European Court reaffirms home state regulation for digital platforms

The European Court of Justice (ECJ) recently delivered key judgments regarding Italian regulations on digital platforms such as Airbnb, Expedia, and Amazon. The Italian regulations in question demanded that digital platforms operating in Italy, although established in another EU member state, must register, report, and pay fees in Italy to deliver their services. The decisions relate to the EU e-Commerce Directive and the principle of home state regulation.

Italy, in the specific cases (C-662/22 and C-667/22), believed that the regulations in question were necessary to ensure the national implementation of Regulation 2019/1150. In addition, Italy cited that the regulations were imposed to enforce other rules, for the overall sake of maintaining public order and safety.

The service providers argued that the Italian regulations conflicted with the e-Commerce Directive, which centralizes regulatory responsibilities in the country of establishment, in accordance with the principle of home state regulation.

The court ruled that e-Commerce Directive did not entail the member states to apply rules of general and abstract application for the purpose of maintaining public order and safety. Regulations with such purpose are, in fact, legitimate, although only if targeted towards specific providers.

Furthermore, the court sided with the service providers; ruling that the broad Italian regulations cannot supersede the principle of home state regulation. Additionally, according to the ECJ, Regulation 2019/1150 did not require the type of pre-registration that Italy demanded.

These fresh rulings are part of a broader legal discourse on the regulation of digital platforms in the EU. Due to the fact that companies such as, for instance, Google, Uber, and Airbnb, normally have a significant impact on the local markets, the boundaries of the principle of home state regulation are contentious. Case-390/18 (Expedia), with opposite conclusion to case-434/15 (Uber), illustrate just how unclear the line is.

The ECJ's judgments align with EU's overall effort to harmonize regulations with recent legislative initiatives, such as the "Digital Services Act" (DSA) and the "Digital Markets Act" (DMA). The rulings reinforce the principle of home state regulations, whilst accordingly limiting individual member states from imposing additional regulations on digital platforms established in another EU state.

The number of rulings and legislative acts highlight the relevance and importance of the ongoing challenges of balancing local regulatory needs and the EU's superior goal of a unified digital market.