Reshaping Digital Markets From Brussels to Beijing
By Guillaume Couneson, TMT Partner in Brussels, and Clare Murray, Technology Strategy Consultant in London, at Linklaters
Regulation of the digital economy has become a priority for governments across the globe at a time when technology and data are more critical than ever. From Brussels to Beijing, there is increasing scrutiny of major technology platforms, and increasing appetite to address their market power, use of personal data and responsibility for online harm.
Regulators and lawmakers make waves
This year regulators in the EU, the UK, the U.S. and China have been making headlines with regulatory enforcement action against technology companies. Legislative initiatives in these major economies could empower regulators to go even further. There is a wave of new and proposed regulations which will shape digital markets: imposing more responsibility on tech platforms, granting individuals more rights, and providing regulators with greater powers to intervene.
In some cases, this regulatory intervention could have far reaching consequences for fundamental aspects of the digital economy such as targeted digital advertising. We are already seeing certain industry initiatives pre-empting aspects of the proposed regulations – such as Apple's decision not to track without user consent, and Google’s intention to stop third party cookies in its browser.
The Brussels Effect
In the EU, the introduction of the General Data Protection Regulation (‘GDPR’) was a watershed moment. In setting an EU standard, the EU took first mover advantage in regulating data – one of the core elements of the digital economy. The GDPR has since been emulated by lawmakers in many other jurisdictions and used by multinationals across their global operations as the common standard for data protection.
The EU continues to lead the way in the regulation of the digital economy, pursuing a series of legislative initiatives intended to shape Europe’s digital future. These initiatives could again inspire regulation across the globe, as in the case of the GDPR. The EU’s ambitious proposals touch on almost every aspect of the digital economy: from regulating “gatekeeper” platforms ensuring well-functioning competition in digital markets; creating a single harmonized digital market for finance; safeguarding users from online harms; establishing a framework for the regulation of Artificial Intelligence, to improving operational resilience against a growing cyber threat.
While lawmakers and regulators around the world are looking to address largely similar concerns, their approach can differ and the initiatives currently on the table across the globe contrast the EU’s approach with other models. The U.S. indeed seems to be looking for a more active role in the regulation of the digital economy; Brexit has given the UK an independent role which it is keen to use; and China’s recent regulatory actions and legislative initiatives in relation to large tech companies indicate that it does not intend to sit still either.
Going forward, the degree to which these regulatory efforts are coordinated and align is likely to dictate whether or not the risk of fragmentation in the digital environment will materialize. The emergence of a relatively consistent regulatory framework is not evident at present and multinationals face the risk of encountering inconsistent regulation that will present them with significant challenges. The key for businesses will be to keep track of the evolving regulatory landscape, to identify the opportunities and risks early on, and to adapt their strategy to pre-empt disruption and future-proof their business.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.