Article written by: Andrea Meleri

The digital economy is growing fast, and the global pandemic has accelerated its rise. Digital platforms have now invaded every area of our lives, private and otherwise, at a frightening speed, so much so that it seems like decades since the advent of the first smartphones or the first social networks, when in reality it is just over 10 years since we began making daily use of digital tools. Despite this, public actors, both national and supranational, still have not been able to respond, in a comprehensive manner, to the economic, legal and political challenges that these new tools have imposed.

Regulation of digital platforms: European Union at the forefront

The importance of this issue is well represented by the difficulties in reaching a solution that is both equal and satisfactory for all the players involved. The G20 and the Organisation for Economic Co-operation and Development (OECD) have been taking the initiative to reach an agreement on digital tax for several years now, especially from an economic point of view, but negotiations broke down last summer. In fact, the U.S. notified its European partners that it wanted to temporarily suspend work on the Global Digital Tax.
On the legal side, European legislators are working on the introduction of new digital legislation, the Digital Services Act (DSA) and the Digital Markets Act (DMA), which will update the current legislation, which dates back to 2000 (eCommerce Directive), reducing the gap with the reality of the digital world. The European Commission put forward two proposals in March 2018, and it seems that this, or the next, could be the right years for the conclusion of the work. Considering also the recent statements of the European Commissioner for the Economy Paolo Gentiloni , according to whom, if by the end of the first half of 2021 a solution will not be reached in the OECD, the European Commission will present its proposal.

What are DSA and DMA:

The Digital Services Act, as explained on the European Commission’s website , makes significant improvements in mechanisms for removing illegal content and effectively protecting the fundamental rights of online users, including freedom of speech. The legislation mainly refers to those platforms that reach more than 10% of the EU population (besides Google, Amazon, Facebook and Apple there are others). The new rules would, among other things, give users the ability to challenge the removal of content by platforms and provide them with clear information about why content is being recommended. Analyzing the other side of the coin, the obligation for platforms would be to explain how certain content is removed, how ads are shown and report who shows the content.
The conditional is used for a simple reason: the proposal made by the Commission must now go through the European Parliament and the Council, and during the legislative process the proposal may undergo changes. The same applies to the Digital Market Act, whose purpose is to act ex-ante. Referring once again to the website of the European Commission, the regulation intends to introduce a series of objective criteria to define online platforms that have the characteristics of “gatekeepers”, i.e. that control an essential facility (i.e. an asset indispensable for competitors to operate in the market). The aim is to encourage competition, obliging them to share data with competitors, prohibiting the use of non-public information belonging to users to compete unfairly, encouraging greater connection between consumers and businesses operating on the platform.

The political and economic fallout:

On the economic level, the reasons for introducing a tax on digital platforms concern, once again, the inadequacy of current legislation. At present, in fact, taxation is linked to the place where all or part of the company’s activities are physically carried out, and this has proved to be anachronistic, for different reasons: first of all, it is difficult to establish the tax presence of some companies, given that the digital services provided by these types of companies require a minimum physical presence in a given tax jurisdiction.
Secondly, within the digital business it is unclear how and where economic value is created from the use of data collected by Big Tech (not by chance, today we are talking about the phenomenon of datafication, i.e. the collection of data without a specific purpose, but to be used as a bargaining chip to be sold to third parties). The nine European rules, if approved, will not give discounts to digital platforms: in case of violations, in fact, fines of up to 10% of the company’s total annual worldwide turnover and penalties of up to 5% of the average daily turnover are foreseen.

From the political point of view, the signal that comes is strong and has a double meaning. First of all, it is important that the European Union does not go in random order on the subject, thus avoiding showing itself once again to be weak and fragmented on decisive issues, but, on the contrary, an actor able to pursue common goals and interests (even if, by the way, we must remember the unilateral initiatives of France, Italy and Hungary in introducing their own digital tax).
To this we must add that the aforementioned Directive on eCommerce, which does not make the platforms responsible for the content conveyed and the products sold, has had repercussions on the quality of democratic debate, encouraging the spread of fake news and polarization of political confrontation.

Democracy, in fact, is not only a matter of quantity, but also of quality, and clearer rules will help to transform the web into a useful tool for the democratic context. Digital technology has now pervaded every aspect of our days, but we are still not totally capable of having a fruitful “confrontation” with it. Like any new tool, it is necessary to learn how to use it and to know its strengths and weaknesses.