STUDY: The e-commerce Directive as the cornerstone of the Internal Market

e-commerce Directive Internal Market CERRE think tank

CERRE's Academic Director, Alexandre de Streel (Professor at the University of Namur) has co-authored a new study for the European Parliament's think tank on Europe's e-commerce Directive. The study assesses the effects of the Directive as a cornerstone of the Digital Single Market and proposes reforms for the future Digital Services Act.

Over the last 20 years, many new rules, enforcement tools and institutions have been adopted leading to the emergence of a much more complex regulatory framework for online platforms. The E-Commerce Directive is now the baseline regime which is complemented by stricter rules applicable either to specific types or sizes of platforms or to specific types of online illegal content or products.

Some Member States are also adopting national laws, in particular, to reinforce the measures that online platforms should take to tackle illegal content online. Those national laws carry serious risks of undermining the completion of the Digital Single Market.

Key findings

The country of origin principle is the greatest successes of the E-commerce Directive and should be maintained in the forthcoming Digital Services Act. It could even be extended to cover the online platforms which are not established in the EU but provide their services to EU customers, for instance by requiring the designation of a representative in the EU. However, to be accepted and effective, this ‘passport system’ requires trust between Member States and their citizens that the regulation in the country of origin is sufficiently protective and effectively enforced.

The puzzle of rules applicable to online platforms and their enforcement mechanisms should also be made more coherent and effective, in particular by improving the baseline liability regime of online platforms and by strengthening the regulation of online advertising. The new rules imposed by the Audio-visual Media Services Directive on the video-sharing platforms are a good starting point and could be generalised to other types of online platforms.

The authors propose that the Directive’s liability regime of the online platforms in case of illegal content: (1) prescribes strong, swift and scalable remedies against over-removal of legitimate content, including through an external Alternative Dispute Resolution to  incentivize better internal quality review;  (2) sets concrete incentives for high-quality notification and review process by means of elaborate rules developed through technical standardization in different areas; (3) clarifies the passivity criterion by linking it to editorial choices and thereby avoiding discouragement of voluntary preventive measures; (4) includes a set of new safe harbours, at least for hyperlinks, search engines and domain name authorities; and (5) creates an EU-wide legal basis for targeted measures (preventive or corrective) responding to the risks posed by the hosting providers provided that the evidence suggests a failure the notice and takedown process and that they remain compliant with the no monitoring obligation and fundamental rights.

Self- and co-regulation should continue to be encouraged given the rapid and uncertain market evolution as well as the exponential increase of online content. However, to respect our EU values, in particular human rights and rule of law, better safeguards need to be set up:  Codes of conduct should be accepted by the main stakeholders representing all the interested parties and values and that their implementation should be regularly monitored in a transparent and independent manner.

The revision of the E-Commerce Directive which is horizontal and applicable to all the online platforms in Europe could be accompanied by two complementary reforms to take technology and market developments into account. The first complementary reform could increase the incentives for data sharing and mobility given the key importance taken, at the age of Artificial Intelligence, by data for innovation. The second complementary reform could consist in the adoption of stricter rules for the online platforms raising systemic risks to the European economy and society.

Such asymmetric rules could be enforced by an EU regulator to increase effectiveness and internalise the cross-countries externalities but in close partnership with the national regulatory authorities to meet the principle of subsidiarity.