Rule By Decree: A Comment on the Commission’s Letter to Twitter, Facebook and Google

On March 17, the Commission published a press release concerning a meeting following a letter it sent in November 2016 to Twitter, Facebook and Google. The letter demanded action from the said platforms in two areas: unfair contracts terms and removing fraud & scams. The meeting on March 16 was organised to hear the three companies’ proposal for action. The press release is accompanied by the European consumer authorities’ common position, which provides a somewhat more detailed explanation of the legal bases for each demand.

In the first area, the following changes are demanded:

  • Social media networks cannot deprive consumers of their right to go to court in their Member State of residence;
  • Social media networks cannot require consumers to waive mandatory rights, such as their right to withdraw from an on-line purchase;
  • Terms of services cannot limit or totally exclude the liability of Social media networks in connection with the performance of the service;
  • Sponsored content cannot be hidden, but should be identifiable as such;
  • Social media networks cannot unilaterally change terms and conditions without clearly informing consumers about the justification and without given them the possibility to cancel the contract, with adequate notice;
  • Terms of services cannot confer unlimited and discretionary power to social media operators on the removal of content.
  • Termination of a contract by the social media operator should be governed by clear rules and not decided unilaterally without a reason.

In the second, the following is demanded:

  • scams involving payments taken from consumers;
  • subscription traps where consumers are offered to register for a free trial but are not given clear and sufficient information;
  • marketing of counterfeited products;
  • fake promotions like “win a smart phone for 1 €” have proliferated over social media which were in fact a true contest but entailing a hidden long term subscriptions for several hundred euros per year.

There are two kinds of problems with the Commission’s approach.

First, in spite of the obvious worthiness of some of the Commission’s aims, the letter is an unfortunate example of “rule by decree”. There is no obvious reason why a public authority should address foreign or EU corporations with the competition law-styled statement of objections – a power which the Treaties do not give it. Nor is there reason to single out a small number of Information Society Service (ISS) providers, which all happen to be public platforms, rather than address its communication to ISSs in general or offer interpretative communications on each relevant regulation or directive. ISS are legitimate subjects of EU regulation in the content layer while platforms are not. Moreover, if the rules in question are obviously applicable to the otherwise extraterritorial platforms, why is it necessary to remind them of that fact and much less already extract their commitment to change their practices? While it is certainly true that a “carrot-and-stick” approach has sometimes been used in the EU, this is normally not done in cases where clear rules already exist but in cases where there are no rules and the Commission encourages self-regulation with a (usually thinly) disguised threat to the stakeholders to engage in self-regulation or suffer the consequences of EU laws. The example in question is significantly different: the Commission is informally enforcing a disparate bunch of rules already in existence – and rules whose applicability to the question in hand it obviously doubts – for why would it otherwise be necessary to threaten enforcement rather than simply engage in it, as is the Commission’s duty?

Second, it is far from certain that some of the Commission’s statements are even true. Three items from the Commission’s list can be taken as examples.

First, it is not a given fact that social media cannot deprive consumers of the right to go to court in their Member State. Brussels I Regulation (Recast) Article 18 (on special jurisdiction for consumer protection) and Article 25 (on prorogation of jurisdiction) talk of jurisdiction of “Member States” only and do not openly prohibit jurisdiction or arbitration clauses in favour of third countries. Their application to third countries is far from obvious. While it is possible to interpret these provisions as prohibiting any jurisdiction clause in favour of courts or tribunals in third states, no CJEU case law exists to confirm or reject such a view yet.

Second, the limitation or exclusion of liability which the communication speaks of is, in reality, affected by contractual arrangements as well as the liability regime in Articles 12-15 of the E-Commerce Directive. A statement limiting liability may very well be valid under national contract law and under the provisions of the 1993 Unfair Contract Terms Directive. That directive, which is not a full harmonisation measure and allows discrepancies in national implementation, quotes as examples only specific cases of limitation of liability, the first of which relates to death or personal injury and the second to “inappropriate” limitations of liability in cases of non-performance or partial performance. None are obvious examples of platform limitations of liability.

Finally, the storage and removal of content is governed by a contractual relationship between the users and the platforms. That relationship is subjected mostly to national law. It is certainly true that the power to remove content is not unlimited and usually not entirely discretionary. Consumer Rights Directive and Unfair Commercial Practices Directive, which are full harmonisation measures that preclude further national intervention, may very well apply to the problem even though the common position does not even quote them. The enforcement of such measures should not be subject to EU discretion but is, instead, entirely in the hands of national courts. The common position quotes Article 3 in relation to item 1(m) in the Annex of the Unfair Terms Directive. This puts the problem in the context of user-generated services being offered in exchange for the use of the platform. In such a scenario, the consumer gets access to the platform in exchange for providing user-generated content. But, this is not a typical use of platforms nor their dominant business model. Instead, the user is accessing a service on the provider’s terms, agreeing to be subject to certain amount of advertising and agreeing to its personal data being used. What the user “sells” is information about the user, not his or her content. The contractual relationship, therefore, is free access and use of the service in exchange for some personal data (usually obtained on consent) and exposure to advertising. An arbitrary removal may raise liability issues as it tilts the balance between the parties but the exercise of a discretion in removing content voluntary provided does not.

In summary, the regulatory approach is obscure. Rather than encouraging self-regulation, the Commission is simply overstepping its authority. The letter states that the companies have already “agreed to propose changes.” More significantly, even, the issues which have been bundled together as falling under “consumer protection” are a diverse package of issues concerning jurisdiction and the applicable law, contract law, customs law, criminal law and even unfair competition. These complex issues, in as much as they fall within EU competences, are better be left to tried and tested methods of enforcement. The Treaties do not give the Commission ex ante enforcement powers which it had taken on itself. Instead, it gives it the power of passing specific laws, regulations, directives and decisions, which national consumer authorities and national courts – not the Commission – are authorised to enforce.