The sharing economy and competition law: how does the European Commission’s growing focus on the digital economy affect sharing platforms?
Published on 5th Nov 2015
Sharing platforms are now an important part of many business sectors, and an innovative and disruptive force within the wider economy. Accordingly, the European Commission is keen to examine the potential and impact of platforms within its ongoing Digital Single Market initiative, and to look at related competition issues.
So how do these developments affect the sharing economy, where are the risks for your business – and how can you influence the direction of regulation?
Digital Single Market: platforms consultations
On 24 September 2015, the Commission launched its public consultation into the “Regulatory environment for platforms, online intermediaries, data and cloud computing and the collaborative economy“.
Defining a “platform”
This very wide consultation defines a “platform” as an “undertaking operating in two (or multi)-sided markets, which uses the Internet to enable interactions between two or more distinct but interdependent groups of users so as to generate value for at least one of the groups. Certain platforms also qualify as Intermediary service providers.” The Commission specifically includes collaborative economy platforms, naming Airbnb, Uber, TaskRabbit and BlaBlaCar (for example) as coming within this definition – although respondents are asked to confirm whether they agree with the definition and its consequent breadth.
A fact-finding exercise
In many ways, the consultation is a broad fact-finding exercise, with the Commission asking about a range of topics: from whether/how platforms should be regulated; whether platforms are conducting their businesses transparently and “fairly”; to whether platforms should benefit from the hosting exemption.
The sharing economy also receives a dedicated section in the consultation. The Commission says that its questions seek to “improve the Commission’s understanding by collecting the views of stakeholders on the regulatory environment, the effects of collaborative economy platforms on existing suppliers, innovation, and consumer choice. More broadly, they aim also at assessing the impact of the development of the collaborative economy on the rest of the economy and of the opportunities as well as the challenges it raises”.
There are fundamental questions around whether the Commission should be doing anything to promote the sharing economy – and whether it should be doing anything to regulate it, including to ensure a level playing field with “traditional providers”.
For anyone active in the sharing economy, now is the time to engage with the Commission and explain your business, the challenges facing it and your views on how and why regulation might influence you and the sharing economy as a whole. The consultation should be seen as a precursor to an EU agenda for the collaborative economy and responding is your opportunity to influence this.
Digital Single Market: geo-blocking
A key part of the DSM initiative has been the focus on geo-blocking, i.e. the use of geo-blocks to prevent consumers from accessing websites/digital content from other member states (or automatically redirecting them to their local site). Following a widespread sector inquiry into e-commerce, which focused strongly on this issue, the Commission is now running a public consultation on geo-blocking alongside the platforms consultation, with proposals on geo-blocking due by 2016.
The limits of competition law?
Competition law investigations are also ongoing in respect of Pay TV services and PC gaming downloads. A statement of objections has now been issued in Pay TV, which suggests that agreements to geo-block will be deemed anti-competitive. Although we await the outcome of this case – and the guidance it will provide on geo-blocking agreements – it highlights the limits of competition law in achieving the Commission’s aim of “ending ‘unjustified’ geo-blocking”. Competition law only attaches to unlawful agreements and/or abuses of dominance, meaning that, if non-dominant companies stop agreeing to geo-blocks (but continue to do so independently), the Commission’s competition powers will not bite.
We have seen the Commission pursue car rental companies under the Services Directive for amending pricing of car rentals based on the geographic location of the consumer but it is unlikely that these powers go far enough for the Commission’s stated aim of restricting “unjustified” geo-blocking. The question therefore remains; will the Commission try and introduce new powers to curb geo-blocking and, if so, when is geo-blocking ‘unjustified’?
The provision of many services in the sharing economy is inherently local and there are often good reasons why sites are geo-blocked. If this is the case for your business, now is the time to explain to the Commission why you geo-block (or might need to in the future). As the Commission determines its position on geo-blocking, make sure you have your say.
Competition investigations: vertical restrictions and price parity agreements
The EU focus on the digital economy has also heralded a growing focus on ‘vertical’ restrictions between suppliers and platforms or distributors, where historically authorities mainly targeted horizontal cartels. This includes a crackdown on any agreements which discriminate against online sales over bricks and mortar.
For the sharing economy, an important aspect of this shift has been the number of investigations into resale price maintenance. While always considered a hard-core restriction of competition, vertical pricing agreements were not generally penalised in practice. This is changing, with recent decisions on resale pricing taken in several member states, most notably in Germany.
Price parity agreements are also under the spotlight, with platforms in the travel, car insurance and e-book sectors all having been investigated for “most favoured nation” clauses, recognising that these provisions can dampen competition in some markets.
You and your suppliers
For sharing platforms, it is crucial to assess your relationship with your suppliers:
- Do you provide platform services only?
- How is pricing set?
- Is there a risk that you are unlawfully agreeing resale prices?
- Do you agree to price parity, or other forms of “most favoured nation” clauses?
The growing use of platforms as a route to market means that investigations into the pricing of goods and services sold over those platforms is likely to increase. In the sharing economy, challenges from traditional providers can also be expected to revolve around pricing. As your business grows, ensure that your commercial arrangements comply with competition law.
What next: Big Data and the competition authorities
As data becomes the heart of many businesses – and particularly platforms – the competition authorities are having to tackle the question of whether (and how) Big Data should form part of the competition assessment. When Competition Commissioner Margarethe Vestager came to office, she immediately stated that the Commission needed to develop a deeper understanding of the markets for Big Data, saying “I very much recognise the profile of Big Data as being the next big currency of the internet”. It has also been a key component of merger decisions such as Facebook/WhatsApp.
This has translated into the Digital Single Market initiative, with the platforms consultation asking questions around the use and trading of data, whether there is the case for opening up privately held data and how data should be regulated.
We will continue to watch this closely and, as with the DSM initiative, would encourage all interested parties to have their say in influencing how data businesses are treated in a digital Europe.
This article is the fourth in a series of six weekly articles on the legal issues affecting the sharing economy. Click here to read the last update on the tax challenges associated with sharing economy platforms.
Register here for future sharing economy updates.