14 December 2020
Radar - December 2020 – 5 of 8 Insights
2020 has seen a real push to move forward on regulating online content and platforms in the UK and the EU. While many initiatives are at early stages, others have been introduced and further change is inevitable. This is a crowded space but here are some of 2020's highlights.
As we discussed, the Platform to Business Regulation came into effect on 12 July. It aims to redress a perceived imbalance in the relationship between online platforms and the businesses which provide goods and services on them, as well as between online search engines and the websites which appear on their listings, particularly in relation to ranking.
The UK Online Intermediation Services for Business Users (Enforcement) Regulations 2020 came into force at the same time as the Regulation and provide for enforcement through the courts. There will be no regulator for compliance purposes in the UK although there is scope under the P2BR to appoint one. The Regulations confirmed that the P2BR will be retained law after Brexit.
The EC published a lengthy set of Q&As by way of guidance on how to implement the requirements of the P2BR, who is caught by the legislation and who can benefit from and enforce requirements. The EC guidance applies to the whole of the EU including the UK until the end of the transition period. It will continue to be helpful to UK businesses after transition but should be read carefully in light of changes made to the post-Brexit version of the legislation which will apply in the UK. In particular, the section on public bodies enforcing against OIS providers or search engines, will not be relevant after the end of the implementation period.
The UK's Digital Services Tax (DST) has applied since 1 April 2020. It is a 2% tax on businesses with global annual turnover of over £500m where more than £25m of annual revenue is generated from providing social media services, internet search engines or online marketplaces to UK users. The first £25m of revenue from UK users will be exempt. The tax is on revenue not profit and it applies to global group revenue so the thresholds should be calculated at group level but liability is at entity level and groups have to nominate a company to fulfil reporting obligations.
The OECD ran a consultation on model rules for tax reporting for online platforms. The idea is that model rules could be adopted by jurisdictions to collect information on transactions and income realised by online platform operators on a uniform basis. The rules would target transactions on "platforms" which are currently defined to cover all software products accessible by users and which allow sellers to be connected to other users for the provision of specified services. It includes associated services such as payment processing services but not platforms which only offer the operator's own services. In July, the OECD published model rules for reporting by platform operators with respect to sellers in the sharing and gig economy together with a Code of Conduct on co-operation between tax administrations and sharing and gig economy platforms. If the proposals are adopted, they will add a significant compliance burden for platforms in participating jurisdictions. The UK has said it will review the DST if an international system is established.
In March, we discussed the EC's plans to create a "Europe fit for the digital age" covering a huge range of areas from AI, to data, to plans to regulate platforms and protect consumers. Since then, it has published its New Consumer Agenda and a draft Data Governance Act. Expected imminently at the time of writing is the Digital Services Act Package which will have significant implications for online operators and those impacted by their activities. Leaked documents gave us more of a hint about what to expect as we covered in October.
As we reported in July, the CMA published its final report following its market study of online platforms and digital advertising. It called on the government to introduce a new, pro-competition regulatory regime to tackle the market dominance of Google and Facebook and govern the behaviour of major platforms funded by digital advertising.
The CMA, Ofcom and the ICO set up a Digital Markets Taskforce (DMT) to build on the conclusions of the market study and advise the government on how to design a new regulatory regime for online platforms. The government announced in November it would be setting up a Digital Markets Unit to oversee a pro-competition regime for platforms including those funded by digital advertising. It will produce a new statutory Code of Conduct to give consumers more choice and control over how their data is used and to help SMEs promote their products online. The Code will also support the sustainability of the news publishing industry to help rebalance the relationship between publishers and online platforms. The new unit, which will begin work in April could be given significant enforcement powers.
Prior to that, the CMA published its response to the EC consultations on the Digital Services Act package, cross-referring to its own recommendations which are similar. It will be interesting to see the extent to which the UK and EU initiatives keep step.
In February, the government published its Initial Consultation Response to its Online White Harms Paper. A final report was expected in spring 2020 but failed to materialise. We are currently expecting: the codes of practice on terrorism and CSEA by the end of 2020 or in early 2021; the final government response to the OHWP consultation before the end of 2020; and draft legislation in spring 2021.
The EU is also working on this issue. the European Commission's proposal for a regulation on preventing the dissemination of terrorist content online includes one-hour takedown requirements on hosting services providers, proactive filtering measures and a duty of care. Meanwhile, the Copyright (Digital Single Market) Directive removes safe harbour protections for online content-sharing service providers and requires them to take additional steps to benefit from a defence to copyright infringements on their services. The EU announced further plans to tackle online harms in its Digital Package.
In October, we covered a significant judgment which potentially affects all businesses including platforms in the UK which operate as middlemen introducing individuals, purportedly on an arms-length basis, in which the worker operates on a self-employed basis. The decision is being appealed.