This article is written by Mona Tomar pursuing a Diploma in US Tech Law (Bootcamp). This article has been edited by Ojuswi (Associate Lawsikho). 

This article has been published by Sneha Mahawar.

Introduction

The market is the place where the exchange of goods and services takes place for definite monetary consideration. It can be a retail market or virtual/digital market. But every market has some geographical limitations and transit goods, services, capital and people across the border add various costs and taxes to the price of the goods and services, etc. Thus, the extra cost is to be borne by businesses and ultimately consumers.

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Ancient market trends where the goods and services were made available at defined physical locations in every city are changed with the advent of digital markets like Amazon, eBay, etc. The method of trading changed significantly from just physical availability to digital availability of products and services, also bringing in more services and jobs. Now a person, sitting in the comfort of his home or workplace, can search and buy products online. The digital market has broken the walls between one’s home, local and inter-city markets but not between trans-nation markets.

The European Commission, realizing the benefits of digitisation and the contribution it can make to its economy, introduced the idea of creating one digital market for all European nations. If one umbrella market is created, breaking all geographical boundaries, what benefits can it bring to consumers and businesses? When businesses can expand multi-fold in areas beyond their local reach, will their IPR rights be protected? What measures can be taken to ensure cybersecurity and consumer data protection? What will be the strategy to implement the idea of a digital single market? What impact can it have on the economic growth of European nations?

Historical background

In 1957, the Treaty of Rome established the European Economic Committee and laid the foundation of the Common Market (or European Single Market). It aimed to bring together countries – Belgium, Germany, France, Italy, Luxembourg, and the Netherlands – to work towards economic growth through the free movement of goods, services, people, and capital. The idea behind was to serve two purposes – 

i. transformation of trade and production; and,

ii. the political unification of Europe. 

In 1992, the European Union was formed. The idea of the Single Market remained intact, with the objective of improving the quality and availability of goods and services across the expanded European regions at reduced prices, thereby paving the way to encourage collective economic growth of all member states of the European Union. It was believed that the expansion of the market beyond borders with countless resources, would mark a prominent presence of Europe in worldwide trade and would make businesses more responsible to ensure a better quality of their products and services, involving specialized skills. The whole idea was to bring the trade and commerce industry of member states in close relation to amalgamate and grow together as one unit and thus stimulating economic growth across the EU.  

On May 6-2015, the European Commission, re-establishing the concept of a Common Market in the digital era, by adopting the strategy of a Digital Single Market. It came as one of 10 political priorities and aimed to reduce the barriers faced by the consumers and businesses when using online tools and services. The governments, businesses, and citizens cannot fully reap the benefits of digitisation because of the cross-border restrictions to access some goods and services. The Digital Single Market was based on the idea to open new opportunities and remove key differences between online and offline markets. The European Union (EU), which now, after the exit of the United Kingdom, consists of 27 member States, acknowledged the benefits of 27 national digital markets and adopted the strategy of converting them into a single digital market. This will result in strengthening business competitiveness in the digital economy that could bring a remarkable contribution per year to the economy and would also create new jobs and boost digital connectivity. 

Digital Single Market Strategy

The Digital Single Market Strategy contains a coherent vision with the aim and ambition to propel Europe to the forefront of the world’s digital economy. It is made of three policy pillars:

Pillar 1 – EU identified that providing better access to online goods and services for consumers and businesses across Europe will require either revision of existing legislation or making new legislation or following a competition authority’s inquiry into the e-commerce area relating to the online trade of goods and provision of services. The proposed legislative measures will introduce cross-border rules to make consumer and business services simple and effective and bring some uniformity in tax regimes to avoid administrative burdens. It will also require addressing copyright issues and bringing reforms to them.

Pillar 2 – It will also necessitate restructuring and transformation of existing telecom rules, the Audio-visual Media Services Directive and the e-Privacy Directive to help in creating and achieving the right conditions for digital networks and services to flourish. This will require a broad analysis of digital platforms, structuring of private-public partnerships, and an increase in cybersecurity rules and laws.

Pillar 3 – Extension of interoperability framework and inter-connection of businesses register will maximize the growth potential of the European digital economy by a free flow of data and European cloud services. The digitalization underway affects five business areas i.e. payments and account management, savings, insurance, SME services, and lending.

Legislative Framework

The European Commission, thus, proposed a digital services package on 15 December 2020 that comprises two legislative proposals i.e. the Digital Services Act (DSA) and the Digital Markets Act (DMA) to revise and upgrade rules governing digital services in the EU. They form a single set of new rules applicable across the whole EU to create a safer and more open digital space.

The two main goals of the Digital Services Act and Digital Markets Act are – 

  1. to create a space that is safer for digital services and wherein the fundamental rights of users are safeguarded; and,
  2. to create a digital market space where everyone gets a fair and equal chance across the globe and in the European Single Market to give a stage to new ideas, technology, innovation, growth and competitiveness to serve quality goods and services to the consumers.

The Digital Services Act will harmonize digital services across European nations by introducing transparency measures on online advertising, scrutinising the working of platforms, safeguarding user data, obligations to prevent abuse of digital systems, and rules to trace and remove sellers of illegal goods, services or online content from the online market and bring innovative processes to ensure effective enforcement.

The Digital Markets Act will aim to prohibit malicious practices through the designation of “gatekeepers” to conduct market investigations and proactively take measures to ensure the proper functioning of third-party services providers, search engines etc. It will also ensure compliance with new rules and impose fines that could go up to 10% of the gatekeeper’s worldwide turnover, for non-compliance. The Commission will be appointed to ensure compliance and conduct targeted market investigations to assess if any new practices and services need to be added to these rules, in order to ensure that the new gatekeeper rules keep up with the fast pace of digital markets. 

Journey So Far

On April 23, 2022, the European Parliament and Council reached a temporary political agreement on the Digital Services Act. European Commission President Ursula von der Leyen expressed her opinion on DSA by saying:  “Today’s agreement on the Digital Services Act is historic, both in terms of speed and of substance. The DSA will upgrade the ground rules for all online services in the EU. It will ensure that the online environment remains a safe space, safeguarding freedom of expression and opportunities for digital businesses. It gives practical effect to the principle that what is illegal offline, should be illegal online. The greater the size, the greater the responsibilities of online platforms. Today’s agreement – complementing the political agreement on the Digital Markets Act last month – sends a strong signal: to all Europeans, to all EU businesses, and to our international counterparts.”

About a month ago, on March 22, 2022, the member States and European Parliament reached a provisional agreement on Digital Markets Act. Executive Vice-President for a Europe Fit for the Digital Age, Margrethe Vestager, said: “What we want is simple: Fair markets also in digital. We are now taking a huge step forward to get there – that markets are fair, open and contestable. Large gatekeeper platforms have prevented businesses and consumers from the benefits of competitive digital markets. The gatekeepers will now have to comply with a well-defined set of obligations and prohibitions. This regulation, together with strong competition law enforcement, will bring fairer conditions to consumers and businesses for many digital services across the EU.”

The views expressed by the President of the European Commission and other dignitary members mark a strong “go ahead” signal in the journey of a very important legislative piece of work collectively “Digital Services Package”. It is expected that the legislation will be soon approved and adopted and will directly apply across the European Union creating a safe framework of the digital online market.

Conclusion

With the Digital Single Market, the consumers and businesses will be in a win-win situation as it will strengthen the business competitiveness by providing better access to goods and services to the consumers. As the businesses grow with the expansion of the market through digital connectivity, more jobs will be generated and governments will also get to scale up their revenue, consequently bringing the European economy to the forefront worldwide. Though the businesses will be getting the opportunity to flourish, they can also witness copyright and trademark infringements. With the online availability of huge personal data of consumers, cybersecurity, cloud protection and consumer data protection are required to be relooked and revised to make it more stringent to ensure great protection and provide a huge penalty in case of a breach. 

The three pillars specifically identify each of the challenges and lay down the foundation of a digital single market strategy. It led to the design of the framework of legislations like the Digital Services Act and Digital Markets Act, taking in the views of different stakeholders involved. Though the legislations are still pending approval, the proposals look very promising to protect the IPR and e-data by enacting provisions for creating a safe online space and also to take measures to provide opportunities to the small and medium enterprises of Europe to grow outwardly and mark their existence by competing with bigger brands. Once these legislations are finally approved and adopted, these will apply across the EU directly and will be the first set of regulations in the digital field to regulate and supervise online markets.

References

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