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Interoperability in the Digital Services Act

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An introduction to the policy background of interoperability duties for large platforms in the forthcoming EU Digital Markets and Services Acts

Interoperability in the Digital Services Act

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Interoperability in the
DigitalServicesAct
Ian Brown
Source: Furman et al., Unlocking Digital Competition (2019), UKTreasury, p.25
Interoperability in
the DSA (and New
CompetitionTool)
– EC: “the Digital Services Act package would propose ex ante rules
covering large online platforms acting as gatekeepers, which now
set the rules of the game for their users and their competitors.The
initiative should ensure that those platforms behave fairly and can
be challenged by new entrants and existing competitors, so that
consumers have the widest choice and the Single Market remains
competitive and open to innovations.”
– EC leak: scope is “(i) online intermediation services (incl. esp.
market places, app stores and social networks), (ii) online search
engines, (iii) operating systems and (iv) cloud services.”
– IMCO compromise amendments: “28h. Underlines that
interoperability is key to enable competitive market, as well as
users’ choice and innovative services, and to limit the risk of users’
and consumers’ lock-in effect; Calls on the Commission to ensure
appropriate levels of interoperability for systemic operators and to
explore different technologies and open standards and protocols,
including the possibility of a technical interface (API).”
Potential social
benefits
– improved social infrastructure (e.g. access for users irrespective of
their attractiveness to advertisers)
– promoting media pluralism and diversity (e.g. more incentive for
news sources to offer quality news rather than seeking to
maximise user attention/advertising revenues with
disinformation/hate speech)
– incentives to offer more better privacy (e.g. competing in terms of
quality of data privacy/protection safeguards, more data
portability)
– improved moderation of harmful content while protecting
freedom of expression (e.g. giving users a choice of moderation
regimes)
– reduced environmental impact of the online economy and
“internet of things” (e.g. more incentive to offer sustainable
products)
– favouring Europe’s digital sovereignty (e.g. by allowing new
market entrants from Europe to compete successfully).
Five key digital
competition
concepts
– Digital conglomerates: many digital markets show extreme returns to scale
(very low marginal costs, and positive feedback loops on quality) and scope
(easy for services to use consumer data and relationships to move into
adjacent markets), which incentivises mega-corporations, via organic growth
and acquisitions — e.g.GAFAM
– Network effects — value of service increases for all customers with each
additional customer – typical with communications services
– N-sided markets — firm facilitates transactions between n sets of customers
(e.g. Facebook users and advertisers; Uber drivers and passengers; Deliveroo
customers, restaurants and drivers), with indirect network effects giving ability
to squeeze least price sensitive customers (e.g. Uber drivers) and monetise
data flow between customer groups
– Gatekeepers – “online platforms reaching a certain level of users and covering
different types of services that are considered to have a particularly important
impact and play a distinctive role as ‘gatekeepers’ to the services they
provide.”Also known as firms with systemic market status (UK), of paramount
significance for cross-market competition (DE)
– Multi-homing – making use of multiple, similar, services simultaneously (how
many IM apps on your phone?)
Authoritative
sources
– The “Vestager report” (128pp) Jacques Crémer,Yves-Alexandre de
Montjoye and Heike Schweitzer, Competition policy for the digital
era (Luxembourg: Publications Office of the EU, 2019).
– The “Furman review” (150pp) J Furman, D Coyle, A Fletcher, D
McAuley and P Marsden, Unlocking Digital Competition (London:
HMTreasury, 2019)
– The “CMA market study” (450pp + 1,000+pp) Online platforms and
digital advertising (London: Competition and Markets Authority,
2020).

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Interoperability in the Digital Services Act

  • 2. Source: Furman et al., Unlocking Digital Competition (2019), UKTreasury, p.25
  • 3. Interoperability in the DSA (and New CompetitionTool) – EC: “the Digital Services Act package would propose ex ante rules covering large online platforms acting as gatekeepers, which now set the rules of the game for their users and their competitors.The initiative should ensure that those platforms behave fairly and can be challenged by new entrants and existing competitors, so that consumers have the widest choice and the Single Market remains competitive and open to innovations.” – EC leak: scope is “(i) online intermediation services (incl. esp. market places, app stores and social networks), (ii) online search engines, (iii) operating systems and (iv) cloud services.” – IMCO compromise amendments: “28h. Underlines that interoperability is key to enable competitive market, as well as users’ choice and innovative services, and to limit the risk of users’ and consumers’ lock-in effect; Calls on the Commission to ensure appropriate levels of interoperability for systemic operators and to explore different technologies and open standards and protocols, including the possibility of a technical interface (API).”
  • 4. Potential social benefits – improved social infrastructure (e.g. access for users irrespective of their attractiveness to advertisers) – promoting media pluralism and diversity (e.g. more incentive for news sources to offer quality news rather than seeking to maximise user attention/advertising revenues with disinformation/hate speech) – incentives to offer more better privacy (e.g. competing in terms of quality of data privacy/protection safeguards, more data portability) – improved moderation of harmful content while protecting freedom of expression (e.g. giving users a choice of moderation regimes) – reduced environmental impact of the online economy and “internet of things” (e.g. more incentive to offer sustainable products) – favouring Europe’s digital sovereignty (e.g. by allowing new market entrants from Europe to compete successfully).
  • 5. Five key digital competition concepts – Digital conglomerates: many digital markets show extreme returns to scale (very low marginal costs, and positive feedback loops on quality) and scope (easy for services to use consumer data and relationships to move into adjacent markets), which incentivises mega-corporations, via organic growth and acquisitions — e.g.GAFAM – Network effects — value of service increases for all customers with each additional customer – typical with communications services – N-sided markets — firm facilitates transactions between n sets of customers (e.g. Facebook users and advertisers; Uber drivers and passengers; Deliveroo customers, restaurants and drivers), with indirect network effects giving ability to squeeze least price sensitive customers (e.g. Uber drivers) and monetise data flow between customer groups – Gatekeepers – “online platforms reaching a certain level of users and covering different types of services that are considered to have a particularly important impact and play a distinctive role as ‘gatekeepers’ to the services they provide.”Also known as firms with systemic market status (UK), of paramount significance for cross-market competition (DE) – Multi-homing – making use of multiple, similar, services simultaneously (how many IM apps on your phone?)
  • 6. Authoritative sources – The “Vestager report” (128pp) Jacques Crémer,Yves-Alexandre de Montjoye and Heike Schweitzer, Competition policy for the digital era (Luxembourg: Publications Office of the EU, 2019). – The “Furman review” (150pp) J Furman, D Coyle, A Fletcher, D McAuley and P Marsden, Unlocking Digital Competition (London: HMTreasury, 2019) – The “CMA market study” (450pp + 1,000+pp) Online platforms and digital advertising (London: Competition and Markets Authority, 2020).
  • 7. Security and privacy implications – Potential benefits: – “allows you to have any client you want, and more importantly maybe, and where the data is stored is under the control of the user” – Many users love “free” services, and it’s hard to compete on a market where they exist – interoperability lets competing F/OSS and paid services overcome network effects – EDPB: “Interoperability will lead to additional processing and disclosure of data to additional entities. As always, data subjects need to be made aware of any additional processing of their personal data and the involved parties.The users should always have a clear understanding of what the use of the application entails and should remain in control of their data.” – Standards body expert interviewee: – “Web tracking is an example of an open and interoperable environment turning into a cesspool of exploitative practices by both large and small corporate actors.That doesn't mean that open environments are bad, quite the contrary. But they require governance, beyond code and markets.” – IMCO opinion compromise amendments: – “systemic operators may not make commercial use of any of the data that is received from parties during interoperability activities for purposes other than enabling those activities” – “interoperability obligations should not limit, hinder or delay the ability of intermediaries to patch vulnerabilities”