Regulating market “gatekeepers”.

At the beginning of the 21st century, the European Union implemented the e-Commerce Directive that has “the foundational legal framework for online services in the Internal Market.” Over the past 20 years, the way we use the internet has changed from a desktop computer and dial up to being in our mobile phones and wireless internet connection. Social media sites and online market shopping sites have provided a new opportunity for business to grow and connect to new customers. These new platforms and means of doing business have posed a regulatory challenge that has, until now, gone unchallenged without an EU level response. In December 2020, the European Commission proposed new legislation to regulate these new businesses in the Digital Services Act and the Digital Markets Act. 

Currently, the proposal is in the preliminary stages of the Ordinary Legislative Procedure and a wide range of interest groups, who would be considered  ‘gatekeepers’ under the new legislative proposal, have already published their positions on how these regulations should be enforced and implemented. To start, we should define what a gatekeeper is. 

Gatekeepers

A ‘gatekeeper’ is defined as a business that has a significant share of the market and acts as a significant barrier for businesses to grow on the internet. This allows for a couple of firms to dictate the rules of the market and place high barriers for competition to break into the market. As part of the EU’s competences, ensuring any market is competitive and that EU citizens’ data is protected, the Commission has the right to regulate this industry and market. 

The Commission and other relevant groups agree that a gatekeeper is defined by its market share. In a press statement, the Commission defined gatekeepers as being connected to ten percent of the EU population. The European People’s Party (EPP), one of the largest European Parliamentary groups, agrees with this position and threshold.

The other main Parliamentary groups have not yet published their group positions on the proposals. However, their press statements suggest they would agree with the threshold. Therefore, we can already see that consensus from the Commission, Member States and the European Parliament exists on certain characteristics for labelling certain platforms as gatekeepers. As the Commission’s proposal works through the ordinary legislative procedure the points of disagreement will be venerated around what needs to be disclosed to the public, what would be seen as an anti-competitive praise and which institution/s will enforce such rules and update them. 

Enforcement

This question is important to answer as the actors responsible for overseeing gatekeepers will require dedicated oversight from either national agencies or a supranational European agency. The EPP has expressed its desire to have the European Commission take lead and “The EPP Group does not advocate a new agency” at the EU level. Instead, the EPP would prefer national agencies with European links to emerge rather than a completely new EU level agency.

On the other side of the debate, the governments of the Netherlands, Belgium and France, and the Party of European Socialists (PES) political family, which is made up of various centre-left wing parties across the EU, favour a European level approach with emphasis placed on a “European body entrusted with the enforcement of the new regulation…”. Neither the Commission nor business interest groups have expressed a particular governance structure and are more focused on having rules in place for the market to flourish. The issue of what agency or agencies are responsible for enforcing and monitoring these gatekeepers will become increasingly clear as the legislation makes its way through the EU’s Ordinary Legislative Process.

Removal of illegal goods and content

Online platforms have a responsibility to remove any product or service that does not comply with EU law. The EPP, Renew Europe and PES, the three largest political parties in the European Parliament, agree that this new regulation should enforce this practice further. The question here is again who should enforce this regulation. The centre-right political family, the EPP, favours a network of national agencies while the centre-left PES prefers a European agency taking lead. Renew Europe has not expressed a preferred position, but given that the governments of Belgium, France and the Netherlands – all these governments having members of this European political family in office – have expressed support for an EU level body it is likely that they share this stance. Therefore, we can say that, in principle, the main political parties are in favour of strengthening the removal of illegal content – but which actor holds the responsibility is the sticking point.

A ban on targeted advertisement?

Gatekeepers tend to be a multi-sided business where they offer a free service to customers and charge businesses who wish to advertise on the platform. A classic example would be the social media site Facebook. On one side, they offer a free service to those who wish to connect and share pictures. On the other side, they generate income by providing targeted advertising campaigns to companies who wish to connect with potential customers. 

The EPP have praised how “targeted advertising can have a positive economic and societal impact”, whereas PES have expressed their concern for them. As a compromise, PES would wish to see targeted adverts more clearly labelled and have outlined their wish for regulatory authorities to have some oversight in what can and cannot be used in a targeted ad. Clearly, a balance between economic freedom and concerns regarding privacy and the type of advertisements allowed is a point of contention between the business friendly EPP and the concerned PES.

Having said that, there is a strong consensus regarding the data that all online advertisements generate. The EPP, Renew Europe and PES all agree that gatekeepers should share the data generated on these gatekeepers’ domains. In particular, they highlight the need for third party verification for the services the gatekeepers provide and the need to protect small startups and businesses. This could foster competition in this market as it would ensure that gatekeepers are unable to hold onto valuable information and prevent new firms from entering and competing.

Overall, it is clear that regulating online gatekeepers poses many challenges for the EU. The main sticking points seem to be finding a balance between business and citizens’ concerns, and  whether a network of multiple national agencies or a single European agency would be preferred to monitor and regulate these businesses going forward. 

As the Digital Services Act and Digital Markets Act proceed through the legislative process it will be interesting to see if any new positions in the European Parliament, Commission or national governments emerge during this time, as they could sway the direction of the new regulations significantly.

Finn McCartney has previously obtained a degree in European Studies from the University of Amsterdam, majoring in European Economics. Currently he is studying the European Policy MA at the UvA.

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