Improving the Economic Effectiveness of the B2B and B2C Data Sharing Obligations in the Proposed Data Act

The Data Act (DA) is a key pillar of the European Data Strategy that aims to create a single market for data and make the EU a leader in the data economy. The proposal, unveiled in February 2022, sets harmonised rules for fair access to and use of data.

This new CERRE report, led by Academic Co-Director Jan Krämer, zooms in on Chapters II-IV of the regulation covering the basic rules for data sharing for data co-generated through the use of connected products by both commercial users and end users. This part of the DA applies to both personal and non-personal data and to virtually all products in the so-called Internet of Things ranging from smart machinery over connected vehicles to fitness bracelets. The B2B/B2C data sharing provisions are considered the ‘heart and soul’ of the DA, which also covers other data-related issues such as business-to-government data transfers and switching between cloud providers.

The CERRE report considers the effectiveness of the proposed data-sharing provisions, predominantly from an economic perspective. The report is supportive of the DA’s general idea to provide data users with a new right to portability – similar to the one found in the GDPR, but also including non-personal data and enhanced data transfers in real-time. However, it criticises the numerous exceptions to that portability right and the use of data, such as exceptions for certain products and a prohibition to use the data for the development of a competing product. These exceptions make the law overly complex for a horizontal regulation, create legal uncertainty, and raise transaction costs that, combined, reduce the attractiveness for users and third parties to use the data and ultimately undermine the DA’s goal of unlocking data. On the whole, the ambition is to create a regulatory framework that is intended to strike a balance between preserving innovation incentives for data holders and increasing innovation and investment incentives for data recipients. However, the report argues that the current proposal of the DA risks eschewing this balance towards the data holder and therefore falls short of its ambitions.

The report argues that the balancing of innovation incentives should be done mainly by limiting data-sharing obligations to raw data generated by product use, excluding derived data. In reverse, the complexity of the regulation can be significantly reduced, and its effectiveness increased, by reducing the number of exceptions.

To this end, the report makes six concrete policy recommendations to achieve this:

• Remove the no-competition clause (Articles 4(4) and 6(2)(e)), which otherwise undermines innovation incentives by both data holders and data access seekers.
• Introduce a rebuttable presumption that access to raw data does not impede trade secrets. Remove Article 8(6) which suggests otherwise.
• Introduce rebuttable presumption for a zero access price for third parties, instead of stipulating that access seekers need to negotiate a positive access price.
• In return, exclude not only micro- and small-sized enterprises, but also medium-sized enterprises from having to provide data access to connected products under the DA.
• Remove most product exclusions, such as for webcams.
• Allow users to transfer data to any third party that they deem useful, including gatekeepers under the DMA, to maximize innovation potential from data.

This report is part of a larger CERRE project on the Data Act, which started with a first assessment of the proposal (published in July 2022), and will now produce three thematic reports analysing the three most relevant sections of the proposal (B2B/B2C data sharing, B2G data sharing and cloud switching) and giving recommendations on each of them to improve the regulation.