The Digital Single Market mid-term review

1. TheDigitalSingleMarketmid-termreview
Alastchancetodeliver
May 2017

2. © Brunswick 2017 | 2
Outstandingor
underwhelming?
Two years ago, the European
Commission came upwith abold plan
to make Europe a world leader in
information and communication
technologies: theDigital Single Market
(DSM) Strategy. It pledged to give the
EUthetools to succeed in theglobal
digital economy, to make better useof
theopportunities offered by digital
technologies.
Halfway through theimplementation
of its strategy, theCommission
congratulates itself for itsbold
approach to deliver tangible and
noticeable benefits to theEUthrough
digital policy, and for doing its share of
thework through its legislative
initiatives.
Butin reality, theCommission has
started with low-hanging fruit and has
mostly delivered some quick, easy
wins, aimed at reconnecting theEU
with itscitizens suchas theabolition of
roaming charges, thecross border
portability of online content and the
ban on unjustified geo-blocking.
Otherinitiatives are instead
progressing slowly. Too progressive
for Member Statesand not ambitious
enough for theEuropean Parliament,
several bold projects to overhaul
sector legislation –suchas on
copyright and telecoms law - are stuck
in thegridlock thatis typical of EU
decision-making.
Thereview is therefore being usedto
apply pressure and - perhaps - to play
theblame game: theCommission says
theball is now in Member States’ and
theEuropean Parliament’s court. Itis
now upto themto showpolitical
responsibility and implement theDSM
strategy that wasagreed.
TheCommission hasalso been
criticized for its creative useof
competition policy, as away to short-
circuit thelegislative process. The e-
commerce sector inquiry is thelatest
example of thisapproach, with afocus
on high profile, political, competition
cases.
The Digital Single Market
mid-term review outlines
the European
Commission’s plans until
the end of its term in
2019.
The DSM review takes
stock of the EU’s digital
policy actions over the
past two years and is the
last chance of the Juncker
Commission to create its
legacy.
Expect policy actions on
cybersecurity,online
platforms and the free
flow of data bythe end of
2017.
In parallel, the European
Commission published
the long awaited results of
its competition inquiry in
the e-commerce sector,
paving the way for future
enforcement action(s).
What is the
DSM Strategy?
TheDigital Single Market (DSM)
Strategy isa policy paper published
by theEuropean Commission on 6
May2015. It outlined aplan to create
asingle European market with
harmonized rules for digital
products and services.
TheDSM Strategy is one of the10
priorities of thecurrent European
Commission led by Jean-Claude
Juncker. It intended to boost
European jobs and growth, to open
updigital services to all citizens and
strengthen business competitiveness
in thedigital economy.
TheEuropean Commission
estimates it can unlock €415 billion
in additional annual European GDP,
€250 billion of which could be
delivered during theCommission’s
current mandate
ending in 2019.

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The triplewin
TheCommission claims successfor the
delivery of whatit calls its “triple win”
for European consumers - three, soon
to be implemented initiatives that are
supposed to bring tangible, visible,
benefits to European consumers.
Those are :
 The abolitionof retailroaming
charges.Consumers willbe able to
travel the EU and use their phone
withoutpayingroamingsurchargesas
of June 2017.
 Cross-borderportabilityof online
content.Consumerswill be able to
enjoy films,music,sports,and
broadcasts whileon holidayor
temporarily abroad.
 The ban on unjustifiedgeo-blocking.
Consumers willbe free to purchase
goodsand servicesfrom providers in
othercountries without
discriminationbasedon nationalityor
location.
Themore substantial elements of the
Digital Single Market Strategy, from the
deployment of 5G across Europe to the
revision of privacy rules for electronic
communications or theoverhaul of
copyright law, may still take years to
materialize.
The e-commercesector
inquiryresults
Inparallel to thepolicy work on digital
issues, theEuropean Commission’s
competition department hasbeen
investigating potentially abusive
practices in thee-commerce sector.
Two years and hundreds of
questionnaires afterstarting an inquiry
into thee-commerce sector in 2015,
theCommission haspublished thefinal
results and outlined futureactions.
TheCommission’s findings assert that
certain common practices in theonline
environment may be in breach of EU
competition law.
For traders of consumer goods these
controversial practices largely relate to
selective distribution systems,
enforced through contractual
restrictions on pricing, platform bans,
restrictions on theuseof price
comparison tools and exclusion of pure
online players from distribution
networks. Unexpectedly, theEuropean
Commission also identified theuseof
big data in e-commerce as apotential
anti-competitive practice under certain
conditions.
For digital content, theCommission
highlights certain licensing practices,
suchas bundling of rights or thelength
of contracts, thatmake it more difficult
for new players to enter themarket
and ultimately result in limited
consumer choice.
As a result, new antitrust
investigations will be launched
targeting companies inthe e-
commerce sector, giving the
European Commission a new
opportunity to make use of its
competition enforcement
prerogative.
Inparallel, theCommission will
strengthen thedialogue between
national competition authorities to
ensure theconsistent application of
competition law in thisarea among the
Member States.
TheCommission also plans to review
theframework for vertical selective
distribution agreements –a common
practice in luxury and high end tech
goods –and will usetheinquiry’s
results in itsreform, set to start in
2022.
The whole e-commerce value chain
will be impacted, from content
rights holders to broadcasters, but
also manufacturers, wholesalers
and online marketplaces for both
goods and services.
Competition:
the alternative
to policy-
making
The European Commission
has strong powers in
competition policy allowing
for swifter action than
through legislative reform.
The results of these
investigations are therefore
also likely to shape future
digital policy.

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The essenceof the review
TheDSM review also includes plans for
new reforms, which could potentially
havea great impact on business.
 Cybersecurity
Theincreasing exposure of European
businesses and citizens to cyberattacks
haveled theCommission to announce
thereview of its 4-year old
cybersecurity strategy.
Work on cybersecurity standards,
certification and labelling, to make ICT-
based systemsmore cyber-secure, is
expected.
TheEuropean Union Agency for
Network and Information Security,
which currently only actsas quasi
think-tank, shouldget anew, wider,
mandate. Expect the10 year old
agency to gain in influence and play a
bigger role in standard setting.
These cybersecurity measures
could pave the way for European
cybersecurity standards.
Companies will need to ensure
those are adequate and donot
diverge from those being developed
inother parts of the world (i.e. USA).
 Onlineplatforms
Whilebusinesses oftensay that
innovation does not rhyme with
regulation, many haveloudly called for
more fairness in theplatform
economy, asplatforms are more and
more theenablers – or even gate
keepers –of thedigital economy.
IntheDSM review, theCommission
announces possible legislative action
on unfair contractual clauses and
trading practices in platform-to-
business relationships.
TheCommission also wants to address
theissueof removing illegal content
online and will issueguidance setting
out whencompanies are liable for the
content posted on their platforms.
Through these measures, the
Commission wants to create a fairer
and more predictable legal
environment inthe platforms
ecosystem. This is likely to have an
impact on any company running or
using digital marketplaces and app
stores.
 The data economy
Thedata economy, one of Juncker’s
Commission’s favorite causes,is at the
center of thereview. While aproposal
to break down barriers to thefree flow
of data in theEUwas expected, the
Commission iseven more ambitious
thananticipated.
Wecan now expect a free flow of data
framework that will not only support
data flows in theEU,but also set out
rules on theporting of non-personal
data whenswitching business services,
and on cross border access to data held
in other EUcountries for regulatory
control purposes (thinktax).
These measures are adouble edged
sword for companies: data
localization is a burden that most
want gone, but data portability can
make it easier for customers to
switch service providers, bringing
(non-personal) data with them.
Brexit and
the Digital
Single Market
TheDigital Single mid-term review
closely follows thetriggering of
Article 50 of theEULisbon Treaty,
which launchestheBrexit formal
procedure. WhiletheCommission
wants to push for an ever more
inclusive market among Member
States,thewithdrawal negotiations
risk creating additional digital
barriers.
TheEUand UK will haveto
reconcile their diverging interests
with theneed to support the
European techindustry (including
theUK).
Akey issuein thenegotiations will
be to prevent regulatory
divergence in thefield of data
protection, and to ensure data
flows to and from theUK.Data
protection and theright to privacy
are both enshrined in theEU’s
treaties whichwill make
discussions difficult.
WithBrexit, theEUalso loses one
of its digital champions, and the
Commission may thinkthat itstime
to push forward an ambitious
reform agenda islimited.

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Coming up
2017
Q2
June
Q3
Q4
Nov
May
Unjustified
geo-blocking
is bannedRoaming
charges end
Data economy
proposal comes
out
Unfairplatform-to-
business trading
practices are
addressed
Online content
becomes
portableacross
borders
2018
Agreement on
new telecoms
framework
Agreement
on copyright
possible
agreement on
ePrivacy
Regulation
General Data
Protection
Regulation
enters into force
2022
Revisionof the
VerticalBlock
Exemption
Regulation
 Digitizationof industry
TheCommission wants to support the
digitization of a number of sectors.
Smart mobility, e-health,financial
services and energy are under the
spotlight. The Commission is
considering potential actions to ensure
asmooth digital transition and has
pledged to secure dedicated funding.
Initiatives supporting thedevelopment
of connected and automated mobility
are to be expected by spring 2017.
Support from the Commission often
means funding opportunities for
companies. It is thus likely to put
more money on the table for
companies involving digital
solutions intheir business
operations.
 Digital Skills
For theEuropean Commission the
DSM isnot just about regulation, but
also about creating a tech-savvy
workforce and population at large.
This implies designing and supporting
national techliteracy plans and digital
skills trainings.
Business has a crucialrole to play.
Because of national budgetary
restraints, business-led initiatives
inthis area are highly regarded by
EU institutions, opening upmany
opportunities for corporate social
responsibility and to develop a
positive brand image.
The futureof theDSM
Withonly half its term left to run, the
Junker Commission is under pressure
to deliver concrete results to EU
citizens and business. So far, priorities
were set and bold strategies were
developed but theyhaveled to limited
outcomes.
Whilesome of theCommission’s
objectives are starting to come to
fruition, suchastheso-called “triple
win for EUconsumers,” more pressing
challenges remain unaddressed.
There isa mismatch between the
ideals and thereal needs of citizens
and businesses. Whileit can be useful
to access your online content while on
holiday, it is hardly life changing. The
Commission, by focusing on these
types of initiatives, isperhaps not
prioritizing well.
Inthecurrent context of rising
cybersecurity threatsand increasing
measures by countries to restrict the
free flow of data, it isimperative that
theCommission finally delivers on its
commitments.
Fortunately, thestars seem aligned for
theCommission. The new proposals
announced in thereview fill areal need
for business and citizens.
Data localization measures are costly
and burdensome for businesses; the
Commission haswanted to act for
quitesome time buttheprocess was
blocked byFrance. The recent election
of President-elect Emmanuel Macron
with apro-business and tech-friendly
agenda, and expected shift in the
position of hisgovernment may unlock
theprocess.
Thepolitical climate is also ripe for a
push on cybersecurity asterrorism,
leaks, and interference with elections
routinely make headlines.
Astheuncertainties brought by Brexit
are slowly subsiding following the
beginning of theformal Brexit process,
theCommission hasa window of
opportunity to deliver positive reforms
thatcan support business and citizens.
Let’s hopeit makes useof it.
© Brunswick 2017 | 5

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