A Comparative Approach to Digital Market Regulations: Lessons from Across the Pond

In the modern era, e-commerce has never been more active. Since 2019, there has been a steady increase in the overall trade volume of these online marketplaces. Considering this, it should come as no surprise that there have been significant legislative activities in this field worldwide, particularly as governments attempt to adapt to the changes to the commercial landscape brought about by new technological advancements. This paper will analyze and consider these developments.

Before going forward, one must first distinguish the types of digital markets available - namely, between what is regarded as a ‘formal’ digital market, as well as an ‘informal’ marketplace. In sum, informal marketplaces are characterized by peer-to-peer, bottom-up regulation, and are often found on forum sites, such as Reddit, or other marketplaces located on forum-websites. Regulators rarely, if ever, consider these sites; instead, they seem to be self-regulated by the moderators of those platforms. However, ‘formal’ marketplaces are established solely to facilitate e-commerce. They include eBay, Etsy, or even Amazon. Being run by top-down management and a dedicated company behind them, they are more heavily regulated, especially given the lack of user participation on these platforms. Given this, any regulation targets the latter. Informal marketplaces are significantly harder to regulate, as little is known about them, and they often have their own unique community cultures and practices, perhaps a degree of their own lex mercatoria. Conversely, legislative reforms often target major formal digital marketplaces which are known to be predatory on consumers.

This paper underscores this distinction by reviewing three major jurisdictions that have taken different paths: Europe, the United Kingdom, and finally, the United States.

European Union

The European Union’s (“EU”) primary legislation pertaining to e-commerce sites is Directive 2000/31, most commonly known as the “e-Commerce Directive” by scholars. Notably, the e-Commerce Directive also states that service providers are subject to the laws of their State of incorporation rather than the laws under which they provide services while also providing minimum obligations on providers, such as communications, requirements for certain electronic contracts, and disclosure obligations that these companies have to consumers, liabilities of third parties, and storage of data.

Broadly, internal studies within the EU have indicated that the e-Commerce Directive has been an integral part of the success of the single market, with further recommendations to develop it. Undoubtedly, the clarity of the governing law in the EU’s approach is something to be applauded, as it provides significant legal certainty for consumers as opposed to using complicated end-user licensing agreements, which have been significantly criticized.

The UK

Having recently left the EU, the UK is in a position to replace the e-Commerce Directive with its own solution pertaining to e-commerce and has attempted to do so through the Digital Markets, Competition and Consumers Bill 2024. While it has not passed Parliament yet, three core focuses can be identified. First, it significantly increases consumer protection laws. Second, it empowers the existing Digital Markets Unit to conduct greater fair-trading investigations. Finally, it promotes general regulatory and enforcement powers through means such as higher penalties.

Regretfully, unlike the EU’s position, the UK’s new legislation seems somewhat misleading. While the EU seeks clarity and minimum standards to adhere to, the UK’s position seems merely to expand the top-down approach. However, greater enforcement powers merely acts as a deterrent, and does not create a minimum standard departing from the EU’s model. This fails to address underlying issues that often occur in e-commerce, such as complicated EULAs and user-unfriendly clauses and instead resorts to police powers.

The US

Even broader than the UK, the US seemingly lacks e-Commerce specific legislation. Instead, it regulates these platforms by the general provisions that apply to any business. For instance, it is regarded that consumer obligations in traditional brick-and-mortar transactions would apply similarly as in e-Commerce transactions. In a similar vein, there is no larger regulatory body that deals with e-commerce specifically, and the Federal Trade Commission regulates both retail and online transactions. The only specific legislation targeted towards these sites is the CAN-SPAM Act, which seeks to protect consumers from unsolicited and false commercial marketing. However, even this legislation is arguably more targeted toward online marketing than e-commerce. Nonetheless, the US’ treatment (or lack thereof) of digital markets is undoubtedly a cause for concern.

In the US, larger companies are free to enact policies and terms that can be said to be under-regulated. As such, it is no wonder that the growth of e-Commerce in the US has stagnated compared to the rest of the world. Similarly, fraud in the US has grown significantly, and fraud-detection and prevention businesses remain at an all-time high. In that vein, one might go so far as to suggest that the US had ‘outsourced’ its legislative powers in this field to third parties, perhaps in an attempt to mirror informal marketplaces. Nonetheless, such a light-touch approach indicates more can be done in this field.

Conclusion

In sum, this paper sought to provide a brief insight into the regulations of digital markets. While the EU has adopted a rather pro-regulatory framework, seeking to take matters into its own hands, the US, in stark contrast, has left the e-commerce market to be subject to the laws of traditional brick-and-mortar regulation. Broadly, both approaches have their benefits and criticisms, which could remain the subject of a separate study. Nonetheless, where both jurisdictions are experienced, the UK, in developing its own regime, had threaded its own path and adopted the persona of the internet “police,” seeking to regulate through harsh enforcement. This position is rather worrying and might only lead to more hostility between e-Commerce service providers and regulators.

Gregory Chan is a current LLM student at New York University specializing in International Business Regulation, Litigation and Arbitration, and current research assistant to Professor Franco Ferrari and Professor Linda Silberman. Prior to commencing his LLM, he worked at UNIDROIT Digital Assets and Private Law working group, disputes groups of various firms in Singapore and was a mentee to Svenja Wachtel for the Young Energy Disputes Arbitration Centre mentorship program. He completed his LLB at King’s College London, and was a member of the Willem C. Vis Commercial Arbitration Moot Team as well as the Cross-Examination Moot Team.