Private Power, Online Information Flows and EU Law

Mind The Gap

Angela Daly

• Publisher: Hart Publishing
• Year: 2016
• ISBN:
  9781509900657
• Edition: 1
• Topic: Law
• Subtopic: Antitrust
• Index: Law

This monograph examines how European Union law and regulation address concentrations of private economic power which impede free information flows on the Internet to the detriment of Internet users' autonomy. In particular, competition law, sector specific regulation (if it exists), data protection and human rights law are considered and assessed to the extent they can tackle such concentrations of power for the benefit of users. Using a series of illustrative case studies, of Internet provision, search, mobile devices and app stores, and the cloud, the work demonstrates the gaps that currently exist in EU law and regulation. It is argued that these gaps exist due, in part, to current overarching trends guiding the regulation of economic power, namely neoliberalism, by which only the situation of market failure can invite ex ante rules, buoyed by the lobbying of regulators and legislators by those in possession of such economic power to achieve outcomes which favour their businesses. Given this systemic, and extra-legal, nature of the reasons as to why the gaps exist, solutions from outside the system are proposed at the end of each case study. This study will appeal to EU competition lawyers and media lawyers.

1

Introduction

The phenomenon of the Internet is widely believed to have been a revolution in society akin to that of Gutenberg’s printing press 600 years ago. One aspect of this revolution initially was perceived to be the ungovernable, indomitable nature of the Internet, especially as compared to the control that could be exerted over previous communications technology, such as television, print media and the telephone, due to the decentralised nature of the ‘network of networks’.

However, after more than 20 years of the Internet being widely available as a public medium, poles of power have emerged, both public (based around the nation-state) and private (based around for-profit corporations), which also interact with each other to produce a corporatised private-public pole of power over the Internet. It is the private aspects of this public-private nexus which is the topic of this book. This private power has manifested in concentrations of power which do not promote and facilitate an optimally free flow of information online for users, compromising their autonomy.

A framework of laws and regulation already exist with the explicit aim, or implicit effect, of governing such concentrations of private power. It is those of the European Union (EU) that are considered here, in particular antitrust/competition law,¹ sector-specific regulation, data protection and human rights. However, it is competition which is the most prominent: absent any ex ante regulation, mono- and oligopolies are prima facie governed by competition law (as a ‘legal regime of last resort’); also, EU competition law has strong enforcement measures available for when breaches are detected. Indeed, in only one of this book’s case studies is ex ante regulation present, namely telecoms markets, with its presence a legacy of the privatisation and liberalisation of this sector from the 1980s rather than a response to the new challenges posed by the Internet. Given the Internet is used as a communications medium extending beyond a mere economic marketplace, EU data protection law and fundamental rights, in particular privacy and free expression, are also relevant to the book’s discussion.

Each chapter of the ‘substantive’ part of this book forms a case study which provides an example of where existing law and regulation in the EU, namely competition, sector-specific regulation, data protection and fundamental rights, leave a ‘gap’ where Internet users’ interests, encapsulated in the idea of ‘autonomy’ explained below, are not protected and instead left exposed to the negative effects of concentrations of private economic power affecting online information flows.

These gaps exist due, in part, to current overarching trends guiding the regulation of economic power, namely neoliberalism. Accordingly, only the situation of market failures can invite ex ante rules. This is also buoyed by the lobbying of regulators and legislators by those in possession of economic power to achieve outcomes which favour their businesses. Given this systemic, and extra-legal, nature of the reasons as to why the gaps exist, some ‘quick fixes’ from outside the system are proposed at the end of each case study, namely the potential for applying regulation and/or applying ‘self-help’ solutions, which are mainly technical measures using peer-to-peer design. These extra-systemic solutions are, admittedly, not a complete or perfect solution to the problems of private economic power online, but they do give a glimpse of alternatives which could be deployed on a grander scale to effect positive change for users.

I.This Book’s Approach

This book explores how information flows on the Internet are controlled by for-profit corporations at various important ‘choke-points’ and critiques the EU’s existing legal and regulatory framework for being unable to ensure that these flows occur in an ‘optimal’ way. In practice the corporate ‘gatekeepers’ of these online information flows at the choke-points are private, for-profit undertakings which have a monopolistic or oligopolistic character. The main argument of this book is that existing EU law and regulation does not adequately address concentrations of private economic power adversely affecting online information flows to the detriment of Internet users’ autonomy due to their neoliberal basis.

A ‘law in context’ approach is taken to the subject of corporate dominance over Internet data flows.² More specifically, a critical political economy approach is taken to the study of the EU legal and regulatory frameworks governing concentrations of private power online.³ This is preferred over a traditional ‘black letter’ doctrinal approach to the law due to the issues of power, freedom, autonomy and control which are explored in relation to online information flows.

The focus of this book is on Internet markets whose subject matter concerns online information flows. While the Internet is transnational by its very nature, the EU is the book’s principal jurisdictional locus since it is one of the two most advanced competition and regulatory regimes in the world, as well as having a highly complex and developed Internet infrastructure, the majority of which is privately-owned (as opposed to being the property of the state). The analysis is comparative in part, drawing as well from the experience of the United States of America (US) where relevant, given its position as having the other most advanced competition and regulation regime globally. In addition, many of the Internet corporations managing online information flows considered here are transnational entities, which operate in both the EU and the US. This also triggers a (partially) comparative analysis since what happens to such a corporation in one jurisdiction in terms of competition investigations and regulatory action can have spillover effects in the other jurisdictions in which that corporation operates.⁴

Internet corporations involved in the management and facilitation of online information flows, by providing either physical or virtual infrastructure through which this information flows between Internet users, are considered. These corporations can be termed ‘gatekeepers of information’ since through their infrastructure they channel information to users, and they also have the power to switch on or off these flows, as well as manipulate the flows in other ways: thus, they exert control over the information flows.⁵ Online information flows have become increasingly important to social and economic aspects of life, given that the data they contain may be the ‘new currency’ of the information economy, or a business input as important as capital and labour.⁶ The rise of ‘Big Data’ (ie the collection and analysis of large volumes of information), and the associated hype around it,⁷ reinforces the importance of data in the information economy, and the crucial role of the entities which control that information and data.⁸ Indeed, the transition to the ‘Internet of Things’, whereby a plethora of objects such as clothes and accessories, coffee machines, and energy meters are becoming Internet-enabled, is likely to cement data gathering and analysing as key functions of the economy but the problems that are generated by control of information are also likely to be amplified as a result of this development.⁹ Moreover, the proliferation of devices connected to the Internet culminating in the Internet of Things and the amount of activities in the lives of those in (over)developed Western societies which take place involving the Internet in some way or other cause the distinction between online and offline to blur.¹⁰ In an increasingly ambient intelligent environment, more of what used to be ‘offline’ is now also ‘online’, which makes this book and the issues it interrogates all the more timely.

Such corporations operating in markets in which data and information gathering is of paramount importance challenge conventional EU competition and regulation analysis, due to facts such as: the nature of their products and services being highly complex and technical; users in some cases paying no monetary sum (although often paying with their privacy)¹¹ to access the services or products which make up examples of two- or multi-sided markets;¹² and the rise of ‘prosumer’ peer production to (part-)produce informational products and services.¹³ These factors place obstacles in the way of traditional applications of competition law, as well as competition’s paternalistic attitudes towards passive consumers and failure to see or deal with the ‘non-economic’ aspects of issues it encounters.

This book looks at available law and regulation to address the control of online information flows by concentrations of private economic power. Absent specific regulation, competition law is the main legal player, operating as a residual regime to address accumulations of economic power principally through its sanctions for abuse of dominance. There are other legal and regulatory regimes which intersect with parts of the Internet and its information flows but they too leave gaps where Internet corporations are concerned. In any event, these laws also are not designed primarily to tackle corporate dominance resulting from concentrations of private economic power, and for this reason also cannot be relied upon to deal with this issue.

Yet certain other legal regimes, which promote the autonomy of users and are applicable to the scenarios at hand, are considered to determine the extent to which they can solve problems of corporate control of online information flows in the interests of users. EU data protection laws and fundamental/constitutional rights to free expression and privacy are highly pertinent to the governance of online information flows. Furthermore, the objectives of these areas of law converge with the idea of user autonomy, which is central to the argument of this book. Data protection law has the objective of protecting individuals’ privacy, which itself protects individuals’ autonomy.¹⁴ In Europe, the right to free expression is conceptualised as centring on the individual, and being based on the ideas of autonomy and human dignity.¹⁵

There are various related areas which are outside this book’s scope. First, the discussion concentrates on exercises of private economic power, and thus excludes state-only control of online information flows, such as for the purposes of preventing crime (eg child pornography, terrorism, fraud), addressing copyright infringement and restricting ‘adult’ material. While the nation-state and private economic power do cooperate with each other for mutual benefit, pure state conduct is excluded from consideration, as well as its ‘outsourcing’ to private providers.

Secondly, the discussion here centres on whether current EU law and regulation, and their application, are capable of addressing the problems caused by the control of online information flows by private economic power, and thus ensure that users’ autonomy is preserved and protected. Accordingly, possible conceptual reforms to this law and regulation to promote user autonomy are not considered in great detail. The omission of such discussion is due in part to concerns of space and to the fact that such conceptual reform is also likely to be a longer-term project in terms of time. Instead, a more pragmatic approach is taken to the problems that exist now with these large concentrations of private power online manifesting in commodified information gatekeepers, and how they may be resolved in the short term by existing law, regulation and extra-legal methods. Nevertheless, the reform of existing law and regulation in ways which would promote user autonomy online, and perhaps autonomy for citizens in other areas of life as well, may be a much larger project, part of a broader and more profound societal change which embraces more radical, heterodox, schools of economic theory, such as participatory economics (and participation beyond just the economic sphere).¹⁶

Thirdly, of current EU law and regulation, consumer protection law is largely excluded from consideration. Consumer protection law may theoretically promote individuals’ autonomy through its concern for the weaker parties (ie individuals) in the marketplace. However, in practice redressing this balance has generally involved greater transparency obligations on companies to provide more and accurate information about the products and services they are selling. While more information may be provided about eg non-net neutral conduct from Internet Service Providers, what happens to users’ data once it is collected or the existence of restrictions that mobile device providers put on their devices and access to content, this does not go far enough to advance user autonomy. The Unfair Terms in Consumer Contracts Directive (93/13/EEC) does concern the substantive ‘fairness’ of terms in standard form consumer contracts, which are frequently used for digital products and services, and in theory an expansive interpretation of what constitutes ‘unfairness’ in such contracts may involve invalidating terms which impinge upon user autonomy as defined below. Yet in practice, consumer law has been tardy in its consideration of digital matters compared to other areas of EU law.¹⁷ There is scant Court of Justice of the European Union (CJEU) jurisprudence on unfairness in digital consumer contracts, even though several types of terms commonly used in such contracts would likely fail the current ‘unfairness’ test, let alone an expanded version of it.¹⁸ Furthermore, many ‘consumer protection’ issues regarding privacy are already subsumed by the data protection regime in the EU, in contrast to the US which, lacking a similar comprehensive data protection law, has experienced a more activist Federal Trade Commission protect consumer privacy via its authority to police unfair and deceptive trade practices.¹⁹ Thus, consumer protection is not one of the areas of law considered in detail within this book’s substantive chapters, but its consideration ought to be incorporated into future reform.

Fourthly, this book contains illustrative examples of the gaps left by the current legal and regulatory system in terms of addressing the adverse effects on online information flows for Internet users resulting from concentrations of private economic power. It does not attempt to cover all such examples. Indeed, for instance, the domain names and root server system overseen by the Internet Corporation for Assigned Names and Numbers (ICANN) is outside the scope, even though ICANN may fall into the definition of an online private gatekeeper, or at least a ‘public-private gatekeeper’.²⁰ The reason for this is multifaceted: ICANN and the system it oversees can be seen as sui generis in various respects.²¹ Despite its global reach and the ‘public’ nature of some of the power it wields, in terms of legal structure ICANN is currently a private, not-for-profit organisation incorporated under Californian law. The extent to which the law of other jurisdictions, for instance European law, applies to ICANN in any way is far from a settled point.²² Furthermore, even in the US, ICANN has claimed that antitrust law does not apply to its activities, so even in its ‘home’ jurisdiction it is unclear what aspects of the legal system govern its activities.²³ Another absence is a full consideration of monopolistic social networks such as Facebook, which could also be termed a gatekeeper of information online²⁴—or at l...