BEUC The European Consumer Organisation—Supplementary written evidence (OPL0068)

Online Platforms and the EU Digital Single Market

BEUC additional comments

Disclaimer: For BEUC’s final position on the question of online platform regulation please refer to our response to the European Commission’s public consultation, to be published in December.   

Introduction

From a consumer perspective, platforms play a fundamental role in the digital economy as they work as entry points for consumers to access goods, services and digital content. Although at EU level there is no legal definition of a “platform”, these entities are already regulated by many existing laws.

Thus, the legal definition would depend on the role the platform in relation to each legal instrument: for example, under the E-commerce Directive a platform could be considered as a “service provider” or a “hosting provider”, while under consumer laws the platform is a “trader” vis-à-vis the consumer.

We would argue against grouping all platforms under a common headline. This is because they represent different business models and therefore raise different types of consumer concerns depending on their sector of activity. In this regard, companies like Google would bring different challenges in comparison to communication platforms like Skype and WhatsApp or social networks like Facebook. Let alone, platforms providing so-called “sharing economy” services.

Common consumers concerns

As expressed at the evidence session, consumer concerns in relation to platforms would depend on the specific sector in which they operate. However, we can identify three groups of common concerns regarding: restrictions of consumer choices in the single market, privacy issues and compliance with consumer protection rules.

Restrictions to consumer choice:

Digital technologies and the massive internet usage provides for an environment for platforms to develop a dominant position even faster than in the off-line world. This raises concerns when such platforms become “gatekeepers” of the internet because they are used by consumers as the entry point to access products and services. Some companies have abused that market power by benefiting certain products or companies in detriment of competitors therefore restricting choice and eventually leading to higher prices. In these type of situations it is important to ensure that existing competition rules are rigorously enforced.   

Usage of consumer persona data:

The misuse of personal data is perhaps the main source of concerns for consumers using platforms, particularly social networks. This is confirmed by recent data showing that 70% of EU consumers are worried about how their data is being collected and processed[1].

In this regard, many of the mainstream consumer services provided by companies like Facebook and Google are based on ‘for free’ models, in which consumers are tracked and may be profiled as they surf the web in exchange for using the service. This raises potential concerns about price discrimination, behavioural advertising without informed consent, and state surveillance.

As technology continues to develop rapidly and more and more companies collect and process huge amounts of personal data, the importance of protecting consumers’ privacy is also increasing exponentially. Digital technologies and Big Data might have the potential to improve consumers’ daily lives by increasing connectivity between people and products, but this must not come at the expense of fundamental rights and freedoms.

Some of our members have taken action against these companies for the misuse of the consumer’s personal data. For example, the French consumer association UFC Que Choisir[2] has recently taken Google, Twitter and Facebook to court for different infringements, including non-compliance with data protection laws. Our German member, Verbraucherzentrale Bundesverband, also took action against Facebook in different occasions, and more recently on the advertising of the social network as a free service when in reality the company is monetising consumers’ personal data[3].  

Consumer law compliance:

The last point to consider relates to the role of the extensive consumer law acquis in this debate. The European legislator has been developing, for almost three decades, specific laws to protect consumers across the EU but with a strong focus on the physical world. Only recently the Consumer Rights Directive incorporated specific information rights for digital content products (e.g. functionality and interoperability of digital content). The challenge is how to make these laws fit for purpose in the digital environment. In the UK the Consumer Rights Act 2015 is a good example for the modernisation of consumer law, which could and should be a good basis to modernise the European rules on guarantees for digital content products.

Unfair terms in general terms and conditions are also a problem from a consumer perspective. For example, many clauses that are often included in End-User Licenses Agreements (EULAs) and that could be valid under copyright laws, may be regarded as unfair under the unfair contract terms legislation. This is particularly relevant for consumers when they concern restrictions in the use of legally acquired digital content through these platforms, for instance restrictions to make private copies for different purposes such as format shifting or back-up copies.

Additionally, some platforms of user-generated content include in its general terms and conditions that the consumer gives a worldwide license to the platform over the contents that the consumer posts or share. This type of clause) are already illegal under many national copyright laws (e.g. France and Belgium) but are nevertheless widely used.

Finally, the Unfair Commercial Practices Directive also represents an important tool to ensure that consumers receive transparent and reliable information about the way the platform operates. For example, if we consider comparison websites, it is important that consumers are duly informed about the scope and criteria to compare goods and services. 

The Sharing Economy

BEUC welcomes the discussion at EU level with regards to the Sharing Economy and its role within the Digital Single Market. Sharing Economy platforms can provide many benefits to consumers, such as access to new forms of consumption or the potential to generate new sources of income. However, many challenges remain in order to guarantee good standards of consumer protection that will secure a safe environment in the Sharing Economy. The first challenge is to identify the risks that consumers face when using these services, and how regulation can be modernised to target those risks. Traditional regulation will not necessarily be the right tool for new business models.

It is important to analyse how EU consumer protection legislation applies – or not – to different Sharing Economy business models. For example, there is a need to assess the role of market participants, understand what contractual obligations are created between different parties, identify and define the obligations of the intermediary platform, and address issues of transparency and information.

In establishing a safe environment for consumers, it is also important to recognise the role of in-built mechanisms such as well-managed consumer review systems.

NB: In the coming weeks BEUC will develop a detailed position paper on the sharing economy.

The way forward - is it necessary to further regulate platforms?  

BEUC considers that before deciding on whether platforms should be further regulates, it is necessary to carefully assess what are the current rules that apply to different services provided through platforms and whether the different objectives cannot be achieved by means of better enforcement of existing rules.

In this regard, we have an extensive consumer law acquis that it is not always consistently enforced across the EU therefore it is important to look at how those rules already apply to online platforms. Similarly, the enforcement EU antitrust rules can address many existing bottlenecks, particularly when it comes to distribution agreements between suppliers and platforms that lead to a fragmentation of the single market.     

Against this background, we do identify gaps in traditional European consumer law concerning consumer rights when purchasing digital content products. For example, can the consumer turn to the Appstore to complain for the malfunctioning of an app? Or even more, can I ask for damages if the app was infected and caused a malfunctioning on the hardware and software?

The European Commission is already looking into these aspects and this is indeed a positive development. There are already some laws in place in the member states e.g. in the UK, which could serve as a European model.

Another important aspect to look at is the role of the E-commerce Directive. This legislation has been a key pillar of the development of internet-based consumer services. However, it deals with issues that have a rather limited scope, namely third party content, comparing to emerging business models like sharing economy platforms.

In any case, if the European Commission considers revising the liability regime of the E-commerce Directive, this would not be necessarily to protect consumers but to strengthen the powers of copyright holders vis-à-vis intermediaries.   

To conclude: does the EU need to regulate platforms even more? Well, first let’s define what would be outside the scope of existing rules and what the objectives the EU wants to achieve really are, and that cannot be fulfilled by means of enforcement of existing horizontal and specific legislation.

26 November 2015