Digital freedom: law and the evolution of market relations

Digital platforms and marketplaces are not only changing the way business is conducted, but are also giving rise to new forms of economic and legal relationships between market participants. It is vital that legal professionals today work to develop systems which not only protect fair competition and the rights of consumers and businesses, but also promote innovative development. As well as requiring a deep understanding of current legislative frameworks, such an undertaking also requires an ability to anticipate how changes in technology and the market might affect the legal landscape. Those were the conclusions reached at a session entitled Digital Freedom: Law and the Evolution of Market Relations, which took place as part of the St. Petersburg International Legal Forum.

The Forum was organized by the Roscongress Foundation with the support of the Ministry of Justice of the Russian Federation.

KEY CONCLUSIONS

Digitalization has led to the creation of a new economic sector

“We have created an entire sector. <…> We are on the verge of a new era. Today, the digital economy is changing the conventional relationships between market participants. <…> Everyone is moving to the digital realm now, be that online or offline businesses. <…> Every business endeavours to be cost-effective, and if you cross a certain threshold, you realize sooner or later that your future lies in platforms, big data, algorithms, artificial intelligence, scoring, and ratings,” Tatyana Bakalchuk, General Director, Wildberries.

“Wherever you look, there is a trend towards recognizing this as a sector in its own right. It is a sector with its own principles,” Ekaterina Papchenkova, Deputy General Director, Center for Strategic Research.

“According to the Ministry of Digital Development, the internet economy enjoyed 3.5-fold growth over the past four years. The digital economy accounts for no less than 4% of gross domestic product (GDP). These are enormous figures. We have seen how digital platforms have changed our lives. They perform unique functions. They not only ensure a stable supply of goods and services, but also remove territorial barriers to access. All this helps make price competition more effective,” Vadim Vinogradov, Dean of the Faculty of Law, National Research University Higher School of Economics.

As a new sector, the digital economy is in pressing need of its own regulatory framework

“We need to define some concepts and set some principles. Together, we should try to work towards developing regulations, describing what is meant by the platform economy and digital economy, and understanding where we are all heading,” Tatyana Bakalchuk, General Director, Wildberries.

“Disputes arise due to problems and ambiguity related to interpretation, and legislative gaps. As relationships develop, so legislation follows a little later. This is particularly clear in this sector. Technologies are progressing at an incredible rate today,” Ekaterina Ilgova, Rector, Saratov State Law Academy.

PROBLEMS

The lack of a sound tax policy and legislative regulation in relation to platform-based employment

“Who should actually be the ones to pay taxes? Logically, it should be the person providing the services. Our tax system is not yet ready for this. Graded personal income tax is a great topic, and one which, we believe, needs to be developed further. That is because the more you earn, the more you should put back into the economy,” Tatyana Bakalchuk, General Director, Wildberries.

“Not all regulators and Duma deputies fully understand this sector of the economy they want to regulate. Some say that marketplaces should be separated into parts because they offer a variety of services, as well as operating in logistics and sales. They also claim that the sector requires things like holidays and work contracts. But what about those who want to work 11 days a month, for whom holidays are not important? It’s not made clear. Legal professionals are constantly coming up against these sorts of challenges,” Denis Kosenkov, Managing Partner, Kosenkov & Suvorov; Vice President, Russian Association of Retail Market Experts.

“A range of legal stipulations were analysed. Some thought needs to be given to the current project – it is perhaps in need of improvements and additions. As things stand, it does not comply with the Regulation of the Digital Environment federal project [part of the Digital Economy of the Russian Federation national programme – ed.]. It is not in any way compatible with the concept of the aforementioned federal project,” Ekaterina Ilgova, Rector, Saratov State Law Academy.

“For some reason, our regulator chose to traverse a path of tough imperative restrictions. That applies to timeframes relating to offers and to imposing fines. In other countries, this is virtually not done at all, despite the subject of regulation being the same. <…> Procedures are being developed to resolve disputes before they come to trial. The parties have the option of turning to mediators, and artificial intelligence is being employed instead of humans to consider disputes. This provides protection against potential arbitrariness, and creates transparent rules, while keeping the option of levying fines or blocks,” Ekaterina Papchenkova, Deputy General Director, Center for Strategic Research.

A lack of proactiveness on the part of the marketplaces themselves to set out their position

“All the negative and excessive measures being implemented now are a response to the lackadaisical position taken by the marketplaces themselves when the perfect conditions were created for them. <…> With big money comes big responsibility,” Oleg Pavlov, Chairman, Public Consumer Initiative Organization for the Protection of Consumer Rights.

SOLUTIONS

Improving the mechanisms for regulating platform-based employment

“We will need to learn how to deal with platform-based employment because it is here to stay. This is not just about low-skilled labour, but also software developers and lawyers, as people want to manage their time and earn more for the hours they are willing to spend working. A platform‑based employment framework enables several tasks to be performed,” Tatyana Bakalchuk, General Director, Wildberries.

Enshrining regulations on the digital economy in law, while focusing on striking a balance

“It would be good if we – as members of the digital economy, a new sector – could work with the larger legal community to develop a legal framework,” Tatyana Bakalchuk, General Director, Wildberries.

“We could enshrine good practices in law. This would reflect the goodwill of the platforms and companies themselves. It would be an outcome of their competition with one another. Things like advance notice of changes in offers, the possibility of arbitration when considering appeals against fines, timely responses to requests from sellers or pick-up points – all these will absolutely improve these relationships and make them more transparent. This would result in greater predictability, which would benefit everyone. Platforms directly depend on their partners and vice versa. What I would definitely not do and would not recommend is interfering with pricing in a highly competitive market,” Artem Sokolov, President, Association of Internet Trade Companies.

“A balanced approach is needed. Putting large barriers and control measures in place does not always lead to positive outcomes. We have an opportunity to develop. Any development strategy for digital platforms must incorporate a sense of freedom. And we should rely on the integrity of participants, and not accuse them in advance of violating someone’s rights,” Ekaterina Ilgova, Rector, Saratov State Law Academy.

“Regulators and legal professionals need help today because we cannot develop legal norms, regulate public relations, and create something that contradicts these relations and hinders development,” Denis Kosenkov, Managing Partner, Kosenkov & Suvorov; Vice President, Russian Association of Retail Market Experts.

*This is a translation of material that was originally generated in Russian using artificial intelligence.

For more information, visit the Roscongress Foundation’s Information and Analytical System at roscongress.org/en

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