Reed Smith Client Alerts

Authors: Stephen Edwards

Type: Client Alerts

After being elected as President of the European Commission (EC) in June last year, Jean-Claude Juncker made the realisation of a European ‘digital single market’ (DSM) a top priority. The EC’s much-anticipated white paper was released on 6 May and sets out its DSM strategy.

The EC wants to create a DSM that mirrors the possibilities of the physical single market. Its proposed measures are based around three main pillars: (1) better access for consumers and businesses to digital goods and services across Europe, (2) the creation of the right conditions for advanced digital networks and innovative services to flourish, and (3) maximisation of the growth potential of the digital economy.

First Pillar The main measures are: (1) cross-border e-commerce rules that consumers and businesses can trust, (2) affordable high-quality cross-border parcel delivery, (3) preventing unjustified geo-blocking, (4) better access to digital content, and (5) reducing VAT burdens in cross-border sales.

Second Pillar The main measures are: (1) making the telecoms rules fit for purpose, (2) building a modern media framework, (3) a fit for purpose regulatory environment for platforms and intermediaries, and (4) reinforcing trust and security in digital services and the handling of personal data.

Third Pillar The main measures are: (1) building a data economy, (2) boosting competitiveness through interoperability and standardisation, and (3) creating an inclusive e-society.

What this means for the media industries The measures contained in the first two pillars are the most relevant to the media industries.

1 Copyright In relation to access to digital content, the EC says that copyright reform is necessary to respond to new technologies, consumer behaviour and market conditions. The EC is particularly concerned that barriers to cross-border access to copyright-protected content services and their portability are hindering the growth of the digital economy. The white paper also says, though, that the new rules should reward creation, boost innovation and nurture cultural diversity.

The white paper’s main proposals for copyright reform are: (1) portability of legally acquired content, (2) better access to online services from other EU member states, (3) harmonising copyright exceptions, (4) clarification of the rules on use of copyright-protected content by intermediaries and (5) modernisation of the enforcement of intellectual property rights.

Although the EC highlights the principle of territoriality of rights as problematic for digital content access, it also recognises its importance for the creative sector, particularly the film industry, and says that it does not want to change it. Rather, the EC’s focus is on the facilitation of the licensing of rights to ensure better digital access.

Additionally, the EC will review the 1993 Satellite and Cable Directive to assess how it has facilitated consumers’ access to, and the portability of, satellite services in the internal market. It will also consider a possible extension of its scope – presumably applying the ‘country of emission’ principle – to certain broadcasters’ online services.

2 Geo-blocking In relation to geo-blocking, the EC’s concern is that it limits consumer choice, causing frustration and fragmentation of the internal market. The white paper states that in the large majority of cases, online geo-blocking is not justified and proposes to address unjustified geo-blocking through legislative proposals. These could include a targeted change to the e-commerce framework, as well as to the framework on non-discrimination of recipients of services.

In parallel, the EC yesterday launched a Competition Sector Inquiry to analyse the application of competition law in this area. The inquiry will focus on restrictions that create barriers to cross-border e-commerce. The results will help to target competition law enforcement better to remove such restrictions.

It should be noted, though, that the audiovisual industry appears to have been notably successful in gaining recognition of the importance of territoriality in the financing of productions. As mentioned above, the EC’s focus is on facilitating legal access to cross-border content. The white paper states that this will help deal with geo-blocking concerns, while also respecting the value of rights in the audiovisual sector. The EC specifically states that since the financing of the audiovisual sector widely relies on a system based on territorial exclusivity, its use of geo-blocking cannot be considered to be unjustified. Representatives of the film and television industries will no doubt keep a close watch on how the Commission proposes to strike the right balance on this point.

3 Media Regulatory Framework In relation to a modern media framework, the EC wants to ensure that the regulatory framework keeps up with the development of new business models for content distribution and the increasing variety of ways that viewers access audiovisual content.

The white paper proposes a review of the Audiovisual Media Services Directive to examine whether the current system of rules applying to broadcast and on-demand services should be adapted. The EC will also consider whether the current scope or rules should be widened to include new services and players that do not currently fall within the Directive and/or providers that fall outside its current geographical scope.

In relation to a fit for purpose regulatory environment for platforms and intermediaries, the EC is concerned that under the current system, the disabling of access to illegal content and the removal of such content by providers of hosting services can be slow and complicated, while content that is actually legal can be taken down erroneously.

In tandem with its wider assessment of the role of online platforms, the EC will analyse the need for new proposals to tackle illegal content on the Internet. It will consider, for example, more rigorous procedures for removing illegal content and a ‘duty of care’ for intermediaries, i.e. whether to require them to exercise greater responsibility and make more efforts in the way they manage their networks and systems.

Client Alert 2015-113