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Focus on Regulation

Fragmentation instead of level-playing field? How the German Government’s announced White Paper on digital platforms adds to regulatory uncertainty on topical issues of the digital economy after Brexit

Many digital platforms attract consumers and businesses on a global basis. It is a challenge for national regulators to enforce competition law and other regulatory provisions against such international players. Germany´s Federal Minister of Justice, Heiko Maas, argued in a similar way in an interview with the German newspaper Handelsblatt on 5 October 2016. He took a stand on the significant market shares of certain digital platforms questioning whether current competition law rules enable enforcers to sufficiently tackle current issues in the digital economy. Interestingly, despite calling for an EU-wide approach towards dominant players in the internet sector, the German minister announced a White Paper on Digital Platforms for early 2017.

These statements come at a time where the EU Commission is struggling to take the lead in shaping a EU competition law policy approach towards the handling of big data (see our blog post on Commissioner Vestager’s recent speech on Big Data and competition law). In the last months mainly national regulators have been active in publishing papers or decisions dealing with digital and platform issues. The German and the French competition agencies have issued a joint paper on data and competition law in May 2016. France has also announced the launch of a “full-blown sector inquiry into data-related markets and strategies. This comes at a time of uncertainty for the future structure of the Digital Single Market as the UK has voted to leave the EU, thus triggering another element of re-nationalization of regulation.

Some voices raise concerns that Germany and France as key forces of European integration press ahead so much with national plans. After the Brexit vote, digital companies and platform operators face the problem of potentially more fragmented approaches in the EU. In addition, should the UK leave the Single Market (“hard Brexit”) this may have the potential to influence the balance of opinion in EU policymaking towards a more regulated and less “free market” perspective. This may eventually result in the UK setting a distinctive policy to either make itself more attractive to global players or to act more inward-looking and protectionist promoting a “UK first” policy.

Market players should follow these developments very closely, especially as it is unclear whether Germany´s regulatory actions in this field may become a role model for EU-wide actions, but maybe not for the UK.

In his statement, the German Minister of Justice focuses specifically on three key issues:

  • Ongoing evaluation of current antitrust framework:As regards to the market power of specific online platforms and search engines in Europe, the German Minister of Justice emphasized the need for an assessment according to antitrust rules. However, the minister questioned whether the current European and German competition law framework provides sufficient enforcement tools to find the right answers regarding Big Data and the digital economy.Although the most recent 9th amendment of the German Act Against Restraints of Competition (GWB) which will enter into force at the end of this year will contain some specific provisions dealing with the definition of digital markets and the assessment of market power in this area, these recent statements suggest that plans for the next amendment may already be in the drawer. In addition, these statements add to the recent speech of the EU Commissioner for Competition, Margrethe Vestager, on Big Data and competition law in which the Commissioner announced a new EU Directive to ensure the consistent application of competition law in relation to Big Data throughout the EU.
  • Tackling the “For Free-Culture”:Further, the German Minister of Justice stated that the German Government is currently evaluating the so-called “For Free-Culture” in the internet, e.g. allowing digital platform operators to offer press content of publishers for free. He emphasized that the current debate on neighboring rights will form part of the evaluation and that such general questions should be tackled on an EU-level rather than only on a national level.
  • Towards a liability of online platforms:Referring to the recently increasing amount of insulting posts on specific online platforms, the German Minister of Justice openly discussed a potential need for legislation to hold online platforms liable, if the current voluntary self-commitment fails. The minister plans holding platforms responsible for deleting such posts within 24 hours after notice. In case of non-compliance with this duty, he considers obliging platform operators to annually publish protocols about how they reacted to notifications concerning respective posts. As a last resort, the minster even considers the introduction of legislation to hold platform operators legally liable for such posts. However, he emphasized that the German Government is currently still evaluating the actions taken under the voluntary self-commitment of online platforms and stressed their social responsibility.

These suggestions build on the German Government’s “Digital Strategy 2025” facing current issues concerning the economic role of digital platforms and challenges of a data-driven economy, further developed in the German Federal Ministry of Economic Affairs´ Green Paper on “Digital Platforms”.

Three things online platform operators should now keep in mind:

  1. The German Government is expected to publish its White Paper on Digital Platforms in early 2017.
  2. For the same time, EU Commissioner Vestager has announced a first proposal for a new EU directive to empower national antitrust enforcers to deal with competition law issues arising out of Big Data.
  3. Adding additional regulatory topicality: both events are likely to fall together with the UK Government’s announced plans to enact Brexit in March 2017 adding additional uncertainty on a uniform approach to regulatory enforcement, specifically in the area of the digital economy.