Reed Smith Client Alerts

Authors: Stephen Edwards

It has been a busy few months for the European Commission. When the Commission announced its plans for the digital single market (DSM) on 6 May, many commentators and stakeholders felt that it provided more questions than answers. Since then, the Commission has been slowly adding flesh to its initial strategy paper, and with a recent spate of consultations published, now is a good time to take stock and re-consider the status and direction of the Commission’s plans.

It can be hard to keep up with the Commission’s ambitious and ever-evolving plans and so this alert will review some of the more controversial aspects of the DSM project and consider the progress made towards (or away from) the Commission’s originally stated aims.

Geo-blocking: Content for one, content for all?

What were the plans? One of the most contentious aspects of the DSM strategy was the Commission’s objective of facilitating cross border access to content, putting an end to what it considers “unjustified geo-blocking”. The Commission hoped that this would enable consumers to purchase and access the same products and content online (and at the same price) regardless of which member state they were located in. This caused significant apprehension within the audiovisual industry, concerned that it might spell an end to territorial licensing and, with it, a collapse in the value of content rights. In addition, the audiovisual industry has raised legitimate concerns that the complete removal of the territoriality principle would marginalise minority languages and cultures, where it is not efficient for large organisations to operate, leading to less investment in local and culturally diverse content and less opportunity for local sponsorship and product placement.

What is the latest position? Faced with these concerns, the Commission has acknowledged that geo-blocking to prevent cross-border access to content may be justifiable in order to maintain a healthy European audiovisual production industry. Consequently, the focus on geo-blocking has shifted in recent months to the issue of portability. The “portability of legally acquired content” was also referenced in the original DSM strategy paper and aims to enable consumers who subscribe to a particular service in one member state to access that same service (with the same available content) when travelling to other member states. It would not allow an individual resident in Spain, for example, to access or become a subscriber to a UK service. While not as radical as putting an end to territoriality altogether, there are still significant issues, both practical and legal, that will need to be overcome for portability to become a reality.

What is on the horizon? The Commission has published a consultation on geo-blocking, which is open for response until 28 December 2015. However, this consultation is not intended to cover services related to copyright and licensing strategies, which the consultation notes will be addressed in separate initiatives. In parallel, the Commission has launched an EU antitrust competition inquiry into the e-commerce sector. The inquiry was launched alongside the DSM in May and the Commission has requested information, by means of a questionnaire, from a wide range of businesses and industries in which e-commerce is widespread (including electronics, clothing and digital content). The questionnaire represents quite an in-depth fact-finding mission, particularly regarding potential barriers to cross-border online trade. Where the responses received generate specific competition concerns, it is likely that the Commission will open competition case investigations in order to enforce EU antitrust rules. Given the ongoing investigations into the contractual arrangements of certain film studios relating to pay television, it will be interesting to see how this sector inquiry contributes to the Commission’s broader thinking and proposals regarding cross-border access and portability for digital content.

We may not have long to wait, in fact, with it rumoured that the Commission will publish a draft Regulation to address portability as soon as 9 December, accompanied by a further roadmap for the next steps. Certainly a day to mark in the calendar for keen observers.

Copyright and regulatory reforms: Re-writing the rule book?

What were the plans? To complement the Commission’s plans regarding geo-blocking, the Commission announced that it would “make legislative proposals before the end of 2015 to reduce the differences between national copyright regimes and allow for wider access to works by users across the EU”. As part of this, the Commission announced that it would review the Audiovisual Media Services Directive 2010/13/EU (AVMSD) and Satellite and Cable Directive 93/83/EEC (SatCab).

What is the latest position? The Commission has published two separate consultations regarding the AVMSD and SatCab, respectively. The AVMSD currently applies a country of origin regulatory regime to television broadcasters and on-demand services (such as Netflix), but does not regulate Internet services hosting user-generated content which does not have the characteristics of television broadcast programming. The consultation is particularly concerned with the extent to which this current system is working or whether new services should be further regulated, given the changing ways in which content is distributed and viewed. Similarly, the SatCab consultation focuses on whether the SatCab Directive’s country of origin copyright regime for determining where a communication to the public by satellite takes place, should be extended to certain online transmissions in light of market and technological developments since the last review was carried out in 2002. It has been suggested that an extension of the SatCab Directive may be the most effective way of implementing the Commission’s portability proposals.

What is on the horizon? The AVMSD consultation closed at the end of September and responses are currently being reviewed by the Commission. The deadline for responding to the SatCab consultation is 16 November 2015, giving interested parties a little longer to have their say. It is most unlikely that a uniform EU copyright code will be introduced as part of the DSM project, not least due to the political difficulties of asking each member state to give up their own copyright systems. There is believed to have been some debate within the Commission as to whether any copyright reforms are best achieved by adopting a regulation rather than a new directive. Indeed, regulations are often more carefully negotiated because they typically leave no room for member state discretion in implementation. The Commission is expected to issue a further communication before the end of the year, not least a draft regulation addressing portability.

Online platforms: With great power comes great responsibility?

What were the plans? In its initial strategy paper, the Commission noted the increasingly central role that online platforms play in social and economic life and called for a broad assessment of the role of platforms including, amongst other things, how online intermediaries should contribute to the combatting of illegal content on the Internet.

What is the latest position? After much speculation and even a leaked draft of the consultation document, the Commission has now published its formal consultation on the regulatory environment for platforms, online intermediaries, data and cloud computing and the collaborative economy. The consultation is typically broad, but of particular note are the questions relating to the role of platforms in tackling illegal online content, including content that infringes IP rights. The questions seek to analyse the extent to which the mere conduit, caching and hosting exceptions provided for by articles 12 to 14 of the E-commerce Directive 2000/31 should be re-visited and, more specifically, whether a duty of care should be imposed on online intermediaries. The consultation also seeks to obtain views on the “free flow of data” within the EU, the ‘European cloud initiative’ and the extent to which EU law is fit to support the growing trend of ‘collaborative economy’ platforms (such as Uber and Airbnb).

In addition to the Commission’s consultation, the UK House of Lords EU Internal Market Sub-Committee has published its own call for evidence, in order to better understand the views of UK consumers, platform operators, businesses that sell goods and services via online platforms and non-digital competitors.

What is on the horizon? The deadline for submitting responses to the House of Lords questionnaire was 16 October 2015, although we expect that submissions made shortly after this deadline will still be accepted. Interested parties have until 30 December 2015 to respond to the Commission’s consultation and we encourage all those affected or interested to do so. The wording of the consultation certainly points towards intervention in the regulation of online platforms. If so, it will be a difficult but important task for the Commission to balance freedom of expression and the benefits afforded to consumers by these platforms, while at the same time suitably protecting rights holders.

Conclusions The Commission is now firmly in the information-gathering phase of its DSM timeline. In total, seven separate public consultations relating to the DSM are currently open, in addition to the three that have already closed and two more that are scheduled for publication before the end of the year.

The feedback and information garnered from these consultations will have a real influence on how the Commission’s plans and priorities for the DSM progress. As such, it represents a significant opportunity for stakeholders to contribute to the shaping of European policy that will have a profound practical impact on business across many industries. This has already been seen in the shift in the Commission’s attitudes towards access and portability of content. Reed Smith is working with a number of clients on responses to digital single market consultations and inquiries and we would be happy to assist with any queries you may have.

Once the Commission has gathered and reviewed the information, we can expect to see some more concrete proposals. It appears that the Commission is still on track to issue a further communication regarding its plans for copyright and geo-blocking reforms before the end of the year, with a draft Regulation on portability rumoured to be due on 9 December. Certainly over the next six months, we expect to have a much clearer idea of how the DSM will take shape. Interesting times are ahead.


Client Alert 2015-299