Rewriting the digital rulebook

Dr Brian Keegan explains why one of Donald J. Trump’s lasting legacies could be tighter regulation for Europe’s digital sector.

The early weeks of January were dominated by attempts to handle emergent Brexit problems, resurgent COVID-19 problems, and the Trump presidency’s last days.
No sooner does one issue get resolved than another pops up to take its place. In times past, wealth was defined in terms of real assets. The defining asset of the 21st century is data.

In late 2020, the EU Commission fired a dual salvo of legislative proposals almost lost amid the Brexit and COVID-19 noise. The proposed new Digital Market Act will deal with cartels, and the proposed new Digital Services Act will deal with content. Along with the Digital Tax Proposals, they complete a triad of initiatives to deal with information industries.

The EU’s messaging for the Digital Market and Digital Services acts is a simple one. The idea is that what is illegal offline should also be illegal online. That sounds compelling in theory, but the practice could be very different. The Digital Markets Act addresses the businesses that the EU call “gatekeepers” – perhaps including social media platforms like Facebook and LinkedIn, search engines such as Google, Bing and Yahoo, and business intermediary platforms, including Amazon, eBay and Alibaba.

The Digital Market Act’s likely targets are not European, but rather headquartered in the US or Asia. Europe is already finding that when it attempts to tax digital enterprises by reference to market presence, the home country jibs at the prospect of losing tax revenue. Regulation, however, is a different matter. If the Digital Market Act is successful in outlawing anti-competitive practices and is applied consistently, a properly regulated environment can attract reputable business while enhancing choice for businesses and consumers alike. The Digital Services Act, on the other hand, is aimed at consumer protection. It contains rules that would enforce the removal of illegal goods, services or content being promoted or sold online. What is considered “illegal” is anything that may be illegal in any EU member country. This is an unusually broad definition, which appears to work on the assumption that legal, cultural and consumption norms are the same right across Europe. As such, the proposals are a multi-bladed weapon directed at a Hydra-headed creature and have a particular focus on platforms that reach more than 10% of the European consumer base.

In early January, the world saw just how powerful such a weapon might be when Twitter permanently suspended the account of the then President of the US, Donald Trump. From the point of view of the major social media platforms, that may have unforeseen consequences. Governments become irritated when the private sector wields power that they themselves do not possess, and the exclusion of Trump was an extreme example. Thierry Breton, one of the EU Commissioners sponsoring the proposed digital legislation, commented that “it is not only confirmation of the power of these platforms, but it also displays deep weaknesses in the way our society is organised in the digital space”. Twitter’s action also prompted critical comment from MEPs and German and French leaders.

This political reaction could well ensure that the Digital Market Act and the Digital Services Act move more speedily through the EU’s often labyrinthine acceptance and ratification processes. The proposals were drowned out by Brexit and COVID-19, but will endure long after both crises have passed.

The ultimate result of a US president’s actions and the well-intentioned response of Twitter could be earlier and tighter regulation of the digital space in Europe.

Dr Brian Keegan is Director of Advocacy & Voice at Chartered Accountants Ireland.