The European Commission’s plan to make the “EU's single market fit for the digital age” is finally starting to take shape. One year after launching its Digital Single Market (DSM) strategy – which is intended to open up digital services to all citizens and strengthen business competitiveness in the digital economy – the European Commission recently published a package of regulatory proposals on e-commerce, audio-visual content and consumer protection. In their current form, these reforms benefit European citizens more than companies doing business in Europe, which will need to pay close attention to how the latest and future proposals on copyright, VAT and telecoms policy develop into legislation. For more information contact the following partners in our Brussels office: Philippe Blanchard: http://www.brunswickgroup.com/people/directory/philippe-blanchard/ Annalisa Barbagallo: http://www.brunswickgroup.com/people/directory/annalisa-barbagallo/

1. One yearin
Europe’sdigitalsingle
marketstrategy
June 2016

2. Brunswick Group
Europe’s digital single market strategy – One year in
One yearafter launching
itsDigitalSingleMarket
(DSM)strategy– whichis
intendedto openup digital
servicesto all citizensand
strengthenbusiness
competitiveness in the
digitaleconomy– the
EuropeanCommission
recentlypublisheda
packageof regulatory
proposalson e-commerce,
audio-visualcontentand
consumerprotection. In
theircurrentform, those
reformsbenefitEuropean
citizensmore than
companiesdoingbusiness
in Europe,whichwill need
to pay closeattentionto
howthe latestand future
proposalson copyright,
VAT and telecomspolicy
developinto legislation.
Monthsof negotiationwill
follow, but whenthe
proposalsbecomelaw,
theywill havea directand
significantimpacton the
waya rangeof companies
conductbusiness,
includingnot justonline
retailersand platformsbut
alsologisticscompanies,
broadcastersand
producers,telcosand
companiesadvertising
onlineand on TV.
Europe’s Single Market isarguably the
most tangible result of European
integration for residents and visitors
alike. Consumers haveaccess to a wide
selection of products originating from
other countries. Intheory, therapid
development of e-commerce should
havebroadened consumers’ choice
even further, giving themaccess to an
even wider catalogue of goods and
services from around theEU. Yet
consumers and businesses still
encounter obstacles whentrying to
buyand sell across borders.
Inthisfirst year since thelaunch of its
DSM Strategy, thefocushasbeen on
removing theseobstacles. Consumers
will be thenet beneficiaries of thisfirst
wave of reforms, while thebenefits for
businesses are limited.
Forthcoming proposals on copyright,
telecom regulation and VAT may
present more concrete advantages for
companies doing business in Europe,
for example byfacilitating investment
in telecom infrastructure or by
simplifying theVAT regime, but it is
still too early to predict where those
reforms will land.
Implications by sector
Onlineretailers
All companies selling online will be
subject to an obligation to sell to
consumers from across the28 EU
Member States.Butthere many
caveats: theyare not obliged to shipto
all 28 EUMember States.Companies
will still be able to propose special
offers and prices targeting specific
markets. They may also legitimately
refuse to sell across borders, for
example to comply with national policy
obligations (e.g. rules on tobacco sales).
Thenew guidelines also clarify that
online marketplaces would need to
abide by existing rules on “unfair
commercial practices.”
Europe’sdigitalsinglemarketstrategy
–Oneyearin
The copyright
conundrum
One of themost contentious
building blocks of theDSM has
been left for last: cross-border
access to content.
Commission President Jean-Claude
Juncker had promised an overhaul
of copyright rules byearly 2015.
Eighteen months later weare still
waiting. While thecontent of the
draft legislation – now expected for
theautumn– remains unknown, a
complete overhaul of thecurrent
regime isunlikely. Theaudiovisual
industry staunchlydefends
territorial restrictions as the
backbone for theEuropean
creative industry. We canexpect
thenew rules to make it easier for
users to access some of thecontent
made available in other countries –
but wewon’t do away completely
with territoriality. The rest of the
package will tackle lower-hanging
fruit,such ascopyright exceptions
for research institutions. Thewild
card will be theissueof
neighbouring rights, whichextend
acopyright-like protection to
subjectsother thantheauthorof a
work, suchas publishers. This
position is staunchlydefended by
Commissioner GuentherOettinger,
who is under pressure from
German press publishers. The
relationship between publishers
and online intermediaries (search
engines and news aggregators) is
at thecore of discussions.

3. © Brunswick 2016 | 3
This means thatany e-commerce
platform should ensure thatbuyers
havea clear understanding of who they
are buying from.
Proposals on contracts for online sales
of digital content and physical goods –
which havebeen on thetable since
December –will also increase
obligations on online retailers. For
example, consumers will beable to
request sellers to repair or replace a
product withouthaving to prove the
defect existed at thetime of delivery.
Online retailers often quoteVAT as an
obstacle for selling across borders. A
move to aVAT system based on the
principle of taxation in thecountry of
destination for thegoods is still a few
years away, but in themeantime other
steps are being considered to facilitate
businesses and avoid VAT fraud.
Measures torealise theseVAT
ambitions are set to be released
throughout thecoming two years and
will include legislation to adapt the
VAT system to thedigital economy and
to theneeds of Small and Medium
Enterprises. Other anticipated VAT-
related measures will address
improved cooperation between tax
administrations and with customsand
law enforcement bodies, greater tax
administration capacity, and areform
of VAT rates.
Logistics
Excessive and wide variation in parcel
delivery prices havelong posed an
obstacle to cross border e-commerce.
Universal service providers suchas
national postal operators, will now be
obliged to publish their cross-border
parcel delivery prices on adedicated
website. According to anew proposal,
thisshouldincrease price
transparency, enhance competition
and bring down thecost of parcel
delivery. National regulators will also
assess theaffordability of tariffs,and if
theydetermine thattariffs for cross-
border parcel delivery are
unaffordable, universal service
providers will be required to provide
justification. Thenew rules will also
remove barriers to entry for third-
party parcel service providers and will
enable themto tender to take part take
in cross-border parcel delivery
operations.
TheEuropean Commission came up
with thisapproach as an alternative to
directly regulating shipping prices, but
havemade it clear that if competition
doesn’t drive down prices, direct price
regulation will follow.
Broadcastersand video
serviceproviders
Broadcasters and Video Service
Providers will be directly impacted by
anew proposal on audiovisual media
services. On-demand video (VOD)
providers like Netflix and Amazon
Prime will haveto reserve at least 20%
of their catalogue for European films
and television programming and
ensure themadequate prominence.
VODs could also be required to
contribute to national film fundsto
finance European media projects
through direct levies on movies and TV
channels. Thisobligation could also be
extended to VOD players thatare
established outside theEUbut
targeting European audiences.
VODs and broadcasters will have to
ensure that any content thatmay
impair minors’ physical, mental or
moral development would only be
made available in away ensuring that
minors do not normally haveaccess to
it (eg. screened at specific hours, or
subject to age verification tools).
Ontheplus side, broadcasters would
see their burden lightened on
commercial communications: the
current cap of 20% advertisements per
hourwill now becounted per day,
during core viewing hours(from 7 am
to 11 pm). Films and news could be
interrupted more often. Product
placement will also become easier.
Measures on portability of content and
on contractual rules, which are
currently being discussed by Member
Statesand theEuropean Parliament,
will be of particular interest to
providers of online content services
suchas films or sports broadcasts.
They will haveto ensure thattheir
subscribers continue to haveaccess to
their services when travelling abroad.
Allhail to disruptors
One of Brussels’ favourite
buzzwords is the“collaborative
economy”. New business models
like Uber and AirBnB, which use
online platforms to disrupt
traditional actors, are generally
seen favourably by theEuropean
Commission astheyincrease
competition and offer more choice
to consumers. Inguidelines to be
published on 2 June theEuropean
Commission isexpected to
encourage Member Statesto adopt
apro-business approach and warn
themagainst overregulation. While
theEU’spowers in theseareas are
oftenlimited and regulation tend to
be national, if not local, the
European Commission wants to
send a clear political message to
national governments to develop a
legal environment which allows
thesenew business models
to thrive.

4. This means thata UK resident traveling
to France shouldstill be able to usehis
or herNetflix account or watch football
matcheson Sky Go.
Providers of digital content, and
potentially also broadcasters, will also
be subject to stricter protection rules
for consumers. For example they
would be required to replace a movie if
thedownloaded file is corrupted.
Whetherbroadcasters will be covered
will ultimately depend on theexact
definition of digital content that will be
agreed and implemented in
national laws.
Videosharingplatforms
Video-sharing platforms thatprovide
third party content (eg. YouTube) will
now be subject to provisions to ensure
thatminors are duly protected. These
requirements would imply, for
example, thatvideo sharing platforms
define in their terms and conditions
theconcepts of “incitement to violence
or hatred” and of content which “may
impair thephysical, mental or moral
development of minors.” Video-
sharing platforms should provide a
report mechanism to flag suchcontent
and should set upan age-verification
system or parental control tools.
Video-sharing platforms will not have
to monitor all content uploaded (most
of which is usergenerated). However,
national legislation could subject them
to stricter requirements if thecontent
uploaded is foundto be “illegal”.
Telco providers
Telcos shouldremain vigilant on
proposals expected in September that
will tackle some very controversial
issues: howto foster investments in
connectivity? Whichtechnology –if
any – shouldbe promoted? How to
ensure coverage in rural areas? How to
level theplaying field between
traditional telcos and over-the-top
players (OTTs)? How to enable 5G?
Private investments in wireless
technology may be spurred by possible
changes in spectrum policy. Whilethe
issueremains highly sensitive for
Member States – whichoften see
spectrum as afundamental national
resource – theCommission is likely to
put forward harmonised rules on the
duration of licenses and auction bids,
which in turn shouldprovide clarity
and help investment.
Onlineplatforms
Despite pressure from France and
Germany to regulate online platforms,
theCommission hasshied away from
regulation. WhiletheCommission has
acknowledged thatantitrust
enforcement may not be sufficient,it
hasconcluded thatmore research is
needed over thenext two years. Asit
was too difficult to define what is
meant by “online platform,” the
Commission haspreferred to list these
specific characteristics theyshare:
1) an ability to disrupt traditional
markets via innovative models;
2) operating in multisided markets;
3) benefiting from network effects;
4) dependence on information and
communications technologies;
5) akey role in digital value creation
and new business ventures, and
6) theability to create new strategic
dependencies.
TheCommission will thenensure that
thesame rules apply to theseplatforms
and to comparable services, thatthey
behave responsibly and fairly and that
markets remain open and non-
discriminatory when it comes to data.
TheCommission will only consider
targeted policy measures once
problems are identified. While it is too
early to pre-empt theresults of this
analysis, attention is likely to focuson
platforms that exercise considerable
market power.

5. © Brunswick 2016 | 5
Advertisers
Companies advertising online or on TV
will be affectedby theproposed new
rules on audiovisual media services.
Advertisers will benefit from more
flexible rules on adsshowing time for
TV: thecurrent cap of 20% on
advertisements will be maintained
between 7 am and 11 pm, but instead
of thecurrent 12 minutes per hour,
broadcasters will beable to choose
more freely when to showads
throughout theday. Movies and news
could be interrupted more often.
Product placement will also become
easier. However, advertisers of
alcoholic beverages or foods high in
salt, sugars or fat will find it more
difficult to advertise theseproducts to
younger audiences. They will now be
bound by codes of conduct, developed
with national governments or with the
European Commission, which would
ban products from advertising unless
theycomply with certain
nutritional criteria.
Next steps
TheEuropean Commission’s plan to
make the“EU's single market fit for the
digital age” is finally starting to take
shape. Measureson geo-blocking,
portability of content, parcel delivery
and audiovisual have shownwhere the
Commission really comes into itsown:
promoting consumers’ interests and
theEuropean ideal of aunified market.
Whileconsumers are likely to benefit
from greater choice and increased
legal protection whenshopping across
borders, theresults are more mixed for
businesses. Theproposals will now
make their way to theEuropean
Parliament and Council for months of
intense negotiations. Bothinstitutions
will be subject to intense lobbying by
their national industry, consumer
groups and NGOs.Companies need to
engage constructively to ensure that
final legislation isbalanced and
innovation-friendly.
Competitionpolicy:
the quick fix?
Inparallel to their colleagues’ work
on digital policy, thecompetition
department of theEuropean
Commission hasbeen carrying out
an investigation into thee-
commerce sector. Launchedin May
2015, theinvestigation has
focussedon how companies
restrict thecross-border sale of
online goods and services. After
sending hundreds of
questionnaires to content rights
holders, broadcasters,
manufacturers, wholesalers, online
retailers of goods and companies
thatrun online platforms, the
Commission isnow analyzing its
findings. Whileafinal report isnot
expected untilthemiddle of next
year, preliminary results shouldbe
available over thesummer.
InMarch of thisyear Competition
Commissioner Margrethe Vestager
announced that theinitial findings
of theinquiry had shownthat geo-
blocking is awidespread practice
in theEU,and thatthesepractices
may constituteanti-competitive
behaviour. Inparticular,
agreements between suppliers and
distributors will come under the
microscope astheymay restrict
competition in thesingle market. In
parallel, theCommission is
carrying out investigations in the
online video-games, pay-tv and
music sectors which will also have
substantial repercussions on the
way policy will be shaped.
TheCommission’s powers in
competition policy allows for
swifter action thanwhen
embarking on legislative reforms.
Theresults of theseinvestigations
are therefore also likely to shape
digital policy and shouldbe
followed closely particularly by
companies which rely on vertical
distribution agreements in the
luxury and high-tech sectors.

6. Brunswick Group
Europe’s digital single market strategy – One year in
Brunswick Group
Brunswick is an
advisory firm
specializingin business
critical issues. We help
companies build
trusted relationships
withall their
stakeholders.
Whenclients turnto us,it’s because
theyknow that engaging effectively
with everyone who hasa stakein the
company is about more thanmanaging
perceptions -it is essential to making
business work.
Ourbackground in financial
communications means weunderstand
howbusinesses are wired. It also
means integrity is deep in our nature:
diligence, openness and accuracy.
Brunswick isone firm globally.
Delivering anywhere, we havea
reputation for high-caliber, highly
experienced people who havediverse
backgrounds and skills.
It means whatever thetask, no matter
howcomplex or where it is in the
world, we can assemble theright
expertise from right across thefirm.
Ourpurpose isto helpthegreat value
creating organizations of theworld
play amore successfulrole in society.
For more information
PhilippeBlanchard
ManagingPartner
Tel: +32 (0) 2 235 6510
pblanchard@brunswickgroup.com
AnnalisaBarbagallo
Partner
Tel: +32 (0) 2 235 6510
abarbagallo@brunswickgroup.com
27AvenueDesArts,1040
Brussels,Belgium
Tel: +32 (0) 2 235 6510
brusselsoffice@brunswickgroup.com
www.BrunswickGroup.com
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Brussels