What economic and societal benefits do online platforms provide?
An increasing number of EU citizens are using online platforms as part of their daily lives, a trend accelerated by the Covid-19 pandemic, which has forced many of us to spend much more time online due to social distancing.
The pandemic's global nature has hastened digitalization at an unprecedented rate, with online platforms playing an increasingly important role in assisting people in adjusting to the new reality of living in a pandemic and allowing them to maintain as much normalcy as possible despite frequent lockdowns.
As online platforms facilitate an increasing number of our interactions – whether in the classroom, at work, or in our personal lives – our dependence on their services grows: for news and entertainment, for connecting and communicating, for expressing ourselves, for producing and accessing content, for finding employment, transportation, and lodging, and much more.
Online platforms, such as online marketplaces, search engines, social networks, content-sharing platforms, app stores, communications services, or online travel and accommodation platforms, are as diverse as their underlying business models.
On the internet, online platforms serve as a conduit for information and communication. They are also important enablers of digital trade in the Single Market and around the world. They broaden consumer choice and convenience, boost industry productivity and competitiveness, and boost civil participation.
The success of online platforms, as key drivers of innovation in the digital world, is inextricably linked to the success of a variety of companies that use platforms to reach consumers. Platforms enable small businesses, in particular, to expand their operations beyond their home state, catering to customers across the Single Market.
The advantages to our economy and culture are so great that the most popular online platforms have attracted hundreds of millions, if not billions, of users, making them the most visited websites on the planet.
Figures and facts about internet platforms
Online services, such as social networks, online shopping, and online content consumption, are becoming more popular among EU citizens.
Online platforms come in a variety of shapes and sizes. In Europe, there is a wide range of online platforms and other online services, with nearly 10,000 high-growth SMEs attempting to expand in the EU Single Market.
In contrast to traditional business models, online platforms are expected to expand at unprecedented rates in 2020. Between January and October 2020, the total value of the top 100 platforms in the world jumped by 40% to EUR 10,5 trillion.
Despite the fact that there are over 10,000 EU platforms, the majority are start-ups that account for just 2.7 percent of the total value.
The minimum business value to be considered for inclusion in the global top 100 has now increased to EUR 5,5 billion. In the global top 100, there are 12 European companies.
The platform economy's challenges and risks, as well as the EU's regulatory response
Successful online platforms benefit from significant economies of scale: as the number of users increases, so does the amount of data collected over time. As a result, a few platforms may be able to shape the nature of our communications and interactions, as well as serve as strong market gatekeepers (which they often create themselves - thus determining the rules of the game for access to and the conditions on these markets). This makes for highly effective supply and demand matching in markets of unprecedented scale, but the centralized power of online intermediaries opens the door to various forms of abuse.
Specific Concerns
Incitement to terrorism, illegal hate speech, child sexual abuse material, and infringements of IP rights are examples of illegal content, goods, and services distributed online.
Fundamental rights, such as freedom of expression and access to information, as well as EU citizens' personal data, must be protected.
Manipulation of platform systems to amplify certain messages and behaviors, leading to the intentional misuse of platform systems for social harms such as incitement to violence or self-harm, the spread of conspiracy theories, and (political) misinformation, all of which have a negative impact on democratic participation.
Business users face unfair business conditions, with no recourse in the event of a problem (imbalances in bargaining power, coupled with the economic dependency of many business users and customers on gatekeepers)
Due to gatekeepers' control over entire platform ecosystems, there is a risk of abuse of dominant position and poor competition in digital markets.
Consumer protection laws that aren't suited to the digital world, as well as unfair consumer commercial practices
Avoidance of taxes
Inadequate service oversight
Many of these issues have been resolved by the European Union in recent years. It has, for example, addressed privacy issues, revised consumer protection laws, and used its competition law powers to address instances of dominant market power abuses. However, in fast-moving markets, competition enforcement is not always successful, and despite a number of targeted, sector-specific EU interventions, such as the Audiovisual Media Services Directive, the Copyright Directive, and the Regulation on Terrorist Content Online, there are still gaps and legal burdens to be addressed. The Platform-to-Business Regulation, the Digital Services Act, and the Digital Markets Act are three key legislative initiatives in the field of online platform regulation that aim to close some of these gaps.
The platform-to-business regulation is a set of rules that governs how platforms interact with businesses
Today, we have access to a vast array of goods and services, and we are increasingly transacting online. With these new consumption habits has emerged a new ecosystem, characterized by bargaining power imbalances in the relationships between online platforms and smaller players conducting business on their platforms.
EU rules will make these relationships fairer and more transparent for companies starting in July 2020. The Platform-to-Business Regulation, also known as the Regulation on Promoting Fairness and Transparency for Business Users of Online Intermediation Services, is the first-ever set of rules for creating a fair, transparent, and predictable business climate for smaller enterprises and traders on online platforms.
In practice, the platform-to-business regulation ensures that online platform terms and conditions:
They must be written in simple, understandable language.
No changes can be made without at least 15 days' notice.
Any reasons that could lead to a business user's delisting must be thoroughly explained.
The main parameters that determine the ranking of search results must be listed.
Must include any information about how a platform that sells on its own marketplace could offer its own goods or services preferential treatment.
It's important to understand the platform's data policy, including what data it gathers, whether and how it shares that data, and with whom.
Furthermore, the Regulation simplifies the process of seeking redress for business users in the event of a problem:
When platforms delist (some of) a business user's products or services, they must provide an explanation right away.
They must provide a complaint handling system that is both efficient and simple to use.
They must participate in any mediation efforts in good faith.
Organizations representing business users have the right to take legal action against non-compliance with the Regulation in national EU courts.
The Digital Markets Act and the Digital Services Act are two pieces of legislation.
The European Commission has agreed to propose an ambitious set of new rules for the digital space: the Digital Services Act and the Digital Markets Act, in response to the array of complex challenges posed by the platform economy. This new rulebook, which will be released in December 2020, establishes a broad and horizontal framework for the regulation of all digital services, laying the groundwork for existing or new sector-specific regulations. The Digital Services Act and the Digital Markets Act will apply to all digital services in the European Union, including social media, online marketplaces, and other online platforms.
The new rules would make the internet a safer and more open place for everyone, while also successfully protecting their fundamental rights. They will also promote innovation, growth, and competitiveness, resulting in fairer and more open digital markets for all. Smaller platforms, small and medium-sized businesses, and start-ups will all benefit from easier access to customers across the entire single market. Furthermore, the new rules will prohibit online platforms that have become or are expected to become gatekeepers to the single market from imposing unfair conditions.
In practice, the Digital Services Act will establish a set of new, harmonised EU-wide responsibilities for digital services, which will be carefully calibrated to the size and effect of the services, such as:
Online measures to combat the sale of illicit goods, services, and content.
Users' basic rights and freedom of expression are well-protected.
Safeguards for users whose content has been deleted by platforms inadvertently.
Transparency obligations on a wide range of topics, including online ads and the algorithms used to make recommendations.
New requirements for very large platforms to take risk-based action in order to avoid system misuse.
Researchers will have access to key data from the most popular platforms in order to better understand how online risks evolve.
New guidelines on business user traceability on online marketplaces to aid in the tracking down of sellers of illicit goods or services.
An innovative oversight structure to address the online space's complexity and ensure effective enforcement across the single market.
The European Democratic Action Plan, which aims to make democracies more resilient by promoting free and fair elections, reinforcing media freedom and pluralism, and countering disinformation, complements the Digital Services Act plan.
The Digital Markets Act will establish harmonized rules identifying and banning unfair gatekeeper practices, as well as a market-based enforcement mechanism. The Platform-to-Business Regulation's transparency and fairness principles are supplemented by strict fairness disciplines for gatekeepers under the Digital Markets Act. The Digital Markets Act, in particular, will:
Establish a set of objective criteria for determining whether or not a large online platform qualifies as a "gatekeeper";
Be well-targeted, i.e., only apply to certain large, systemic online platforms that are particularly vulnerable to unfair practices;
Require gatekeepers to take preventive measures, such as targeted measures that allow third-party software to function properly and interoperate with their own services;
Prohibit a number of clearly unfair practices, such as preventing users from uninstalling pre-installed software or apps;
Will enable the Commission to conduct targeted market investigations in order to designate companies as gatekeepers and determine whether new gatekeeper practices and services should be added to these rules in order to keep up with the fast pace of digital markets.
Future perspectives
The platform-to-business regulation is a flexible regulation that will be reviewed in 2021 in order to respond to evolving technological needs.
In the ordinary legislative process, the European Parliament and Member States will debate the Commission's proposals for the Digital Services Act and the Digital Markets Act. The final texts, if adopted, would be directly applicable throughout the European Union.
Online platforms work in a fast-paced environment. As a result, the Commission established an EU Observatory on the Online Platform Economy to track developments and identify new challenges. The Observatory is looking into problems like data access and use, non-discrimination, and algorithmic decision making or ranking, to name a few.
