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Coordinator of UK Tech Regulation Fears Online Safety Bill Harming Small & Startup Platforms

Report from the Financial Times

In Brief – Gill Whitehead, the first head of the UK’s new Digital Regulation Cooperation Forum (DRCF), a group created to coordinate the activities of four UK regulatory bodies that are taking on increasing digital regulation roles, is concerned that startups and smaller digital firms may struggle with complying with the UK Online Safety Bill that is expected to be enacted this year. The DRCF aims to coordinate digital regulation carried out by the Competition and Markets Authority, Financial Conduct Authority, Information Commissioner’s Office and Ofcom. Whitehead, who had stints at the Bank of England, Deloitte and the BBC before spending three years at Google, is concerned that the Online Safety Bill could negatively impact competition “because there’s a cost to complying with the bill that might be prohibitive for smaller firms.” One area of new regulation is Ofcom’s authority to regulate algorithms, which Whitehead notes could result in the establishment of a third-party auditing regime similar to those in the financial sector, but she stressed that there is no industry consensus on what good algorithms look like. Ofcom believes it will require 44 million pounds and 300 staff to do that job, which Whitehead sees as itself a hiring challenge. The UK Government’s National AI Strategy also envisions a regulatory regime for Artificial Intelligence and Machine Learning, and the DRCF is providing input including proposing to use “regulatory sandbox” authorities and further algorithm auditing.

Context – The UK Online Safety Bill largely parallels the EU Digital Services Act, which likewise aims to regulate how all digital platforms address a wide range of objectionable digital content, with stiffer burdens for larger platforms. The DSA is unique in trying to squarely address regulation costs, imposing a new revenue-based fee of .1% of global earnings on platforms with 45 million or more EU users to fund enforcement. As digital regulation and auditing regimes proliferate, company costs and government funding mechanisms will as well.

India Launches Public Ecommerce Marketplace to Compete with Amazon and Flipkart

Report from Reuters

In Brief – India’s Department of Promotion of Industry and Internal Trade (DPIIT) has launched its “open network for digital commerce” (ONDC), a public ecommerce platform designed by tech tycoon Nandan Nilekani, founder of Infosys Technologies, that aims to connect buyers, merchants, payment providers, and logistics service providers on a fully open-source ecosystem. The project aims to onboard 30 million sellers and to cover at least 100 cities by August. The goal is to provide a public alternative to the country’s two largest ecommerce companies, Amazon and Flipkart, which are both US owned. (Flipkart is a subsidiary of Walmart.) With the ONDC, the government hopes to replicate the success of its Unified Payments Interface (UPI), a country-wide digital payments platform which brought banks on a single platform and allowed seamless person-to-merchant payments starting in 2016. Indian retailers, with its base of millions of small shopkeepers, are key supporters of Prime Minister Narendra Modi, and have long accused Amazon and Flipkart of violating the country’s Foreign Direct Investment (FDI) laws. The ONDC service will emphasize ecommerce connecting small merchants and rural consumers.

Context – This news struck me as “municipal broadband” for ecommerce. But dig deeper, and it just reinforces that India is a unique ecommerce ecosystem with its massive pool of skilled IT workers and firms, the general view that it is the largest ecommerce growth market, but most of all its FDI laws prohibiting non-Indian businesses from operating retail businesses but allowing them to operate third-party ecommerce marketplaces. Amazon has long been accused of violating those FDI laws and has faced investigations by the Indian competition authority and FDI enforcement directorate. At the same time, Reliance Industries, an emerging digital conglomerate led by Mukesh Ambani, India’s richest man, has been attempting to build an Indian-based ecommerce alternative to Amazon. I wonder what he thinks of the ONDC?

Vestager Gives Hope to EU Telecom Companies on New Payments from Big Tech

Report from Reuters

In Brief – European telecommunications and broadband companies will be more optimistic about the prospect that the EU will force large digital video platforms such as Netflix, YouTube and Facebook to pay them new fees after European Commission Vice President for Digital Policy Margrethe Vestager expressed support for considering how digital companies could contribute more to network investments. Network providers have long pressed for digital giants to pay more based on the bandwidth their users consume when downloading or streaming online content, most recently releasing a report claiming that a small number of video, social media and tech companies account for more than 55% of all traffic on Europe’s mobile and broadband networks. In November, telecom company CEOs released a letter to EU policymakers calling on them to force digital giants to support network upgrades, as well as loosen competition standards to facilitate industry consolidation. Vestager, who leads the European Commission’s Competition Authority, again rejected calls for looser merger standards.

Context – Like the big media companies who have been increasingly successful in convincing governments to force Google and Facebook to pay them when consumers access their content online, telecom companies have been accusing Internet platforms of “free-riding” for decades. That despite the digital companies and all their users paying broadband companies for Internet access and bandwidth. Most inspiring to the network companies is South Korea, where telecom companies have been uniquely successful in imposing mandatory data usage fees on Internet-based businesses to subsidize the data usage of consumers despite clear net neutrality concernsFacebook and Netflix have been engaged in long-running legal and regulatory battles, including Netflix being asked to pay added fees to Korea’s dominant network companies because its Korean-produced Squid Game was so popular with Korean viewers.

Epic Games Pulls Bandcamp into In-App Payments Fight with Google

Report from ArsTechnica

In Brief – Epic Games has filed a motion in Federal District Court in California to block Google from being able to impose its new in-app payment policy on Bandcamp, a music distribution platform popular with independent artists that Epic acquired in March. Epic Games kicked off their antitrust crusade in August 2020 by modifying in-apps payments on its massively popular Fortnite game, which caused the game to be suspended from the Apple and Google app stores. Epic then filed long-prepared federal antitrust lawsuits arguing that both platforms were illegal monopolies that charge overly high fees, often reaching 30 percent. Fortnite remains blocked on Apple’s App Store and Google’s Play Store, although users can still upload the Android game from other sites. Bandcamp is a platform that has never allowed in-app purchases on its iPhone app due to Apple’s rigid payments policy. However, Google has historically been less strict with its app upload and payments policies and Bandcamp’s Android app includes in-app purchases. Google is enforcing a tighter in-app payments policy for Play Store apps starting in June and have informed Bandcamp that it will be required to use Google’s payments service and pay a 10% commission on in-app sales. Epic Games is suing to block Google, a ruling it could not get for Fortnite, which is already blocked. Google responded to the suit arguing that the claim is meritless, that the proposed commission of 10% is less than Bandcamp itself charges users, and that there are other options to distribute Android apps.

Context – The key point is that Epic is not stepping back from their massive global legal and regulatory campaign against Apple and Google. They largely lost to Apple in US Federal Court, but a major appeals battle is underway. They continue to press on in the UKAustralia and EU. Their Google suit in US federal court has moved slower than their Apple suit and is scheduled for trial in late 2023, while the Apple suit’s appeal trial is expected in early 2024.

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Platform Economy Insights aims to provide small-to-mid-sized digital platform business leaders, investors and firms that support industry growth, and public officials, staff and media who track the platform economy, with expert analysis of public policy trends impacting the digital platform industry globally. 

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