Fundamentals of IT Law: Online Platforms and Gatekeepers Regulation

IT Subjects: Online Platforms

1 SI CNICA UN E DELL RC UNIVERSITÀ POLITECNICA DELLE MARCHE - Facoltà di Economia "Giorgio Fuà" Fundamentals of IT LAW Prof. Roberto Ruoppo www.univpm.it2 ERSITA PO UNIVERS ECNICA 902 DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE IT Subjects Online platforms . Which is their role in current economic landscape? . Is there a new kind of economic model carried out by these platforms? . How are they regulated? . It is important to define all those subjects involved in this market, since a particular legal framework applies deriving from a specific definition: see «gatekeepers>>; «Very Large Online Platforms» (VLOP); «Internet Service Providers» (ISP)3 ERSITA PO UNIVERS ECNICA 902 DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE IT Subjects Online platforms · Subjects acting online and providing services in information technology society (web search engines, social networks, marketplaces) . Their essential role is to put together demand and offer for concluding contracts (see, e.g., the role of UBER, Airbnb, Booking, Expedia and so on)

Information Society Subjects: Online Platforms

ERSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE Information society Subjects 4 What are the main features of information society services? . Online platforms_mainly provide intermediation activities addressed to put together three different contractual parties, such as: Online platform (intermediation) Commercial user (providing its services) Final consumer (buying a particular good or service) Which was the contract used by Expedia to conclude economic relationships with host providers?

Online Platforms in Digital Markets

ERSITA PO UNIVERS ECNICA 902 DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE Information Society Subjects: Online platforms 5 Online platforms exercise their activity in digital markets: this means no borders and uncertain legal framework Digital markets represent the digital context where goods are sold and services are provided by commercial users to final consumers. Digital markets have developed thanks to the activity of new virtual economic operators: new opportunities and new contracts with new demand of protection (both for operators and consumers) Digital markets are organized and managed by online platforms: in daily economy online platforms are defined as global digital players

Online Platforms as Global Digital Players

ERSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE Information Society Subjects: Online platforms 6 What does it mean when we define online platforms as global digital players? . No distance: they are global since they provide their services worldwide, without any national border . New economic models have been established by them: sharing economy, new contracts (online contracts), or enjoyment of immaterial goods (such as apps, music, movies, softwares) What is the "sharing economy" meaning? Do you know any example of this economic model?

Sharing Economy Definition

ERSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE Information Society Subjects: Online platforms 7 What is the "sharing economy" meaning? Do you know any example of this economic model? It is a socio-economic system whereby consumers share in the creation, production, distribution, trade and consumption of goods and services, leveraging information technology and internet (in particular digital platforms) It entails not only a peer-to-peer phenomenon but a business-to- customer one too «the sharing economy is an IT-facilitated peer-to-peer model for commercial or non-commercial sharing of underutilized goods and service capacity through an intermediary without transfer of ownership»

Online Platforms as Gatekeepers

ERSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE Information Society Subjects: Online platforms 8 What does it mean when we define online platforms as global digital players? Why some of them are defined as "gatekeepers"? . They are usually defined as "gatekeepers": meaning that they have great power in managing online relationships, regulating network access (both for consumers and commercial users) Online platforms can exercise huge power in relation to online relationships, in relation to different points of view: economic, informative, regulation. Such imbalance is not excluded by the fact that the gatekeeper offers a particular service free of charge

9 ERSITA PO UNIVERS ECNICA 1000 DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE Online platforms as gatekeepers · Economic, informative and regulative powers make online platforms as having a real digital sovereignty: they have the power to regulate the market access, representing a new economic model · Market access as a new economic model: in Information society economic relationships are no more founded on property transfer but on goods or services sharing. Many companies give access to their systems in order to allow temporary use of their goods or services (split from the property model to the access model) . That is the reason why this phenomenon has been defined as the "Access society"

Gatekeepers and Fundamental Rights

10 ERSITA PO UNIVERS ECNICA 000 DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE Online platforms as gatekeepers Online platforms can act as new sovereign bodies since they have the power to regulate several aspects of our daily lives, not only from an economic perspective · Sovereignty represents a very useful concept in order to consider, for example, limitations introduced in relation to our fundamental rights, as freedom of expression: see, e.g., the ban applied to Trump by Twitter (now X); or internal rules to answer to customers' requests . Even though they are private actors, entitled to exercise contractual power in order to regulate relationships with their users, they may affect fundamental rights, such as economic initiative or freedom of expression

Impact of Gatekeepers on Commercial Relationships

11 ARSITA PO UNIVERS ECNICA 900 DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE Online platforms as gatekeepers Their powers can have the effect of impacting the fairness of commercial relationship Some of them exercise control over whole platform ecosystems in the digital economy and are structurally extremely difficult to challenge or contest by existing or new market operators: it means that contestability is reduced due to the existence of very high barriers to entry or exit These features are likely to lead to serious imbalances and consequently to unfair practices and conditions for business users, as well as for end users of core platform services provided by gatekeepers, to the detriment of prices, quality, fair competition

High Barriers to Entry for Gatekeepers

12 ERSITA PO UNIVERS ECNICA 005 DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE Online platforms as gatekeepers Which is one of the most important example of high barriers to entry? The processing, for the purpose of providing online advertising services, of personal data from third parties using core platform services gives gatekeepers potential advantages in terms of accumulation of data, thereby raising barriers to entry e.g. Meta and the interrelations between Instagram and Fb e.g. Google, Youtube, Gmail

Digital Single Market and Gatekeepers' Regulation

13 ARSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE Digital Single Market and Gatekeepers'regulation The role of DSM is to ensure balance in the digital market The purpose of the Regulation (EU Reg. 2022/1925) is to contribute to the proper functioning of the internal market by laying down rules to ensure contestability and fairness of the markets in the digital sector Therefore business users and end users of core platform services provided by gatekeepers should be afforded appropriate regulatory safeguards throughout the Union against the unfair practices of gatekeepers, in order to facilitate cross-border business within the Union

Territorial Scope of Digital Single Market

14 ERSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE Digital Single Market and Gatekeepers'regulation What is the territorial scope of DSM? Pursuant to Art. 1, para. 1 DSM it applies: - to core platform services provided or offered by gatekeepers to business users established in the Union or end users established or located in the Union - irrespective of the place of establishment or residence of the gatekeepers and irrespective of the law otherwise applicable to the provision of the service It means that it will be relevant only the place of establishment of the business user or end user, no relevance the law applicable to the service

Gatekeepers and Digital Market Access

ERSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE Information Society Subjects: Online platforms 15 What does it mean when we define online platforms as global digital players? Why some of them are defined as "gatekeepers"? · Gatekeepers are large digital platforms providing core platform services, such as online search engines, app stores, messenger services: they are so defined when they are able to condition the access to the digital market . On September 2023 EU Commission has designated six gatekeepers, because of their important gateway role_between businesses and consumers in relation to platform services

Gatekeeper Designations by EU Commission

16 ARSITA PO UNIVERS ECNICA 04. DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE Information Society Subjects: Gatekeepers and Online platforms C 1 Gatekeeper Alphabet SOCIAL NETWORK Google Maps Google Play Google Shopping Amazon Marketplace App Store Meta Marketplace Google Amazon Meta BROWSER OPERATING SYSTEM Chrome Safari Google Android ios Windows PC OS VIDEO SHARING Youtube Microsoft Gatekeeper Designations Core Platform Service INTERMEDIATION ADS Amazon Tiktok Facebook Instagram LinkedIn Apple ByteDance N-IICS Meta Whatsapp Messenger SEARCH Google Search

DMA and Gatekeeper Regulation

17 ERSITA PO UNIVERS ECNICA DELLE MARCHE UNIVERSITÀ POLITECNICA DELLE MARCHE Gatekeepers and Digital Single Market (EU Reg. 2022/1925) Why the European Commission had the power to designate some online platform as gatekeeper? . The DMA aims at preventing gatekeepers from imposing unfair conditions on businesses and end users and at ensuring the openness of important digital services · The DMA is in force since November 2022 and the first concrete implications can be observed since March 2024