How the new EU data strategy could affect trade and competition

The European Commission rolled out a European strategy for data last week. While the strategy document consists of proposed measures not definitive rules, it has prompted questions on how digital trade and competition might be affected.

Vision for data governance

A much-discussed feature of the strategy includes a plan to encourage “European data pools,” mechanism to exchange data in a standardized way, to enable big data analytics and machine learning. It also eyes the role of data in creating imbalances in market power, particularly in the context of online platforms.

By year-end the Commission will propose a governance framework for data sharing, access and use – particularly focusing on sectors such as manufacturing, mobility, health, finance, energy agriculture and “green data," among others. The framework will aim to facilitate cross-border data use and support standardisation of data sets and data objects to ensure interoperability.

The Commission plans to advance a Data Act in 2021 that could incentivise business-to-government and business-to-business data sharing – for example, by addressing any uncertainty in legal liability or intellectual property rights. Access to data will be made compulsory only on a sector-specific basis to fix a market failure that competition law cannot address.

Considerations for global trade and competition

These proposals don’t yet lay out restrictions on trade and could be helpful in creating new regional economies of scale. But the details will be important.

Any new policies should be transparent and non-discriminatory, as we explain in the recent report "Exploring International Data Flow Governance." Doing so will allow foreign and domestic companies to play by the rules and bring innovations to market.

Ensuring services suppliers can move data in and out of the European space, if compliant with the rules, will also be important. That’s the approach taken in the EU’s privacy laws, even if the standard can be hard to meet for smaller firms in developing countries.

A Digital Services Act package – due later this year – will regulate online platforms, services and products and may take steps to tackle data concentration in a few firms. When reviewing mergers, the Commission will examine the anti-competitive effects of data accumulation through acquisitions and consider using data access or data sharing as a remedy.

Various competition authorities have opined on mandatory data sharing – see here for a report by French and Germany authorities and a Commission report here.

Opinion is divided though. For some, data sharing could breach privacy rules, lower incentives to create original data sources or simply be ineffective to address anti-competitive behaviour in certain markets. Others consider it a useful tool where data and access are indispensable for keeping a market fair.

A half-way house would aim for voluntary sharing before mandatory interventions. Given the size of its market, Europe’s eventual approach may set the course for some other jurisdictions.

Artificial intelligence risks

In addition to its data strategy, the Commission also published a white paper on Artificial Intelligence. Trade policy hasn’t yet thought much about artificial intelligence – with a few exceptions. The Commission foresees new conformity assessments on high-risk AI – involving testing, inspection and certification.

Unlike other such processes, companies may need to re-test AI over time as it learns and retrain systems in the EU. The jury’s out on whether that’ll fragment new types of services trade, or indeed whether it’s a price worth paying.