German Ministry for Economy Publishes White Paper on Digital Platforms
On 20 March 2017, the German Federal Ministry for Economic Affairs and Energy (the “Ministry”) published its Digital Platforms White Paper (the “White Paper” and launched a dedicated web portal), reflecting at least in part the results of its consultation on its Green Paper on Digital Platforms. The White Paper sets out several proposals for digital policy to facilitate growth of digital platforms on the basis of fair competition while guaranteeing individuals’ fundamental rights and data sovereignty. The Ministry appears to start from the premise that digital platforms sometimes fall outside the scope of German competition, consumer protection and commercial laws, such that the White Paper seeks to address this perceived enforcement gap.
The White Paper and other related German initiatives come as the European Commission (“EC”) pursues its 2015 Digital Single Market (“DSM”) Strategy for the European Union (including several legislative proposals, a Communication on Online Platforms and a Communication on Data Economy) and a number of other Member States also focus on regulatory issues related to online platforms (e.g., the French investigation of non-search online advertising).
This post summarises some of the key elements of the White Paper.
A new Agency for Digital Platforms – establishing a “dual-focused and proactive” approach to competition law
According to the White Paper, the specificities of digital platforms (e.g., indirect network effects and scale effects) present new challenges for competition authorities that require a dual, proactive approach combining competition law and systematic market monitoring.
To this end, the White Paper proposes the creation of a new digital agency (the “New Agency”) intended to ensure more active and systematic market surveillance and to intervene swiftly through an institutionalised “early warning system”. The New Agency would conduct market investigations following complaints from consumers, competitors or on its own initiative, enabling it to gather comprehensive market data.
The White Paper makes clear that intervention will not require proof of a dominant position. The New Agency could directly and promptly sanction any violations of the Act against Unfair Competition (Gesetz gegen den unlauteren Wettbewerb (“UWG”)) and consumer laws relating to general Terms and Conditions.
Changes to German competition law
The White Paper contains a section referring to the recently adopted ninth amendment of the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen (“GWB”)). The ninth amendment enables the German Federal Cartel Office (“FCO”) to explicitly take into account the specificities of the digital economy (e.g., network effects, lock-in effects, access to market-relevant data and the behaviour of user groups) when examining market power in merger reviews and antitrust investigations.
Merger control thresholds – The reform introduces a new merger control notification threshold based on transaction value (at €400 million). The target also needs to have significant activities in Germany.
Markets for free services – The changes to the GWB also clarify that a relevant market can exist where a specific service is offered for free (e.g., online search engines, comparison websites, news services or entertainment media). This reflects the FCO’s 2016 Working Paper on “The market Power of Platforms and Networks”. However, the Working Paper qualified this statement as follows: “the use of online platforms for free can under certain circumstances still constitute a market under competition law” (emphasis added).
Interim measures – The White Paper recommends lowering the threshold for interim measures in antitrust investigations. Interim measures are currently rarely sought in Germany because of the high burden of proof. The White Paper notes that interim measures would be particularly useful in cases where the restriction of competition could be easily remedied (e.g., by prohibiting the implementation of certain contractual provisions or requiring the grant of access to a company’s services).
Commitments – The White Paper discusses commitments as a means of swiftly eliminating competition restrictions while taking into account the dynamic nature of digital markets: commitments can have a limited duration and can be designed to adapt to changing market conditions (e.g., by covering related and updated versions of the products concerned).
A “level playing field” for OTT Services
Similarly to the Commission’s proposal in its Communication on Online Platforms, the White Paper considers establishing a level-playing field between over-the-top (“OTT”) and telecommunications services. However, while the Commission is assessing proposing a “targeted mix of proposals involving a degree of deregulation […] together with the application, where necessary, of a more limited set of communications-specific rules to all relevant and comparable services” (emphasis added), the Ministry does not appear to be advocating deregulation. The White Paper advocates for the development of a “future-proof” legal framework at EU level that subjects all of these services to the same consumer protection, data protection and security rules.
The White Paper expresses doubts that the Proposal for a Directive establishing the European Electronic Communications Code (September 2016) provides sufficient flexibility to deal with possible challenges in case of a greater shift towards non-number-based services. The White Paper suggests establishing a binding monitoring procedure to accommodate future services.
The White Paper supports the Commission’s Proposal for an ePrivacy Regulation, because it would apply EU data protection rules to OTT services (included those offered by non-EU companies).
A modern data economy
The White Paper proposes several measures regarding the data economy.
Use of data – The Ministry supports the Commission’s Communication – “Building a European Data Economy” (January 2017). The White Paper advocates for a clear legal framework for the use of (personal and non-personal) data to enable growth of digital platforms in the EU, in particular regarding data ownership (e.g., machine-generated data). It also discusses rules for access to data in order to prevent data monopolies in the B2B sector and sector-specific legislative proposals for access to data to facilitate the development of data analysis and data-based business models.
Transparency – The White Paper proposes requiring digital platforms to produce easily understandable “one pagers” that would provide essential information to consumers on data processing (e.g., commercial use of user’s data, how search results are ranked and sponsored and how offers are generated on digital platforms). In addition, it would require disclosure of the use of self-learning algorithms and, in some cases, to commit to certain ethical standards.
Data portability – The Ministry wants to ensure that the right to data portability can be used. To this end, the White Paper calls for the EU to publish a report on the effectiveness of the data portability rules two years after its entry into force. The White Paper also considers whether a general portability obligation not limited to personal data (e.g., reviews) is warranted, but notes that further examination of the application of competition and copyright law is necessary.
Terms and conditions – New digital business models requires modernisation of the German legal framework governing terms and conditions in B2B contracts.
The White Paper contains a number of additional measures addressing expansion of digital infrastructures and ensuring a democratic digital culture online. These include, for example, new criminal laws regarding cyber-bullying and identity theft, creating an online identification process, creating an EU-wide consumer complaint management system for online platforms (e.g., to report illegal content), and creating an investment fund and “Gigabit vouchers” for SMEs, schools and medical practices (i.e., time-limited grants for gigabit access for use in certain innovative projects).
This White Paper makes it clear that the Ministry intends to further the debate at EU level over regulation of digital platforms. Certain measures are in fact put forward as models for potential EU regulation.
However, many of the proposals reflect a fundamentally different approach to that adopted by the Commission. While the Ministry explains on its website that it “wants to further develop the regulatory framework”, the Commission has avoided broad regulatory proposals encompassing multiple aspects of online platforms. Instead, the Commission has proposed a focused approach intended to address articulated “harms”, such that intervention is only triggered in specific circumstances.
It is far from clear whether that the proposals set out in the White Paper will be implemented in Germany. For example, in November 2016, the Head of the FCO, Andreas Mundt, strongly opposed the introduction of a uniform regulation for online platforms, taking a position very similar to that espoused by Commissioner Vestager, and noting that setting up such regulation would be “extremely difficult and complex”.