12 Feb 2021

EU Digital Saga – the Beginning of the End for Big Tech Supremacy?

Beyond a shadow of a doubt, the Internet has been a key factor in driving globalization and economic growth in recent years.  Along the same lines, leading internet intermediaries have played an essential role in expediting this growth and providing companies of all sizes with the means to capitalize on all the benefits the digital era has to offer.  Thus, it is hardly surprising that many Internet intermediaries, such as Amazon, Facebook, and Google, are among the world’s most successful companies.  However, there are genuine concerns that their economic prosperity and progress are indirectly being encouraged by legislation that shields Internet companies from excessive liability for web content posted by their users.  Another shortcoming of current legislation is that the digital transformation has created a vast space for Big Tech’s creative strategies for exploiting loopholes in outdated legislation.

Namely, the European Union’s current legal framework concerning digital markets is far from perfect. Digitalization has radically changed how the world around us operates, including the EU.  Another point worth mentioning is that the pace of new technology innovations is sometimes really hard to catch up to, meaning that regulators all around the globe are facing a daunting challenge.  In 2000, the EU adopted the e-Commerce Directive centered around removing obstacles to cross-border online services in the EU internal market and providing legal certainty for businesses and consumers.  The e-Commerce Directive is the cornerstone of the legal framework for digital services in the European single market.  Nevertheless, at the time of its drafting, many of today’s challenges were impossible to foresee and manage successfully.

2020 as a Turning Point in Digital Market Legislation

The first step on a long journey towards reinventing the EU digital markets was embodied in a three-month public consultation lasting from June to September.  The outcome of the consultation came at the end of 2020 with the unveiling of draft texts for the legislative package.  This EU campaign to reformulate digital markets regulation culminated in the proposals of two new acts: the Digital Services Act and the Digital Markets Act (the Digital Services Act package).  These two initiatives, announced by the European Commission, are pieces of a much larger picture – the European Digital Strategy.  Building on the existing legislation, their main aim is to transform the EU single market and respond to the challenges posed by the expansion of digital services.  Faced with the fact that rules concerning the digital economy are not fit for purpose in the modern business environment, the European Commission initiated reform of the Digital Services Act.  In a nutshell, the Commission is keen to overhaul the landmark rules by placing more responsibility on Internet companies for content uploaded by users.  The Digital Services Act package opens up several possibilities for greater transparency and fairness in the digital market and is a step beyond the rules that target illegal and detrimental activities on the Internet.

The EU Digital Services Act sets out to accomplish multiple goals:

  • Better protect consumers and their fundamental rights online;
  • Establish powerful transparency and a clear accountability framework for online platforms;
  • Foster innovation, growth, and competitiveness within the single market.

This will be a golden opportunity for Europe to take the lead in ensuring a competitive, clean, and rule-based digital economy.  Internet platforms play a complex role in the economy and in society in general and therefore while bringing benefits, they also require a more transparent and updated legal framework.  The proposed legislation should aim to establish a framework that encourages market participants to play fairly and be compliant with EU legislation.  One of the main reasons for the need to update the liability regime comes from the dramatic increase in the online availability of illegal or unsafe products.  Apropos the foregoing, these planned reforms certainly signal a watershed in the Digital era and could expose Big Tech companies to significant liability.

One thing is for sure, these new regulations are a bold move on the EU`s part, and most certainly are not Big Tech`s cup of tea.  Although the EU aims to create a more competitive market, some doubt remains as to whether this is the right course of action.  There is some opposition to the proposed regulation on various grounds, arguing that such measures may be easily misused and do more harm than good.  But we are still a long way off being able to make conclusive remarks.  The full ramifications of this move by the EU remains to be seen.  To be continued…

Authors: Jovana Trivunović and David Spaić