Online Platforms: The fine line between regulation and innovation

Online platforms are in need of a proper legal framework to define their scope and liabilities. The main challenge facing the legislator is to cover a broad range of fields: tax, privacy, freedom of speech, competition, etc. In that context, a question emerges: How can we regulate while keeping the door open for entrepreneurship and digital innovation?

Transparency and data: What is there to know?

The issue of transparency is prominent when it comes to platforms. Stefan Larsson, Senior lecturer at Lund University in Sweden, highlights how difficult it is for consumers to understand what is really happening to their data; they simply do not have enough information on how it is being used. In his opinion, “lack of transparency makes manipulation even easier.” This tendency extends to regulation of competition, since platforms can create new markets altogether, adapting their information from individual to individual, and maintaining dominance; albeit allowing new players to follow. “Platformisation is taking over the internet”, says Larsson, with AI and big data algorithms reaching fileds such as urban transport, health, education, etc.

What are platforms doing?

“Social media are a driver of growth, in particular for SMEs”, is the message of Aura Salla, Facebook’s Head of Public Policy, arguing that the platform has decreased marketing and publicity costs for the average business owner. However, she admits that online platforms need to take more responsibility, especially when it comes to political ads. “We need more harmonisation from EU legislators to set up the future of the free internet”, says Salla. Regulation should also be consistent across Europe and announced in a timely manner to give platforms a fair chance to adapt. She goes on to explain the “remove, reduce and inform” strategy which was set in motion by Facebook during COVID-19 as an effort to limit conspiracy theories that could lead to physical harm. This time, priority is placed on information by “official and reliable” resources and traditional media such as BBC and CNN.

The regulatory side: A new legal system

“Platforms are not merely service providers”, states Teresa Rodriguez de las Herras Ballell, academic and member of the EU Observatory on the Online Platform Economy. “They are new communities, new legal systems, and we have to tackle how to regulate them as such”. In the request for speed in regulation to catch up with innovation expressed, Herras Ballell stresses that quick processes often end up in failed or not adapted regulations.

However, when it comes to taxation, there is a wide consensus: we need a new, adapted system for online platforms. This system should be created at EU level and have a harmonised set of rules, in order to avoid taxation competition among the EU member states.

This article is based on the latest On the Agenda webinar series, organised by the European Liberal Forum, on the topic of Platform Economies. See the full discussion here.

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