The rules governing the digital economy are being recast. Policymakers and legislators around the world including the UK, USA, Japan, Australia and individual EU member states, are turning their attention to seemingly outdated legislation and deciding how new rules should be introduced to address the exponential growth in the economic and social importance of online services and platforms. This article focuses on government proposals from the EU and the UK and their potential impact on the digital economy.

Many of the proposed reforms directly target the largest online platforms but are also likely to be felt by all businesses and individuals who buy and sell goods and services, build communities and share content online. The proposals seek to address perceived social and economic harms arising from digital activities, as well as to foster greater competition and innovation and curtail potentially monopolistic behaviour.

The immediate focus for organisations is likely to be on understanding the proposals and what they mean for ongoing business activities. These developments cannot be ignored by organisations operating online, especially those defining future state digital delivery and data strategies, including business and technology transformation, or those with business models relying on significant volumes of data.  

Alongside exploring key themes of the proposals, we address some focus areas for organisations seeking to keep abreast of upcoming developments.

Recent developments in the EU and the UK

The European Union

The European Commission (EC) has published key legislative proposals as part of its digital strategy. The Digital Services Act (DSA) proposes a common set of rules for online intermediaries where users have their place of main establishment or residence in the EU to promote a safe and accountable online environment. The related Digital Markets Act (DMA) seeks to establish rules for major “gatekeeper” platforms, aiming to deliver fair and open digital markets.

As part of the European data strategy, the Data Governance Act (DGA), proposes a largely voluntary framework for trusted and strengthened data sharing across the EU, in both the public and the private sectors.

These proposals are the next step in a wider EU digital legislative package, with proposals on connectivity, AI, digital infrastructure to name but a few. This builds on previous legislation such as the General Data Protection Regulation (GDPR), the reform of the e-Privacy regime, the Platform-to-Business Regulation, etc.

The United Kingdom

In the UK, the planned Online Safety Bill aims to protect users from harmful content online and proposes a new duty of care for companies providing online services.

To address concerning market features and potential harms to businesses and consumers, the government is considering the advice of the Digital Markets Taskforce to introduce a new pre-competition regime and has committed to setting up a Digital Markets Unit (DMU).

The outcome of the consultation into the UK’s National Data Strategy, which aims to enable improved data use by government and businesses for the benefit of the economy, is also in the offing.  

Developments in the UK should be considered alongside other initiatives on the UK digital strategy, sustainable journalism, online advertising, and the work of the Centre for Data Ethics and Innovation (CDEI).

These proposals add to the growing patchwork of existing and planned regulation for digital activities and data use. Below we assess these developments in terms of their broad, emerging themes.

Emerging themes in digital regulation

• Fair and effective markets

Ensuring fair and effective digital markets is a key aim of the proposals, with measures seeking to address perceived harms arising from concentrations of market power gained through phenomena like network effects (whereby the value derived from a service by users increases as the number of users increases). These set new obligations for operators of the largest platforms and allow for market intervention, benefiting competitors and business users of platforms via access to data, greater interoperability and transparency.

• Safety online

A key objective of the proposals is to create safer online spaces that respect the rights of all users and, in particular, protect children and vulnerable people. This includes important debates on the distinction between content that is considered unlawful and content that is harmful or objectionable, but not unlawful.

Governments are also considering the conditions under which the liability of online intermediaries like platforms will be limited, whether criminal sanctions for the most egregious violations are needed, the extent to which private communications can be monitored, and rules outlining when online intermediaries must take down the offending content.

• Data availability and data restrictions

Many concerns with the digital economy are linked to perceived asymmetries in information and power linked to concentrations of data. Dominant platforms may find themselves in the juxtaposition of being required to grant access to data and/or platforms to competitors and users of their services, whilst also being prevented from sharing data with their affiliated businesses.

Measures addressing data access may extend beyond the dominant platforms and there are more general measures in the pipeline to encourage data sharing to the benefit of society and the wider economy.

The prospect of a more open data economy poses some challenging questions around the tensions between more data access and stricter privacy expectations, moves to limit international transfers of non-personal data and, in the event of mandated access to data, methods to set a value and prices for giving competitors access to such data.

• Digital advertising

Digital advertising, as perhaps the defining business model of the digital economy, is a key area for reform. The proposals seek to improve fairness in this market and reduce possible social harms – with concerns centred on privacy, user profiling and monetisation of personal data – by increasing access to data for businesses and researchers, transparency for audiences and introducing codes of conduct. Developing an approach which balances all of the issues in a complex ecosystem where technology and business strategy are constantly evolving will be far from straightforward.

• Algorithmic transparency and accountability

Regulators and policymakers recognise the importance of algorithms and automated decision-making in shaping digital markets. Measures such as algorithmic transparency, increased control for users and options for regulatory scrutiny are being considered to counteract perceived negative outcomes arising from their use.

There is still a long way to go before these proposals become law, and it is too early to know what new opportunities and responsibilities organisations will be faced with. However, it seems clear which way the wind is blowing with clear trends emerging in policymakers’ approaches. This will undoubtedly bring a greater compliance burden to the dominant players in the market, but is also intended to provide greater opportunity for innovation for all who buy, sell and interact online.

As organisations are forced to accelerate towards greater digitisation, they should follow these developments, alongside further proposals anticipated in areas such as data sharing and AI governance. This will aid understanding not only of how measures addressing these themes could affect business models, operations and compliance, but also influence business strategy in relation to data usage.

Steps you can take now

• Stay up-to-date

Follow the developments and ensure that senior management are briefed and understand how these measures are likely to apply to the organisation, particularly in international operations and the potential business opportunities and risks that may arise.

• Assess relevance to the wider business, digital and data strategies

Consider how these measures may impact the corporate vision and goals for digitisation and data use, and how they tie into related trends for digital and data ethics and increasingly important concepts of transparency and accountability – e.g. through an internal impact or gap assessment.

• Governance

Consider, in the short-term, creating an internal working group bringing together all relevant stakeholders from across the business with a mandate to track developments and assess their impact. In particular, ensuring the technology function is engaged at an early stage will be integral to developing a joined-up response and assessing the impact on the existing technology infrastructure. In the longer term, organisations may need to consider revising existing governance models to effectively determine and manage the organisational approach to addressing these reforms. 

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A&M’s privacy and data protection professionals have extensive policy, operations and advisory experience together with a proven track record in leading businesses through tough, complex organisational changes. To learn more about our expertise and to understand the full scope of our services, please get in touch with one of our authors.