Normative regulation in digital markets as means of protection of national interests

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Normative regulation in digital markets as means of protection of national interests

O.A. Gorodov*, M.A. Egorova**

Annotation

digital economy protection

The article covers principal directions of digital economics development in the Russian Federation, peculiarities of anti-monopoly and intellectual property regulation in terms of digital economics formation. The article also presents the examples of legal regulation of digital economics in the European Union.

Keywords: digital economics and law, digital markets, anti-monopoly regulation, databases, digital cartels, block- chain, cryptocurrency.

Nowadays, the topic of digital economics development is very relevant all around the globe. Europe has drastically changed within last decades, new technologies have appeared and new infrastructural issues have arose. And today, the BRICS countries' experience is deemed very attractive when it comes to European legislation improvement and economics modernization. To be able to react adequately to the new changed economic conditions it is crucial to consider the global character of the modern economic space and the necessity to converge European and Asian legislations.

Currently, digital economics, and specifically blockchain technologies, open some interesting new areas of activity for legislature and governing bodies. To stay competitive in a modern digital space one must not only examine new technologies, but also determine their legal regulation. As of today, the prime direction of global economics development is digitalization process in every sphere of social relations. A legislator needs to take into consideration the rapidness of the new digital technologies development and the currently occurring changes in existing relationships. The legislation is objectively presented in a role of a «chaser» as its development follows changes in social relations.

As we provide the definition, we consolidate it in a present moment of time, while the nature of digital economics itself contemplates digital technologies development, a certain breakthrough, real-time work, here and now, in constantly changing conditions.

In Europe such regulation of «typical situations» is based on typical contracts and recommendations implementation, which due to the peculiarities of legal mentality are interpreted as mandatory for the participants of such relationships. In the Eurasian Conformity it is expedient to stipulate the principal models on the level of legal acts with specific regulation being set forth by digital ecosystems members themselves.

Digital ecosystems development within the Eurasian Conformity must respond to the challenges connected to acceleration of social and economic environment changes, the growing number of informational and communicational technologies possibilities, integration processes, necessity of expenses reduction and involvement of interested countries.

One of the directions of the EU digital economics development regulation is implementation of a unified taxation system of digital sector of economics companies. Electronic trade is also developing rapidly in the EU, the cause being the adoption of the Directive 2000/31/EU «On certain legal aspects of informational services on an inner market» (specifically regarding electronic trade) by the European Parliament and the European Council. The principal aim of its adoption was formation of legal basis for electronic trade development and elimination of obstacles on the way of digital economics development within the framework of a united European market. In May 2018 a General Data Protection Regulation «On the protection of natural persons with regard to the processing of personal data and on the free movement of such data» of the European Parliament and the European Council № 2016/679 (adopted on April 27, 2017) came into force. This Regulation entails not only the growing level of severity of regulations regarding personal data management conditions but also the new rights and obligations of personal data users and the implementation of new institutes. In France digital economics is developing fast as well. France has the 3^rd largest ICT sector in Europe¹ (the source: European IT observatory, 2010).

The quarter of the economic growth in France and 16 % of production investments in 2010 were connected to the digital development. Digital economics provides 3.7 % of work places in France, 5.5 % GDP, 7.9 % general added value of a private sector and over a quarter of scientific researches in a private sector.

In accordance with the «Internet influence on French economy» research, carried out by MUNCI (l'Association Professionnelle des Informaticiens) in march 2014, in the French Republic the Internet allowed to create over 700 000 work places within 15 years. By 2015 450 000 more work places had been created, which led to the formation of 130 billion euros of added value or 5.5 % GDP in France. Pursuant to the association's forecasts, the digital sector is expected to will have formed 450 000 more work places by 2020. The Internet influence goes beyond GDP. The consumer surplus caused by the Net back in 2009 in France was estimated in 7 billion euros (10 billion dollars) European IT observatory, 2010. ^{URL: https://www.cnfdi.com/p-munci-association-professionnelle-des-informaticiens-56.html.}.

5 innovation clusters which contribute to French digital economics development can be distinguished: Cap Digital (Ile-de-France). The purpose of this cluster is digital content creation and its multimedia distribution and exchange. It is a business cluster found in 2206 by the French state agency dealing with innovative economics developments in the Ile- de-France region in France. With the number of members over 600, Cap Digital gathers data from small companies, large universities, research centers and corporations.

Images and resume (Brittany and the Pays-de- la-Loire region). This cluster is used for connection networks.

Minalogic(Rhфne-Alpes region) is applied to intellectual miniature products and industrial solutions.

Secure Communication Solution (Provence) is purposed for safe processing and communicational solutions.

Systematic (Ile-de-France) is destined for complex systems and generic software.

In France, the following models of digital markets work organization can be distinguished:

1) Multiplan platforms (Les plates-formes multifaces);

2) The model of a «first free dose», Freemium / Premium (Le modиle de la premiиre dose gratuite);

3) The model of a temporary paying (Le modиle Lead-time)

4) The open or collaboration model (Le modиle ouvert ou collaboratif).

One of the key elements of the European strategy connected to digital economics development is primarily aimed at online trade development. Such priority is easily explainable since it is directed at global goods circulation, which is explicitly relevant to digital technologies. In accordance with the data provided by the European Commission (Commission Juncker URL: https://en.wikipedia.org/wiki/Juncker_Commission.), in 2015, 15 % of European consumers make purchases online in a EU country other than the one they reside in (in comparison to 44 % of ones buying goods in their own countries). With that in mind, the Commission wants to focus its interests on 2 directions. On the one hand, it encourages the Europeans to make purchases online in a different country. On the other hand, it helps companies in abroad sales development.

Therefore, there are measures which are aimed at consolidation of internet users trust who try to purchase gods online. For example, consumer protection regulations are considered too inexplicit and uncoordinated between the countries. Some of these measures, such as a response delay (14 days minimum) or information that the consumer must be provided with before signing the contract, have already been agreed upon. However, an issue arises in cases when the product does not comply with the requirements of an existing purchase agreement. Depending on a selling country (and, consequently, a type of a web-site), the rights may differ. For that reason the above-mentioned commission would like to enlarge the part of the authorities responsible for law observance and crime detection.

In November 2017 European establishments have agreed upon 1 of the key measires in this sphere: the «geoblock» limitations which entitles the company to differentiate between its prices and services depending on a buyer country and regardless of transportation expenses (sometimes even illegally). Pursuant to new regulations, which came into force at the end of 2018, consumers can no longer be blocked or redirected while trying to make a purchase on a foreign web-site. They can, for example, «buy their electronic devices online, rent an automobile or purchase concert tickets from abroad just like they can in their own country». At the same time, audio-visual services are excluded from these Regulations, which must also be completed with by transborder delivery improvement. These services are being developed by the European executive power.

In the EU, the measures connected to the protection of national digital economics interests are being actively implemented. Specifically, the European Commission has reported on an elaboration of a document «the European Commission's Recommendations on the effective measures regarding illegal online content control». According to the Recommendations project, the online marketplaces and social media companies, in particular, are to delete messages containing terroristic propaganda within an hour after receiving an official inquiry of law-enforcement agencies «without demanding a court order of an executive decision».

In the Russian Federation the first serious legal acts regarding this area were adopted in July of 2017. Digital economics development demands changes of the whole legislation in terms with new relations, which arise between special parties and on non-traditional subjects of legal regulation. The Federal Service for State Registration, Cadastre and Cartography (Rosreestr) is currently registering blockchain rights. However, state legal entities representatives sometimes regard blockchain applications mostly as a technology being a basis of cryptocurrency, while this technology can possibly be used much larger -- as the means of a safe decentralized data storage. In 2017 a new stage of economic development was contemplated the Russian Federation and in July of 2017 the Russian Government adopted a Digital economics Program (the Program) The decree of the Russian federal Government of 28.07.2017 № 1632-р«On the adoption of the Program “Digital eco-nomics in the Russian Federation”» // Sobraniezakonodatel'stvaRossijskojFederacii. 2017. № 32. Art. 5138.. In accordance with the Program, the government intends to provide major support of digitalization process in Russia.

At the current stage of development, a complex legal regulation of digital economic relations is required. Such regulation must primarily include:

1) Formation of fundamental definitions and principals of digital economics legal regulation, aimed at:

— legal ensuring of structural changes in national economy to depart from its supply dependence, and

— development of national innovative areas, which determine scientific and technical progress and increase competitiveness of national goods (primarily in digital field);

2) Consideration of peculiarities of:

— principal digital economics activities;

— rights and obligations of digital economics participants;

— types and subjects of relations and legal facts stipulation their arising;

3) Formation of digital economics participants' liability models and of mechanisms of their realization;

4) Necessity of mandatory estimation of economic effectiveness of legal drafts, development of legal doctrine regarding digital economics development relations;

5) Issues of legal importance of digital data, including paper documents and other kinds of digital data;

6) Implementation of special legal regimes creating utmost comfortable development conditions for companies which:

— are engaged into business activity in the most prioritized areas of digital economics, including economic activity regarding gathering and utilization of data and/or;

— have a certain level of processes informatization and;

— are ready to open them for the government.

7) Realization of a complex of measures regarding standardization mechanisms improvement. These mechanisms are aimed at ensuring the compliance of technical regulation system and the unity of changes with digital economics development objectives, including being a «driver» of such development which also covers formation of certain legal basis and libraries of existing national standards regarding prior directions in digital format.

In April 2018 in Russia, a National association of international informational security was founded. In the nearest future Artificial Intelligence will be able to optimize applications and to initiate solutions automatically. This will raise serious issues for anti-monopoly and competition law regulators since it will be difficult to identify legal entities responsible for actions taken. Russian anti-monopoly legislation actively improves. It fully complies with a great number of foreign legal regulations in that area and even surpasses them. In Russia, it is necessary to prepare legislative proposals, which will be directed at prevention of goods markets monopolization in the field of digital technologies. Overall, anti-monopoly legislation does not forbid cooperation between competitors, in case the outcome significantly exceeds their solo results or if the processes effectiveness greatly increases. However, when information exchange is connected to data that influences market competition (for example, a planned price and price of goods), such cooperation might become a serious anti-monopoly infringement and, thus, responsibility must be established.

Development of digital economics on a state level is connected to solution of multiple fundamental issues in legal studies to form a new regular legal environment -- which will fully ensure favorable legal regime for modern technologies creation and development -- and also to carry out economic activity connected to implementation of these issues. Such concept is especially suitable for anti-monopoly digital markets, since they are the place where competition liquidation might occur, which is a threat for the Russian national interests and for entrepreneurs and legal entities. The Federal Anti-monopoly Service in Russia has sought public opinion regarding new amendments to the federal law «On competition protection». Naturally, the bill includes certain regulations aimed at anti-monopoly regulation within a field of digital technologies market. In particular, the law «On competition protection» will stipulate specific processes of goods circulation on the Internet. Over the last few years, more economic entities are actively involved in a digital technologies market. This fact explains the growing number of infringements within competition environment and occurrence of mala fide competition -- such practices take place in a form of so-called «digital cartels». More economic entities selling highly demanded goods put «clique prices» on their web-sites. In addition, aggregating platforms, which gather data regarding offer and demand, are being actively created. Taking the above-mentioned into account, the Federal Anti-monopoly Service in Russia proposes to come up with its own informational technologies connected to digital cartels control and also to determine the vector of development and improvement of tender legislation regarding tender transferring to the Internet in the areas where tenders are mandatory. Moreover, the new legislation offers to stipulate certain aspects of online goods circulation process. Thus, the Federal Anti-monopoly service wants to provide the definition of a «price algorithm», which is analyzed by markets to set the price. Unsettled regulation of this area might create conditions for cartel collusion in an electronic form, which is harder to detect and which consequences are more negative. The Federal Anti-monopoly service in Russia proposes to adopt a list of additional criteria of allowability of such economic entities' actions. Using these criteria, the Service will be able to make a decision regarding presence or absence of cartel collusion potential based on a certain online platform analysis.

Another direction, which demands improvement within the framework of anti-monopoly regulation in the Russian legislation, is connected to the merger of Yandex.Taxi and Uber. As a result of such deals, large aggregators digital platforms consolidate. Such consolidation might lead to illegal price coordination on the market. The new Federal Anti-monopoly Service's bill offers the resolution of the collision. The Service points out that such digital platforms can be mistaken for economic activity coordination, and all the platform workers -- for cartel collusion participants. However, unless the platform consolidation effect leads to consolidated aggregator's opportunity to deter- mine transportation services provision conditions on a relevant market, such coordination cannot be regarded as a cartel collusion.

Since the violation of anti-monopoly legislation may cause the possibility of criminal prosecution, all the interested parties to blockchain consortiums must take into consideration potential anti-monopoly risks. Decentralization, inherent to blockchain, inconveniences the jurisdiction determination. Within the framework of blockchain, all the data, divided between the parties involved, must assist consortiums in accomplishing legitimate goals and not in violating the law. The European Commission specifically states that «General standards, agreed upon and used by the market members, shall be overall pro-competitive since they allow to increase “economic mutual penetration”» European Commission's guidelines on horizontal cooperation agreements (2011/C 11/01)/ Par. 263..

Nowadays, public interests demand a certain correction of relations regulation in the field of intellectual property utilization in terms of digital economics formation. To our mind, such correction should not be followed by destruction of traditional legal mechanisms -- instead, it must become legal means of their development. It seems that the spheres of distributed data technologies utilization (blockchain technologies) must be subjected to legal mediation in the areas of:

— intellectual property rights protection at every stage of life--cycle of the subject matters of such rights;

— creation of technological platforms to govern intellectual rights;

— infringing production control.

— gal regulation is also crucial in such fields as the increase of:

— public authorities' (in particular, of the Patel Bureau) work effectiveness and;

— innovative activity of economic entities by means of smart--contracts implementation. The search for promising developments in Russia and abroad, based on patent landscapes., also demands constant regulation. Undoubtedly, big data must be engaged into this area as the means of effective research and analysis.

One of the directions of intellectual property legislation improvement at the current stage of digital economics development can be illustrated by big data regime establishment and by determination of specific mechanisms of such protection. At this point it is necessary to clarify that by the term «big data» we are considering a set of data,

i. e. information, presented by a large number of various symbols and their combinations, and not a combination of different technologies.

It is well-known that a suitable analogue of «big data», pursuant to Russian current intellectual property legislation, is «traditional data», gathered and systematized in a certain way, which is also called «databases». These databases are legally protected in Russia as subject matters of copyright (paragraph 1 article 1260 of the Russian Civil Code) and as subject matters of neighboring rights (paragraph 1 article 1304 of the Russian Civil Code). In the former case databases are a result of a creative work -- a type of a composite work of art presented in an electronic form, while in the latter -- a result of by nature organizational and, as a rule, reproductive (non-creative) attempts of a maker to gather, process and arrange database-composing materials.

Legal protection of databases has its own peculiarities, based on:

— legal monopoly of copyright owners regarding structural database elements or its developers and;

— the possibilities of individuals using the material, extracted from databases (articles 1255, 1260,1334, 1335.1 of the Russian Civil Code). The above-mentioned peculiarities hampers the process of full and direct utilization of the legal protection mechanisms, applied to databases in terms of big data, consisting of 3 different kinds which are: structured, non-structured and mixed data Hurvitz J., Nugent A., Halper F., Kaufman M.Prosto o bolshih-dannyh [Big Data for Dummies]. M. :Exmo, 2015. P. 39--51.. Preliminary work on their systematization, processing and arrangement is required. It is clear that while estimating the necessity and determining of a strategy on the legal protection of the mentioned kinds of databases, besides choosing their legal regimes it is also important to consider various other factors, for example, the requirements for the technical data security infrastructure, the compliance with terms of confidentiality or privacy e.t.c It is possible to grant legal protection to structured data, i.e. data in a certain format, as traditional databases, which are the subject matter of neighboring rights. To achieve these goals, a preliminary work on gathering, processing and arrangement of specific data is required. This brings up the producer, whose part can be performed by individuals and legal entities, allotted by a legally stipulated (article 1334 of the Civil Code of the

Russian Federation) set of exclusiverights. At the same time, there are no obstacles on the way of recognizing of structured data as a subject matter of copyright protection. The conditions of such recognition are a work on systematization of data and creative character of attempts of this systematization. In addition, the fact of the creative element existence entails the requirement of a participation of exclusively individuals in the process of systematization.

As for unstructured data, i.e. data lacking a specific format, both the neighboring rights and copyright protection regimes can be applied to it. The choice of the regime would depend on the presence or absence of creative character of attempts to systematize, gather and process specific data. The same concept can be applied to mixed data.

Trade secret might be considered as other means of big data legal protection. Trade secrets assist in settling of a de-facto monopoly regime over certain types of data. When it comes to choosing a protection strategy for big data, the above-mentioned regime might ensure maximum and, at the same time, economic effect of their utilization.

The choice of a certain regime will depend on the peculiarities of data application and its utilization in business activity of a specific economic entity.

References

1.Hurwitz J., Nugent A., Halper F, Kaufman M.Prosto o bolshihdannyh [Big Data for Dummies] / Russian translation. -- M. :Exmo, 2015.

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