Digital Single Market

It will attempt to implement better access for consumers (individuals and businesses) to the digital world across Europe.[8] The first objective of this first pillar will involve a number of legislative proposals. They will regulate cross-border markets in order to reduce the differences between Member States[9] and also to allow for a "harmonisation of the different VAT regimes".[8] Indeed, there is a difference in contract law and this hinders the smooth flow of trade in the single market. To address this, the commission has proposed two directives[10] (2015) to ensure that "consumers who seek to purchase goods or services in another EU country, whether online or by visiting a shop in person, are not discriminated against in terms of price, conditions of sale or payment arrangements, unless objectively justified on grounds such as VAT or certain legal provisions in the public interest".[8]

A second objective will concern parcel delivery services throughout Europe. However, an exception to this proposal has been made in order not to impose a disproportionate burden on small businesses.[11] They will not be obliged "to deliver throughout the European Union".[8] The third objective will be to address problems of consumer discrimination. It is foreseen that national authorities will have the possibility to check whether sites use geographical blocking.[8] It will therefore be ensured that no consumers can be discriminated against on any basis.[12]

It will attempt to provide a favourable environment for the development of fair competition for the digital network and all developing environments.[4] At the same time, the protection of personal data will be strengthened.[8] The first objective of this pillar is to transform the market so that it becomes simpler and more sustainable. The environment of the European common market must be conducive to fair competition between traditional telecoms companies and new internet players.[12]

The second objective will involve making access to networks and services more reliable but also affordable.[12] Citizens and businesses must have confidence in these networks, especially in terms of preserving their fundamental right to privacy.[12] To achieve this, it was necessary to reform a series of European regulations, especially in the field of telecommunications, but also in terms of cybersecurity and everything that concerns audiovisual media services.[13] The third objective is to enable the market to adapt to changes in its environment. As the market is based on a sharing economy, it must adapt its functioning to this.[12] The construction of this pillar is already well underway, particularly with regard to cybersecurity and telecommunications.[14] However, the most important measure concerning the revision of the directive on privacy and electronic communications is barely underway.[15]

The first objective of this pillar is to foster the digital switchover of industry and services in all economic sectors in Europe.[8] It will also be necessary to stimulate investment through strategic partnerships and networks.[12] The second objective will be access to data and capital. This needs to be in place in order to achieve sustainable and inclusive growth.[8] The third objective will be around data protection, free movement of data and the creation of a European cloud.[8] In order for all these objectives to be achieved, it is essential that the first two pillars are in place.

The aim of the Digital Single Market is to modernize regulations and make them more homogeneous on subjects such as consumer protection, copyright, and online sales.[24] The European Commission specifies and says that five objectives are noted:[25]

1. Boost e-commerce in the EU by tackling geo-blocking and making cross-border parcel delivery more affordable and efficient.
2. Modernize European copyright rules to adapt them to the digital age.
3. Update EU audiovisual regulations and work with platforms to create a fairer environment for all, promote European films, protect children, and better fight against hate speech.
4. Strengthen Europe's response capacities to cyber-attacks by strengthening ENISA, the EU agency responsible for cybersecurity, and create an effective European cyber deterrence while providing a criminal response in this area, to better protect businesses, public institutions, and European citizens.
5. Help businesses of all sizes, researchers, citizens, and public authorities to make the most of new technologies by ensuring that everyone has the necessary digital skills and by funding European research activities in the fields of health and high-performance computing.

To help this, the European Commission will use the full range of instruments and funding possibilities available. However, the full support of Member States, the European Parliament, the Council, and stakeholders is essential. For the benefits of the digital revolution to be within everyone's reach, Europe needs a regulatory framework applicable to electronic communications that promotes the deployment of infrastructures capable of functioning seamlessly throughout the EU, including in rural areas, while preserving effective competition. Much of the necessary investment will come from the private sector, based on an improved regulatory environment.

The digital single market demands high-quality infrastructure. The EU is already mobilizing investments of around 50 billion EUR from the public and private sectors for the digital transformation of industry.[26] It has also released 21.4 billion EUR from the European Structural and Investment Funds (ESI Funds) which will be available for the digital sector once national and regional strategies are put in place for digital growth, which will strengthen the link between policies and funding targets at all levels.[27]

However, more investment needs to be made in digital technology, especially in areas where digital needs are far greater than the capacities of any of the Member States acting in isolation. Efficiency can be gained by combining and complementing EU funding programs with other sources of public and private funding, notably through the European Fund for Strategic Investments (EFSI). In April 2017, investments in the digital sector associated with the EFSI represented around 17.8 billion EUR, including public and private funding, (i.e., 10% of the total amount of investments mobilized at that date).[28] However, current funding instruments have limitations when applied to large mission-oriented initiatives. Therefore, the commission will explore ways to put in place a framework to support the development of a pan-European high-performance computing and data infrastructure. Combining different EU funding sources with national and private funding would be the best way to stimulate investment.

The Geo-blocking regulation adopted by the EU in February 2018 prohibits any attempt to restrict consumers access to goods and services on e-commerce websites on the basis of their nationality or country of residence and establishment.[29] The customers will be entitled to order the product and services irrespective of their place of connection and without having to pay additional fees.[30]

The elimination of retail roaming charges effective June 2017 is a second achievement of the Digital Single Market strategy. It means that mobile users periodically travelling in the EU are able to call, text and access the Internet on their domestic tariff.[31]

Cross-border parcel delivery is another part of the commission's strategy on achieving a Digital Single Market.[32] Its regulation which aims to improve price transparency and to facilitate the assessment of certain high cross-border tariffs, entered into force on 22 May 2018. On the one hand, it implies increased documentation. General conditions of sale of the affected parcel delivery companies and a detailed description of their complaints procedure have to be submitted to the national regulator. On the other hand, it is about improved price transparency. Indeed, each individual national regulator has to publish the public list of tariffs and the terminal rates applicable to items originating from other Member States on a dedicated website and keep them updated. If parcel delivery companies don't comply with the regulation, it will be up to individual Member States to enforce penalties.[33]

From 1 April 2018, consumers will be able to access digital services such as an on-line distribution service for films and TV series that they have already paid for when travelling in a different Member State, without restriction and at no cost.[34]

There is a one-stop shop for VAT registration. The aim is to avoid having to deal with a number of different national tax systems and then VAT rules are simplified in order to incentivize cross-border trade, combat VAT fraud (especially by non-EU actors), ensure fair competition for EU businesses, and provide equal treatment for online publications.[35]

Addressing unlawful practices and identifying rogue traders are national enforcements authorities' means to protect consumers. Thereby, in order to detect the identity of the responsible trader, information can be requested from domain registrars and banks. Moreover, they can check geographical discrimination or after-sales conditions by carrying out mystery shopping and then can order the immediate take-down of websites hosting scams.[34]

In its mid-term evaluation of the Digital Single Market Strategy,[36] the Commission declared that it would present actions on unfair contracts and trading practices in platform-to-business relations. The origin of this P2B regulation can notably be found in the growing significance of online intermediary platforms. Moreover, "online intermediary platforms function as two-sided markets: the more suppliers that use a certain platform, the more attractive it becomes for customers; the more customers use a certain platform, the more attractive it becomes for suppliers".[37] For Benhamou[38] the characteristics of the two-sided markets make it harder to regulate because an intervention on one side of the market can create non-desired or counterproductive effects on the other side of the market. This two-sided market aspect creates a concentration of supply and demand on a restricted number of online intermediary platforms and because a large part of B2C transactions is taking place on those platforms, "it becomes very important for traders to have access to such a platform and as such, it places them in a weak position vis-à-vis platforms. Platforms may abuse their relatively stronger position in order to impose unfair terms and conditions upon traders and/or to use unfair commercial practices towards them".[37]

The Platform-to-business regulation[39] was adopted on 20 June 2019 and its application started on 12 July 2020, date before which the "platforms had to ensure they complied with the P2B Regulation".[40] For the Commission, the regulation « is the first ever set of rules for creating a fair, transparent and predictable business environment for smaller businesses and traders on online platforms ».[40] The regulation also aims to fill the gap between EU and national law and "to establish a fair, predictable, sustainable and trusted online business environment, while maintaining and further encouraging an innovation-driven ecosystem around online platforms across the EU".[41] For Cauffman, "the protection offered largely remains limited to transparency obligations imposed on platform operators. It remains to be seen whether this is sufficient to offer professional sellers the desired protection".[42] The regulation is important because "according to a recent European Commission study, 46% of all business users experience problems with online platforms in the course of their business relationships, with an impact on the EU economy in the range of €2 billion to €19.5 billion a year".[43]

Future steps taken on building the DSM should be more dynamic and should focus on deregulation rather than simple regulation in order to address issues where there is no sufficient focus on and to keep up with the speed of the digital transformation. Furthermore, there is also too much insecurity about how companies can actually adhere to DSM current rules.

For instance, the roaming ban is a positive step toward the digital single market but the different ways by which Telecom companies are trying to poach revenue do not correspond with the bottom-up idea of market-driven integration. Similarly, the parcel delivery legislation was positive but the problems related to transparency on costs are not truly tackled.

Another example is regarding geo-blocking. Indeed, although "unjustified geo-blocking" is prohibited, small businesses are forced to commit to sell to a larger market while abiding costs this may incur depending on the destination country in question. Finally, there is a one-stop shop for VAT registration, which is a good step, but a variety of VAT rates across member states still remains which restrict trade.[55]

In work to create a Digital Single Market, there are three conceptual problems. First, several reforms which have focused much on digital-specific regulations  have added new layers of regulatory complication to data-based commerce in Europe. Second, many of the regulations on data give confusion rather than given clarity and adding more opportunities for experimentation and innovation. Third, the EU's various regulations can have clashes between them. There is therefore a lack of coordination hence the necessity of a clearer taxonomy of the specific ambitions of one regulation. Therefore, in order to create a better and larger space for the digital economy to grow, the efforts of the Europeans institutions and Member-State governments have to be redoubled in the next few years.[55]

The main challenge faced is the fragmentation of the digital single market with twenty-seven national regimes. In a digital environment, which is by nature cross-border, national or regional markets[56] do not offer sufficient size, either to generate final demand or to support investment and innovation. Digital companies need a pan-European market to thrive and compete with global leaders, who themselves benefit from large domestic markets. Businesses and citizens alike need world-class digital infrastructure, such as high-speed networks, cloud computing, high performance computing and big data. They also need digital skills, regardless of their sector.

The DSM also raises legitimate concerns about the future of employment: beyond its impact on certain professions, the digital economy is structurally modifying the distribution of jobs and putting an end to a long trend of expansion of salaried employment, posing new challenges to labor law and social protection.[57]

Moreover, the creation of the digital single market raises the question of certain large companies, particularly the GAFAMs. Indeed, having become too powerful, they are more and more considered as a danger for the economy and democracy by many researchers and could try to abuse certain positions within this future market.[58] It will therefore be imperative to have a specific regulation, to the abuse of dominant positions. Finally, to reach its objectives, Europe is confronted with three challenges in particular: the concentration of players, tax evasion and inequalities linked to digital technology (digital fracture).[59]