Following a Communication – a nonbinding policy document that sets out the European Commission's (EC's) position on a given issue – on the approaches it will adopt with online platforms, the EC published a new Communication on the "collaborative economy" on June 2, 2016. The Communication sends a positive signal to platform businesses because the EC intends to adopt a flexible approach toward licensing and other aspects, including the differences between occasional and regular vendors using a platform. However, platforms should also expect regulators to strive to guarantee a level playing field in these markets, as well as high levels of consumer protection in line with the long-standing traditions of the EC.
The EC is trying to attract more platforms, but it will not compromise on consumer trust
With its new Communication on the collaborative economy, the EC confirms its intention to keep its regulatory and policy frameworks up to date, and tech companies should be relieved by the EC's clear stance toward a favorable environment for new business models.
Following a recent Communication specifically targeted on the regulation of online platforms, the EC's latest statement confirms that it wants to stay away from heavy-handed regulation, unless this becomes "strictly necessary to meet relevant public interest objectives." In particular, the explicit statement that licenses or authorizations should not be required by services that act as "intermediaries" is a clear reference to online platforms, which will be relieved by such a statement and should see this as a signal that the EU is asking platform businesses to invest more in the continent.
The EC's willingness to avoid burdensome regulation is part of the effort to maximize the potential coming from platform businesses. Most online platforms are based either in Asia or in the US, where they have been able to tap into receptive markets and enjoy relatively light regulation. Europe has so far been much less vibrant as a market for platforms compared to Asia and the US. Crucially, regardless of the number of potential consumers that can be reached in the continent, much fewer platforms have been started or are based there. The size of the European market is currently about five times smaller than Asia, and nearly 20 times smaller than the US. A flexible approach to licensing and related rules could be one of the boosts this markets needs to flourish in the EU.
Nonetheless, the light-touch approach highlighted in the Communication on the collaborative economy should not be seen as an intention to leave platforms entirely unregulated. Although the Communication calls for flexibility and light-touch approaches, it also sends a clear message to these businesses, which is that the EC expects them to cooperate on a number of issues, including taxation and consumer trust. As noted in Ovum's The Regulatory Environment for Platforms report, finding a balance between investment-friendly environments and the protection of end users is the key challenge posed to all regulators by these new businesses.
Another recent Communication, strictly concerning the EC's approach to platforms, shows that the Commission will still aim to make sure that a level playing field is guaranteed across similar services, and that consumer protection continues to be ensured. It will also aim to make sure that network effects do not hinder competition because the availability of large data sets could become an obstacle for new entrants trying to compete with established services.
The Regulatory Environment for Platforms, TE0007-001003 (March 2016)
"The four things regulators should think about when considering platforms," TE0007-001016 (April 2016)
Luca Schiavoni, Senior Analyst, Regulation