European Commission opens path to a Data Act to stoke digital economy

The European Commission (EC) has published a proposal for a Data Act that it hopes will stoke a digital economy across the continent, in part by opening up access to machine and internet of things (IoT) data.

Margrethe Vestager, executive vice-president of the European Commission for A Europe Fit for the Digital Age, said in support of the envisaged act: “We want to give consumers and companies even more control over what can be done with their data, clarifying who can access data and on what terms. This is a key digital principle that will contribute to creating a solid and fair data-driven economy and guide the digital transformation by 2030.”

The EC’s proposal encompasses a range of measures covering the use of connected digital devices and the granting of increased negotiating powers to small and medium-sized enterprises (SMEs). It also advocates new means for public sector bodies to access private sector information in event of public emergencies, the drawing up of new rules to allow customers to switch more easily from one cloud provider to another, and supports putting in new safeguards against “unlawful data transfer”.

The Data Act will, said the EC, shield SMEs from “unfair contractual terms imposed by a party with a significantly stronger bargaining position”. The commission will also “develop model contractual terms to help such companies to draft and negotiate fair data-sharing contracts”.

The act will stipulate that databases containing IoT data “should not be subject to separate legal protection” since a 1996 directive on the legal protection of databases is now outdated with respect to such data.

The proposal is the second legislative initiative undertaken within the EU’s data strategy published in February 2020. This aims at creating a single market for data, opening up what the EC calls “data spaces” within which data can be shared.

The original data strategy identified 10 of these spaces in health, agriculture, manufacturing, energy, mobility, financial, public administration, skills, the European Open Science Cloud, and ecology. Media and cultural heritage have also “emerged” since then as spaces, according to the EU.

The first legal initiative was a Data Governance Act, proposed in November 2020 and agreed a year later, to define what Thierry Breton, commissioner for Internal Market, called a “truly European approach to data sharing”.

“Our new regulation will enable trust and facilitate the flow of data across sectors and member states, while putting all those who generate data in the driving seat,” he said. “With the ever-growing role of industrial data in our economy, Europe needs an open yet sovereign single market for data.”

While the Data Governance Act concerns the processes and structures for data sharing, the new act is said to clarify “who can create value from data and under which conditions”.

With regards to the new Data Act, Breton said: “Today is an important step in unlocking a wealth of industrial data in Europe, benefiting businesses, consumers, public services and society as a whole. So far, only a small part of industrial data is used and the potential for growth and innovation is enormous.”

Digital Europe, a trade association for IT companies, noted that while the act “has the potential to unleash the incredible value of the data economy…this will only be achieved if regulation acts as an enabler, rather than as a set of restraining obligations”.

In a statement, the organisation expressed concern that the act could “undermine companies’ contractual freedom and have the opposite effect than intended. To boost data uptake, it is important that data-sharing agreements remain voluntary and commercially viable.”

Instead, it said that the EU “should provide support and incentives for companies to share data, such as schemes allowing companies to closely cooperate without falling under antitrust legislation”.

It also took issue with what it sees as a conflation of “business-to-business and business-to-customer data access and sharing”.

Cecilia Bonefeld-Dahl, director-general of Digital Europe, said: “The data economy represents around 3% of Europe’s GDP. We want to double this by 2025, and therefore fully support the EC’s ambition.

“When it comes to data sharing, many companies – especially smaller ones – are still finding their feet. They need incentives and support. Now is not the time to impose strict measures across the board that are designed to fix problems that simply don’t exist.”

She also warned of a constriction in the proposal of data flows beyond the bounds of the European Union (EU): “Presently, two-thirds of European SMEs transfer data over international borders, but the current proposal will restrict international data flows, which will seriously hamper their growth and competitiveness.

“Some 90% of future growth will come from outside Europe. This is a fact we need to face and work hard to make Europe a better place to do business instead of constantly imposing new regulation.”

The new Data Act has a concentration on products that are now digitally connected, and so generate types of data that did not exist until recently.

In a questions and answers document, the EU said: “When you buy a connected product (e.g. a smart home appliance or smart industrial machinery) generating data, it is often not clear who can do what with the data. Or it may be stipulated in the contract that all data generated is exclusively harvested and used by the manufacturer.

“The Data Act will give both individuals and businesses more control over their data through a reinforced data portability right, copying or transferring data easily from across different services, where the data are generated through smart objects, machines and devices.”

Cloud services also come under the purview of the new act, with the EU adding: “Data processing services, such as cloud and edge services…are a precondition for the innovative use of data. The Data Act will improve the conditions under which businesses and consumers can use cloud and edge services in the EU.

“It will be easier to move data and applications (from private photo archives to entire business administrations) from one provider to another without incurring any costs, because of new contractual obligations that the proposal presents for cloud providers, and a new standardisation framework for data and cloud interoperability,” it said.