From Factories to Facebook: The Shift in Legal Rules from the Industrial Age to the Digital Era

by | Jun 13, 2024

The Industrial Revolution, widely regarded as one of the most transformative periods in human history, ushered in a wave of innovations that reshaped societies and solidified England’s position as a global leader. However, a lesser-known but equally significant debate at the time centered on the choice of legal frameworks to navigate this new industrial landscape. This historical discourse finds a contemporary echo as we transition into the Technology Revolution, with the global community once again grappling with the optimal way to regulate unprecedented advancements.

During the Industrial Revolution, England faced profound societal changes driven by burgeoning commerce and an expanding empire. This period saw towering intellectual figures such as Adam Smith, Lord Mansfield, and Sir William Blackstone engage in rigorous debates about whether legislation or common law should steer economic transitions. Lord Mansfield, then England’s Chief Justice, championed the common law for its adaptability and precision, arguing that “the common law works itself pure by refining rules drawn from the fountain of justice.” His emphasis on an incremental, case-by-case approach proved impactful. By the end of the 18th century, England had transformed into the world’s leading manufacturing and commercial hub. Economic historian Angus Maddison highlighted that between 1800 and 1900, global GDP per capita more than doubled—a feat unmatched in the previous 1,800 years. This period also saw remarkable reductions in poverty, with research by Max Roser indicating significant declines in the global population living on less than $10 per day, although much work remains.

As we move into the Technology Revolution, the debate over the appropriate legal framework is reignited. The European Union (EU) has opted for a legislative approach, introducing the Digital Markets Act (DMA) and Digital Services Act (DSA) to regulate digital platforms and their content moderation practices. Effective from May 2023, the DMA targets ‘gatekeepers’—large digital platforms—imposing rules against combining data from different services and self-preferencing, among other regulations. The DSA, effective from January 2024, aims to govern content moderation on social media. These regulations signify a shift from the ex post competition framework to an ex ante model, raising concerns about due process and the presumption of innocence. Additionally, the EU is finalizing the AI Act, which will impose extensive regulations on AI systems, including risk assessments and human oversight. Critics argue that these stringent regulations could stifle innovation and place Europe at a competitive disadvantage.

The Asia-Pacific region presents a varied response to these regulatory initiatives. Countries like Australia and Korea are considering similar legislation, while others such as Japan and India adopt a more cautious approach. Australia’s ACCC has proposed mandatory codes of conduct for digital platforms and new obligations to combat scams and fake reviews. Korea’s KFTC is pushing for a DMA-style bill but faces internal skepticism about its ex ante approach. Japan is experimenting with ‘co-regulation,’ combining voluntary self-reporting by companies with government monitoring. Meanwhile, India’s Committee on Digital Competition Law is studying the unique challenges of digital markets, aiming to balance regulation and innovation. Other nations in the region, including Thailand, Indonesia, Taiwan, Singapore, Malaysia, and Hong Kong, are also navigating this complex terrain, each adopting different strategies to regulate digital markets while fostering innovation.

Post-Brexit, the UK aims to shed the regulatory burden inherited from the EU. The UK House of Commons has proposed the Digital Markets, Competition and Consumers Bill, expected to come into force later in 2024. This bill seeks to regulate competition in digital markets while promoting a ‘pro-innovation’ approach to AI regulation. As Peter Foster of the Financial Times noted, “Brexit is about creating an investment environment that keeps pace with the best jurisdictions for innovation in the world.”

The ongoing debate on digital market regulation mirrors the historical discourse during the Industrial Revolution. The common law approach, with its adaptability and case-by-case precision, proved highly effective in England’s industrial ascent. Today, the EU’s legislative model faces scrutiny for potentially stifling innovation, while common law jurisdictions like the UK and the US continue to foster technological advancements. Despite aggressive antitrust enforcement, the US maintains a robust tech sector, with American companies dominating global stock market value. This success underscores the potential benefits of a case-led approach over stringent legislative frameworks.

As the Technology Revolution unfolds, jurisdictions worldwide will continue to grapple with the balance between regulation and innovation. The EU’s legislative experiment will serve as a critical case study. If successful, it could set a global precedent; if not, it may prompt a reevaluation of regulatory strategies. Asian economies, poised to be the next global powerhouses, will play a crucial role in this evolution. Their decisions on digital market regulation will significantly impact global innovation and economic growth. Policymakers must carefully consider historical lessons and current dynamics to foster an environment that supports technological advancements while ensuring fair competition.

Thus, the choice of legal framework—legislative or common law—will shape the future of digital markets and technological innovation. The world watches as this critical debate continues to unfold, much like it did during the Industrial Revolution. The outcome will determine how we navigate the complexities of the digital age, balancing the need for innovation with the imperative of regulation.