Tethereum

The first mover advantage is well established in the commercial marketplace. The same concept works in the regulatory marketplace: Whoever gets there first has the upper hand to define what follows.Unfortunately, while other liberal democracies race to define the digital future, the United States is AWOL. The nation whose governmental support helped establish American technological leadership now stands immobile when it comes to national governance and public interest oversight of that technology. When the Congress finally does get around to online oversight, the odds are high that since the policies already implemented in the European Union (EU) and United Kingdom (U.K.) will be the international standards the U.S. will have to follow.I recently met with senior officials of the multiple British regulators that, under new legislation, will be charged with overseeing the activities of the major online platforms. I walked away with the conclusion that while the U.K. government’s long-promised, but undelivered legislation lags the EU, the U.K. is ahead in the preparation to implement digital oversight—even though Parliament has yet to enact the necessary legislation.<h2 id="header-0">LONDON AND BRUSSELS STEP TO THE FRONT</h2>The EU has enacted the <a href="https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/europe-fit-digital-age/digital-markets-act-ensuring-fair-and-open-digital-markets_en" rel="noopener noreferrer nofollow">Digital Markets Act</a> (DMA), dealing with competitive issues, and the <a href="https://digital-strategy.ec.europa.eu/en/policies/digital-services-act-package" rel="noopener noreferrer nofollow">Digital Services Act</a> (DSA), dealing with online content. The acts are now law and being implemented on a phase-in basis by the <a href="https://european-union.europa.eu/institutions-law-budget/institutions-and-bodies/institutions-and-bodies-profiles/european-commission_en" rel="noopener noreferrer nofollow">European Commission</a> (EC), the EU’s administrative body.Heretofore, the Commission has fulfilled the role of administrative technocrats to keep the machinery of the 27-member EU running. Now, the EC must develop the DNA of a regulator as well. Reportedly, the Commission is <a href="https://www.euractiv.com/section/digital/news/commissioner-hints-at-enforcement-details-as-eu-parliament-adopts-dsa-and-dma/" rel="noopener noreferrer nofollow">building</a> a 150-200 person staff to focus on the new competition and content authorities.In the U.K., Parliament has yet to pass the British equivalent of the DMA, the <a href="https://www.gov.uk/government/speeches/sarah-cardell-ensuring-digital-market-outcomes-that-benefit-people-businesses-and-the-wider-uk-economy" rel="noopener noreferrer nofollow">Digital Markets, Competition, and Consumer Bill</a>, or the DSA equivalent, the <a href="https://bills.parliament.uk/bills/3137" rel="noopener noreferrer nofollow">Online Safety Bill</a>. The government also has been unclear as to when lawmakers will act, other than to say both measures will be acted upon in this session of Parliament. Such legislative inertia has not stopped the relevant agencies, however.While, in Brussels, the EC is developing its regulatory skills, the <a href="https://www.gov.uk/government/collections/digital-markets-unit" rel="noopener noreferrer nofollow">Digital Markets Unit</a> (DMU) that will oversee the U.K. Digital Markets Bill has been stood up for over a year as a part of the <a href="https://www.gov.uk/government/organisations/competition-and-markets-authority" rel="noopener noreferrer nofollow">Competition &amp; Markets Authority</a> (CMA). The DMU staff, currently around 40, will ultimately reach 150 to 200 focused experts. <a href="https://www.ofcom.org.uk/home" rel="noopener noreferrer nofollow">Ofcom</a>, the U.K.’s equivalent of the <a href="https://www.fcc.gov/" rel="noopener noreferrer nofollow">Federal Communications Commission</a> (FCC) will be responsible for the Online Safety Bill. Already, it has 350 employees working on content-related issues. Both the DMU and Ofcom have begun market studies and consultations that will define their ultimate actions.<blockquote>“Because there is a belief digital platform companies have failed to sufficiently exercise their <a href="https://dictionary.law.com/Default.aspx?selected&#61;599#:~:text&#61;duty%20of%20care,in%20the%20circumstances%20would%20use." rel="noopener noreferrer nofollow">Duty of Care</a>, however, the governments are stepping in.”</blockquote><h2 id="header-1">DUTY OF CARE AND RISK-BASED REGULATION</h2>Both the U.K. and EU initiatives are grounded in the common law, “Duty of Care” that holds providers of goods and services have the responsibility to anticipate the adverse effects of their offerings and take steps to mitigate those effects. The tort of negligence is rooted in the Duty of Care.Because there is a belief digital platform companies have failed to sufficiently exercise their <a href="https://dictionary.law.com/Default.aspx?selected&#61;599#:~:text&#61;duty%20of%20care,in%20the%20circumstances%20would%20use." rel="noopener noreferrer nofollow">Duty of Care</a>, however, the governments are stepping in. Both the EU and U.K. initiatives are based on the identification of the risks created by the platforms and how those risks can be mitigated.<blockquote>“What is happening in London and Brussels is the creation of a de facto global digital risk management standard.”</blockquote>Such risk-based systems are different from old industrial era regulatory micromanagement. Rather than top-down, “this is how you will run your business” regulation, risk-based oversight involves government making the effort to work with companies to identify harms and mitigation strategies. Companies’ failure to voluntarily do this is what has triggered government intervention.<h2 id="header-2">DIFFERENT PROCESSES, HOPEFULLY COMPATIBLE RESULTS</h2>While the goal of risk identification and mitigation may be similar, the U.K. and EU have dissimilar processes to reach such results.The EU approach is a legislator-driven model. The DMA, for instance, identifies companies as “<a href="https://ec.europa.eu/commission/presscorner/detail/en/ip_22_6423" rel="noopener noreferrer nofollow">gatekeepers</a>” based on their size. Once so designated, the companies must comply with legislated behavioral expectations. The U.K. has begun its oversight with more regulatory discretion to determine if a company has “<a href="https://www.gov.uk/government/consultations/a-new-pro-competition-regime-for-digital-markets/outcome/a-new-pro-competition-regime-for-digital-markets-government-response-to-consultation#:~:text&#61;Strategic%20Market%20Status%20%2D%20summary&amp;text&#61;These%20include%20having%20substantial%20and,firm%20with%20a%20strategic%20position." rel="noopener noreferrer nofollow">strategic market status</a>” and, if so, tailor specific remedies to the company.The risk of such different approaches is that they could produce different outcomes. This is particularly worrisome in the interconnected world where, if the outcome of such different processes were to yield different requirements, incompatible results would be highly disruptive to both consumers and companies. There appears to be a heightened awareness that it does not serve anyone to have major substantive differences between the EU and U.K. policies. As one U.K. official told me, “When faced with the same evidence as the EU sees, it is not unreasonable to expect similar solutions.” Similarly, he observed, the U.K. and EU are not operating unaware of each other, and there is an expectation of significant amounts of cross-fertilization.<h2 id="header-3">PARTICIPATORY REGULATION</h2>In the U.K., both Ofcom and the DMU plan to pursue what they describe as “participatory regulation.” This means that regulators will work one-on-one with target companies to develop behavioral expectations that can be regulatorily enforced.In the case of Ofcom’s content moderation oversight, the companies will be expected to conduct their own Duty of Care analysis and share the conclusions with the regulator. The agency then will provide guidance on the validity of the assessment. Once a risk is identified, the parties work together to develop a behavioral code.

The UK and EU establish positions as regulatory first movers while the US watches

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TETHEREUM

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