are having to reconcile some quite divergent views.

The European Parliament in particular put forward suggested amendments that went beyond the scope of the Commission’s original proposal. These proposed changes include measures that, amongst other things, would:

• Apply the Regulation to all terms and conditions, not only those that are unilaterally determined
• Require that ranking parameters are applied equally to all business users
• Oblige platforms to treat all goods or services equally in all measures
• Ensure that business users’ branding is visible throughout the consumer process on the platform
• Apply many of the measures reserved for platforms to online search engines as well

This is in contrast to the Council of the EU, formed of EU Member State representatives, which on the whole, took a more conservative line, calling for the European Commission’s proposal to be maintained in its original form. In particular a group of seven Member States signed a joint statement setting out that a “light-touch Regulation should [remain]” the desired outcome.

While negotiations have progressed fairly well so far, it seems that the contentious issues are yet to be resolved, making the next few weeks key in order for the Regulation to be adopted. Assuming these negotiations are successful, the Regulation could come into force by the end of 2019 and bring in compliance requirements for a range of online platforms, both large and small.

Drivers of new policies and regulations

The Platform Observatory

Alongside its introduction of the proposed Regulation, the European Commission established an Observatory of the online platform economy. Formed of expert academics, this group was tasked with “monitoring opportunities and challenges for the [European] Union in the online platform economy”. In their first two meetings the Observatory’s work was preliminary and it generally focused on mapping the market and issues at hand, but 2019 is when their work will really begin as they focused on:

• Defining online platforms and the parameters of the platform economy
• Examining forms of preferential treatment that takes place on online platforms
• Considering the role that data plays in competition and innovation

While the Observatory’s primary goal is to inform the European Commission’s policy making, the research is likely to focus on identifying potential problems which may require further legislation from the European Commission. The timescale for further regulatory action may be some way off, but the work of the Observatory is likely to be key in providing the evidence base for future Commission interventions.

Reforming competition law

As online platforms have become an important part of the economy there have been a number of competition cases which have hinged on where these platforms fit in terms of competition law and precedent from case law; recent examples include the Asics, Coty and Guess cases. With an increasing recognition that online platforms have significant differences to established business models, policymakers are now considering how competition law may need to change to reconcile an increasingly digital economy with established methodologies of competition economics.

In 2019 competition reform is beginning to take shape, with Competition Commissioner Margarethe Vestager expecting delivery of an expert report on the challenges of digitisation for competition law enforcement in March. Alongside similar reports and reviews being conducted in the UK and Germany, the European Commission is under pressure to develop EU competition law to address the digital world.

While any new regulatory action is not likely to take place before the new Commission has been installed, the mood music of European politics in relation to the major online platforms suggests that political pressure for changes to competition law is likely to remain, whatever the outcome of the European elections.

The five key questions

There are five questions that will influence the level and type of interventions that will be forthcoming, and the speed at which these develop:

1. How will the Platforms-to-Business Regulation be finalised; will it be light-touch or require more from platforms than the Commission’s original proposal?
2. Will the Observatory identify areas for new policy initiatives from the European Commission with regard to the platform economy?
3. Will the European elections in May lead to a Parliament that is more reluctant to seek solutions at EU level?
4. Who will fill the post of Competition Commissioner in the new Commission and will they be given a clear mandate regarding reforming competition law?
5. Will a dominant consensus emerge amongst competition policymakers and economists regarding how to view competition issues in digital markets?

As the answers to these questions emerge, 2019 will be a year in which large and small players in the platform economy will need to engage with the policy making process if they are to ensure that regulatory approaches are appropriate and do not harm their business models.

You can sign-up to receive updates on policy making and regulation for the platform economy using the form below.