ICLE files position statement in EU Digital Single Market Strategy Platform Consultation
Last week ICLE submitted its answers to survey questions and a separate position statement to the European Commission in the Commission’s Consultation Regarding the Regulatory Environment for Platforms, Online Intermediaries, Data and Cloud Computing and the Collaborative Economy — part of the Commission’s Digital Single Market Strategy.
As we note in the introduction to our position statement:
By “tuning” the cross-border regulations that can impede efficient markets, for example by examining where specific legislation doesn’t work (e.g. data localization) and where it can (e.g. geo-blocking), the DSMS can function as a sort of “digital free trade agreement” among the EU member states. In this regard the DSMS offers the possibility of important welfare-enhancing regulation; free trade has consistently been found to be beneficial for consumers around the globe.
It is critical, however, that the DSMS is not used to enforce a “lowest common denominator” regulatory scheme, employed to shoehorn innovative and valuable business models into a framework that curtails experimentation and competitive differentiation. The platform portion of the inquiry, in particular, would rely upon such a broad definition that many entities not previously subject to certain regulations may struggle under the weight of compliance. This could be particularly costly for new entrants without the resources to interpret and adapt to confusing issues of liability and perceptions of harm.
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Any rules that result from this Consultation must be grounded in cost-benefit analysis and concrete and identifiable harms. As constructed, the questionnaire used to request input seems better-suited for collecting competitor complaints than for obtaining the evidence required for rigorous economic analysis. Under an error cost framework, socially optimal rules are those that minimize the expected social costs of false acquittals, false convictions, and administration. Typically this means competition authorities engage in case-by-case analysis of potentially anticompetitive conduct ― comparing the expected costs to consumer welfare with prospective efficiencies. Conduct is condemned on a per se basis — ex ante — only if there is long-standing experience and economic evidence that the conduct is always or almost always harmful.
The Commission has no such basis to assume that the issues presented by platforms, intermediary liability, geo-blocking, and the like are really best served by new ex ante rules without evidence about perspective harms and potential benefits from concrete conduct.
Importantly, the decision with respect to a new regulatory regime for online platforms is not made in a vacuum; rather, it is a choice between existing rules and the proposed alternatives. Justifying new rules demands a comparison to existing rules, meaning rigorous evidence not only that there is a problem, but also that any problems will be better addressed by new rules than current rules. No regulatory regime is perfect. Even if there are some identifiable problems with the current rules, that alone does not mean that any particular proposed new rules are preferable. The Commission should carefully consider existing law (like competition and consumer protection laws at both the EU and member-state levels) and whether new rules will bring the overall regulatory scheme closer to the optimal level.