New Rules for the Digital Economy

Enormous amounts of data are creating conditions for a few digital companies to attain global leadership in the field. How can the European Union (EU) ensure competition within the digital economy while protecting user rights? In September 2019, a commission of economists and jurists presented their proposals to German Economics Minister Peter Altmaier. A professor of public law at the University of Freiburg, Jens-Peter Schneider, was a member of the commission. Among the focal points of his research are German and European information law, energy and telecommunications law, and environmental law.  Thomas Goebel spoke with him.

Strengthening customer sovereignty and competition at the same time: A European Union platform directive could counter the monopolistic tendencies of major digital platforms. Photo: stock.adobe.com

Mr. Schneider, you were a member of the Competition Law 4.0 Commission, which has proposed to the federal government new rules for the digital economy. Isn't the market power of Google, Facebook, and Amazon already too big for that?

Jens-Peter Schneider: That's precisely why this commission was convened. The federal government is well aware of the problems of regulating digital enterprises. The commission has submitted proposals in preparation for the German presidency of the EU Council, which begins in autumn 2020. We investigated what could be done at a European level to make sure that the European digital economy has a chance against the dominant players from the US and China.

And what's to be done?

An important question is: How do we allow smaller European companies to cooperate with each other more easily? In the area of artificial intelligence (AI) as much varied data is needed as possible. That's difficult in a digital economy made up of small components like the one we have in Europe. And when cooperation does take place, then there's always the risk a cartel could be suspected of being behind it. That's why we want to differentiate "good" cooperation that promotes technology from those whose only aim is to exploit consumers.

Public transportation could be improved with the help of AI if digital companies, civil society, and municipalities worked together. Photo: Sandra Meyndt

What would "good" cooperation between smaller players actually look like?

There are, for example, attempts to use AI to improve local public transportation by integrating the broadest possible range of transport modes. To achieve that, digital companies could join forces with actors from civil society and municipalities. But they need security to act to ensure ultimately that their plan isn't blocked by laws regulating cartels. That's why we would like companies to be able to ask the European Commission in advance if their plans are admissible.

And on the other hand, how would this effectively limit the dominance of the leading digital concerns?

We've proposed an EU platform directive.

That sounds a bit cumbersome…

The major digital players, like Google or Amazon, are classic platforms that bring vendors and customers together. What's behind their market power is known as the "network effect." The more vendors Amazon has, the more attractive it is for customers, which in turn makes more attractive for the vendors to join in. That's why platforms have an economic and social tendency towards monopoly or oligopolies – meaning a few large companies can exploit their position at the expense of the customers. And in the long term, it causes waning motivation to innovate because there isn't any more genuine competition.

Would a platform directive prevent that?

It would set down that platforms with major market power would be subjected to more stringent requirements. It was important to us to really limit this to the powerful market platforms and not to hamper development opportunities for small start-ups, which may also be platforms.

What obligations would the major players have?

Among other things, people who've made their data available to these platforms would have more rights, including the portability of their data in real time. In technical jargon, that's called "multi-homing." That's already going on in the financial sector. According to a directive, my bank has to allow a financial technology company app to view my account data, with my permission of course.  As I result, I can administer several accounts with a single app.

Jens-Peter Schneider says that dealing with the digital economy is one of the biggest political and economic questions of the 21st century. Photo: Patrick Seeger

So users would gain more power over their data – and would as a result promote more competition between digital companies....

That's right. Customer sovereignty would be strengthened and as a result, competition as well, which is ultimately in the customers' interest. But there's a problem: Many of our data refer to others' data at the same time. With WhatsApp for example, it's not just a matter of my communication. I always have a communication partner. Transferring data like this touches on data protection. That's why we've also proposed setting up something known as "data trustees."

So one of these "data trustees" would look after my data?

Yes, as a user I could consolidate my data with a professional participant. The trustee would request my data protection profile, which differs markedly from one user to another, and then would ensure the other participants complied with that profile.

It would be a far-reaching intervention if big digital companies in Europe were required to share their data under certain conditions. How realistic do you think it is, that the EU will actually implement this?

Dealing with the digital economy is one of the biggest political and economic questions of the 21st century. In terms of data protection law, Europe has already defined a position that in the meantime is being adopted by other countries and regions to some extent. Our hope is that the EU develops its own, independent political and economic model. We've also proposed an EU agency that would gather knowledge about digital development throughout Europe. The iPhone's been around for a good ten years and since then, development has been explosive. I consider improved monitoring of this process urgently necessary.

What do you think, how will Google or Amazon be operating in Europe in 2029?

August von Hayek wrote "The Pretense of Knowledge." I don't want to engage in such pretense. Digitization will continue to pose enormous questions for us in any case. That's why it's important for Europe to have a voice and doesn't just disengage. Otherwise, we'll be ground to a pulp between the America's "anything goes" approach and the Chinese model, in which the state decides for its citizens what's allowed and what isn't.