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UK’s upper House urges privacy kitemark for online platforms

TechCrunch TechCrunch 20/04/2016 Natasha Lomas

A report into the market power of large online platforms such as Google, Facebook, Amazon and Airbnb has concluded that more needs to be done to bolster consumer trust in tech giants’ handling of their data.

The review was carried out by the UK’s upper House of Parliament responding to a European Commission consultation aimed at furthering the latter’s digital single market strategy.

Among the report’s recommendations is a suggestion that a privacy standards kitemark be developed to badge best practice by web giants on data protection and transparency in order to further consumer trust and create an impetus for these businesses to compete on consumer rights and user privacy — rather than, as is the current suspicion, by attempting to outmanoeuvre each other via ever more comprehensive data-mining of users.

“The Committee believes that one way to increase consumer trust in online platforms is the creation of a traffic-light style kite-mark on all websites and apps, to show good practice on privacy policies. This, we believe, will encourage platforms to compete against each other to improve standards on transparency, privacy and use of personal data,” the chair of the report committee said today, as the report was published.

The EC launched the consultation into online platforms last fall, calling for evidence on whether the region’s existing regulatory framework is fit for purpose to handle the rise of giant online platforms or whether new regulation needs to be introduced to deal specifically with this dominant sub-set of digital businesses.

Defining exactly what an online platform is was a necessary precursor to the call for evidence — with the EC coming up with the following typically dry descriptor: “‘Online platform’ refers to an undertaking operating in two (or multi)-sided markets, which uses the Internet to enable interactions between two or more distinct but interdependent groups of users so as to generate value for at least one of the groups”.

The House of Lords report concludes that new regulation to govern the operation of online platforms specifically is not necessary but does urge existing regulations to be updated and more robustly enforced to take account of the scale and market power of these tech giants.

It notes the role of “accelerated network affects” impacting the markets in which online platforms operate, and argues the potential for disruptors themselves to be subsequently disrupted by other tech players means competitive pressures can play a role in regulating dominant players. However it also urges case by case analysis — asserting that competition pressure varies in type and intensity from sector to sector. 

“The potential for dominant positions to emerge means that competition authorities must be  vigilant in these markets, to ensure that market power is not abused. Protecting users in these markets also requires that  consumer rights and data protection rights are effectively enforced,” the report notes. 

Regulators failing to keep pace with the business expansion of tech giants has been a staple theme of the tech industry in recent years, whether it’s Uber running taxi industry red lights, Airbnb breezing past rental rules or Google sticking two fingers up at regional data protection regulations. The playbook of many tech giants applies VC funding at a pace and in a fashion that outstrips the pace of regulators to determine which rules are being broken. Leaving existing businesses that do conform to regulatory rules at a disadvantage.

“Companies such as Google, Airbnb, and Uber are not only pioneers of innovation, and key drivers of growth, but they potentially wield enormous power over consumers and businesses, and must do so responsibly,” noted Lord Whitty, Chairman of the Committee, in a statement.

“Growth of our digital economy should go hand-in-hand with better protection for consumers and small businesses. We heard of an array of worrying practices by websites that simply aren’t transparent enough and leave consumers vulnerable to exploitation — from fake reviews to personalised pricing, from baffling privacy agreements to rigged displays of search results,” he added.

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