ARE LEGISLATORS TOO SLOW TO RESPOND TO DIGITAL TRENDS?
Sometimes called the Fourth Industrial Revolution, digitalization has already reached almost every aspect of our lives. Starting with a smart alarm clock that tracks your sleep cycle, you can then track your morning run while streaming music. New business models and innovations have increased the complexity and scale of the global economy, prompting legislators to take action. But are legislators and regulators capable of dealing effectively with the digital revolution?
Any business spends time and money in search of opportunities to maximize its position vis à vis the law. This might be to achieve technical compliance or better its market position. This results in a cat-and-mouse game between regulators and innovative businesses. For example, Spotify, the music streaming service, has been criticized for using a form of digital rights management that has a deleterious impact on freedoms enshrined in US copyright laws.
The curious case(s) of Facebook
Cue Facebook, that serves not only as a social media platform but also as an advertising platform, which in turn leads the user to spend money in (online) shops. As we update our status or like pictures and pages, we reveal much about our personalities, private preferences and personal circumstances. A substantial amount of research, resources and money spent by Facebook is solely invested in privacy protection and the prevention of harmful content on the platform.
A recent decision by the German Federal Cartel Office (FCO) shows the degree of legislators' and regulators' struggles to keep up with digital developments. In its assessment of Facebook's market power, the FCO also considered relevant factors other than market shares, such as access to competitively relevant data, economies of scale through network effects, user behavior and the strength of innovation-driven competitive pressure. The FCO classified the case as an abuse of conditions and based its decision, in particular, on principles of data protection which are not only anchored in German law but also in EU law through the GDPR. The application of data protection principles in an antitrust case has faced harsh criticism, not least by the German courts.
You snooze, you lose?
The Facebook case demonstrates that legislators need to become more flexible and agile in their thinking to keep up with digital trends. Currently, legislators and regulatory authorities often create analog laws, i.e. regulatory frameworks that are designed for traditional markets without sufficient or appropriate consideration for e-markets and the dynamics more relevant to online business. This slows down and even prevents innovation in the long term through restrictive and prohibitive legislation. Rather than battling problems once they arise, legislators should embrace the uncertainty brought about by the Fourth Industrial Revolution and create a legal framework that interlinks different fields of law to allow for flexible jurisprudence. Interdisciplinary thinking might just be the key to get out in front of the issue and effectively deal with digital trends.