Economic analysis of CDSM Article 17: two arguments in support and two arguments against

Ondřej Woznica (Masaryk University)


The contribution aims to provide background into the centrepiece of online copyright regulation, the Article 17 CDSM Directive. The insight provided applies the theory of Economy and Law to rapidly developing technology to identify tendencies previously sidelined by normative research. The analysis builds predominantly on Coasean economics. Article seeks to provide legal background and consider broader policy reasoning, namely the value gap argument, as the driving force behind the implementation and as a moral panic.
Article 17 CDSM Directive provides rightsholders with a better position to leverage copyright by extending legal bundle of rights to previously public domain uses, namely the sharing of user-generated content online where only users performed copyright-relevant acts. Accordingly, Article 17 requires platforms to license, remove, and prevent the re-emergence of content. In addition, it provides rightsholders with legal access to CRM tools to prevent reappearances. Lastly, Article 17 contains several mechanisms for balancing that have been empirically demonstrated to be poorly implemented by platforms.
The article concludes that Article 17 significantly reduces information asymmetry by assigning decision-making status to platforms. It also resolves the observed market failure of value gap, provided the policy reasoning described is valid, which is not supported by the article. CDSM, however, also increases legal fragmentation between jurisdiction and forms of copyright-relevant use. Finally, the risk of overblocking and overpolicing is potent. Subsequently, safeguards introduced in the legislative text and the recent CJEU ruling are crucial.

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