EUROPEAN COMMISSION

Brussels, 25.11.2021

SWD(2021) 355 final

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT REPORT

Accompanying the document

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the transparency and targeting of political advertising

{COM(2021) 731 final} - {SEC(2021) 575 final} - {SWD(2021) 356 final}

Table of contents

1.Introduction: Political and legal context

2.Problem definition

2.1.Scope and context

2.2.What are the problems?

2.3. How will the problems evolve?

3.Why should the EU act?

3.1.Legal basis

3.2.Subsidiarity: Necessity of EU action

3.3.Subsidiarity: Added value of EU action

4.Objectives: What is to be achieved?

4.1.General objectives

4.2.Specific objectives

5.What are the available policy options

5.1.What is the baseline from which options are assessed?

5.2.Description of the policy options

5.3.Options discarded at an early stage

6.What are the impacts of the policy options?

6.1.The baseline scenario

6.2.Assessment of the options

6.2.1.Economic impacts

6.2.2.Social impacts

6.2.3.Fundamental rights impacts

7.How do the options compare?

7.1.Effectiveness

7.2.Efficiency

7.3.Coherence with other initiatives

8.Preferred Option

9.How will actual impacts be monitored and evaluated?

Annexes

Glossary and acronyms

Annex 1: Procedural information

Annex 2: Stakeholder consultation

Annex 3: Who is affected and how?

Annex 4: Analytical methods

Annex 5: Context, scope of the market, and other aspects relevant to the problem definition

Annex 6: Intervention logic

Annex 7: Legislation addressing political advertising across Member States

Annex 8: Presentation and analysis of EU acquis

Annex 9: Illustrative use cases

1.Introduction: Political and legal context 

The President of the European Commission, Ursula von der Leyen, announced in her political guidelines 1 that the European Democracy Action Plan (EDAP) 2  ‘will include legislative proposals to ensure greater transparency on paid political advertising and clearer rules on the financing of European political parties.’ EDAP, presented by the Commission in December 2020 highlights the ‘clear need for more transparency in political advertising and communication, and the commercial activities surrounding it’ and announced that ’the Commission will present a legislative proposal on the transparency of sponsored political content’, to ‘complement the rules on online advertising in the forthcoming DSA, with the aim to have dedicated rules in place sufficiently ahead of the May 2024 European Parliament elections’. To that end, the 2021 Commission work programme includes 3 a proposal for greater transparency in paid political advertising.

The Commission’s initiative on the transparency of political advertising aims to support the functioning of the single market for political advertising services (‘political ads’) addressing the growing patchwork of legislation in this area and related barriers including in terms of compliance cost and lack of legal certainty. It aims to promote high European standards of transparency in political campaigning and free and fair elections in the EU level, strengthen the resilience of democratic processes in the EU and combat disinformation, information manipulation and interference in elections.

Political advertising is a tool in campaigning to convey political messages to voters. It aims to influence people’s views on political subjects and their voting decisions, and is often specifically regulated nationally, with a specific focus on transparency. 4  The traditional media for political ads used to be newspapers, posters, radio and television. Today, these have increasingly been displaced by the digital sphere. Digital technologies have also made political advertising cheaper and increased the number and types of service available to support campaigning. The cross-border nature of online political advertising has challenged the relevance of national rules, which typically included restrictions to ensure democratic accountability and fairer processes and economic operators face difficulties to determine and adapt to applicable rules, limiting their ability to offer advertising services.

Online political ads are commonly targeted at groups of users, based on the processing of personal data 5 . Targeting (directing an ad to a specific group of people based on some shared characteristics) can be very sophisticated. While this can beneficial in addressing political messages to concerned citizens, the Cambridge Analytica scandal 6 revealed a need to address this phenomenon 7 . It brought to light unauthorised interference in elections (including by foreign state actors), exploitation of online social networks to mislead voters, and manipulation of the debate and their choices 8 , using psychographic profiling and opaque practices that conceal or misrepresent key information 9 . Other techniques are also used to spread or amplify manipulative political ads. The application of opaque algorithms and the analysis of personal information allow the tailoring and targeting of political ads, which can exploit vulnerabilities of voters, including in another Member State. The volumes of data at stake are important, including data derived from the use of social media and commercial practices (e.g. consumer profiles), combined with offline data.

This initiative will build on and complement relevant EU law 10 , including Regulation 2016/679 (GDPR), the recent proposals for a Digital Services Act (DSA) 11 and for a Digital Markets Act (DMA) 12 , addressing economic operators and issues identified for political advertising 13 . It is being complemented by other initiatives including the update of the self-regulatory Code of Practice on disinformation 14 , based on the recently published Commission guidance 15 . This proposal will also be in synergy with the efforts led by the EU externally, in the field of election observation (EU Election Observation Missions and their follow-up)

Both the European Parliament and the Council have expressed concerns about the lack of transparency in political advertising and the use of (micro)targeting 16 . Different Parliament committees have engaged on this topic, in particular the Constitutional matters (AFCO), the Internal Market (IMCO) committees and the Special Committee on Foreign Interference in Democratic Processes in the EU, including Disinformation (INGE). The Parliament has called for legislative and non-legislative policy measures. The Council has supported initiatives to promote free and fair elections and democratic resilience, and Member States have been involved in preparing the EDAP and this initiative 17 .

2.Problem definition

2.1.Scope and context

There is no EU-wide common concept of political advertising and Member States use various approaches 18 . For the purposes of this impact assessment, political advertising 19  will be understood as the promotion of a message, published by any means, and which is being paid for by, or disseminated by or on behalf of a political actor, or which may be understood as seeking to influence the outcome of the election or the voting behaviour (especially when published during an election period). This includes ads on all media platforms (including online and offline) disseminated in the European Union, ‘issues ads’, and political advertising which may also have commercial purposes 20 . A broad range of service providers is involved in political ads, online and offline, in their preparation, publication and dissemination. 21  

Issues with regard to political ads online emerged in the public sphere in March 2018, when it was revealed that Facebook data, including Like data, on more than 87 million users was used by political consulting firm Cambridge Analytica to target voters during elections 22 .

There are significant differences between political advertising and other forms of advertising in the single market. Misleading commercial advertising is already forbidden according to Directive 2006/114/EC. Addressing political advertising as other commercial advertising would not be possible due the specific context of political advertising and the close relationship with elections, freedom of expression and political pluralism among others. Transparency of political advertising is also linked to accountability and democratic oversight, as an essential democratic principle.

The Commission’s report on the 2019 elections already noted the importance of increased transparency of political advertising to ensure resilience and integrity of electoral processes in the EU. It also noted the limited implementation of the 2018 Electoral package recommendation in this respect and the need for further measures. The report highlighted the close connection between a lack of transparency in political advertising, the misuse of algorithmic targeting and the increased risk of interference in and manipulation of democracy in the EU. The Commission’s joint Communication on tackling COVID disinformation of June 2020 described the ‘infodemic’ which accompanied the coronavirus pandemic and the challenges this posed including for democracy and democratic processes, and pointed to concrete measures at EU level to address these challenges.

Some Member States have legislated or intend to further legislate in the field of political advertising for reasons of public interest. As a result, a patchwork of national rules is emerging and likely to increase. Heterogeneous national specific requirements on political advertising and related barriers obstruct the exercise of fundamental freedoms with a direct effect on the functioning of the internal market. Member States’ regulation on transparency of political advertising goes beyond what applies to other forms of advertising. The aim of such national regulation is primarily to prevent citizens from being misled in their democratic choices, support their genuine political participation and accountability of political actors, contributing to fair and free democratic processes and their oversight, and preventing external interference 23 . Differences concern, for instance, diverse requirements for each media (e.g. TV and radio and online services), transparency related to the funding of political ads, the way ads should be labelled or what must be made public during election periods and oversight. Further, the regulation of issues ads is even more heterogeneous, even as their role in shaping political campaigns and influencing the outcome of elections is more and more recognised 24 .

The fragmentation leads to impediments for service providers including when providing cross-border services. It significantly increases compliance costs to adapt to the different jurisdictions and is a source of legal uncertainty on the applicable transparency requirements. It further restricts the possibilities and choice for cross-border campaigning for political actors like European Political Parties.

The heterogonous regulation impacts companies operating in a cross-border context. It prevents some operators, especially SMEs 25 , which could offer their political-ads-related services in different Member States from entering the market. There are also many economic actors providing novel ad-related services, such as those providing data-driven analysis and programmatic ads. It may be unclear whether and how these providers are affected by rules designed for traditional campaigning. In the cases where service providers are able to offer cross-border services, the currently heterogeneous legal standards also lead to oversight related issues as affected citizens, the competent authorities and the advertisers and related services providers can be located in different Member States. This results in tensions and barriers in the internal market for services connected to political ads. It also generates poor regulatory outcomes, which combined with the lack of transparency and other issues related to the monitoring and enforcement of relevant rules, undermines the integrity of electoral processes and citizen’s confidence in them.  National action to address the situation is not fully effective and creates further barriers, and the same applies to private sector policies.

Although the DSA will strengthen transparency and supervision of online ads, including political ads, it will not address the specifics of political advertising. The DSA provides a set of horizontal rules which apply to information society services 26 . The transparency requirements provided by this new framework will complement those foreseen by the DSA by addressing the entire spectrum of economic actors involved in the preparation, publication and dissemination of political advertising, following a problem-specific value chain approach and imposes corresponding obligations on types of actors. While the DSA requires platforms to disclose the identity of the advertiser (irrespective of whether it refers to political or commercial ads), the political ads initiative will require them to also provide information about the political affiliation and on the funding of the ads.

National rules apply to European political parties (EUPPs) on issues not regulated by Regulation 1141/2014. The Regulation does not address political ads directly – only as regards the rules on the application of EU funds. Accordingly, campaigns by EUPPs are potentially subject to different national rules (e.g., rules on what constitutes political advertising, targeting, and periods in which political ads are restricted), despite the transnational character of EUPPs and the EU-wide character of the issue they campaign on.

2.2.What are the problems?

2.2.1. Obstacles to the cross-border provision of online political advertising services in the internal market (Problem 1)

Political ads services in the internal market include political advertising delivered through broadcast media, various online channels (social media, banner ads, video-sharing spots etc.) and through other offline means, including billboards, print media and direct mailing. They can involve a large number of related supporting services, such as data services, copywriting, analysis and financial services, often provided by SMEs 37 . 

It is challenging to isolate political advertising from other advertising services in market statistics 38 . The study and consultation did not manage to obtain comparable data on the offline publishing sector, outside of the disclosures made in the context of national elections 39 . Regarding online advertisement publishing activity, there is a lack of transparency that makes is almost impossible to obtain accurate, consistent and comparable data. Nevertheless, it is clear that the size and complexity of the political advertising market is increasing both within and outside the EU – particularly online, where the EU market was estimated to be worth over EUR 100 million in 2019 40 .

Political advertising services are regulated in diverse ways 41 . When offered across borders in the internal market, certain rules can affect economic actors involved, i.e. those regulating: 

1.the availability of political ads (rules banning political ads or banning cross-border provision of such services, setting prices or other issues determining access to the debate, and the period/scope of circulation);

2.the advertisements themselves (rules on content and transparency around them – requiring the publication of logos, sponsor details, spending – as well as prohibiting certain content, such as hate speech).

This initiative focuses on the second category, and particularly on transparency requirements. The initiative does not consider interventions regarding prohibitions of content or of political ads per se, except to the extent that transparency supports oversight of such rules. A key aspect of the regulation of political advertising is transparency to enable their easy identification by viewers to prevent manipulation, democratic accountability and oversight by competent authorities.

Moreover, transparency appears to be the key available area for harmonisation, which de facto allows for shaping the emerging market for political advertising services in a way that minimises fragmentation, barriers and costs for economic actors.

The fragmentation of transparency requirements for political ads, with differences in their substance, scope, implementation and enforcement between Member States, and between the policies applied by leading ad publishers, generates various costs and challenges for economic actors operating across borders or seeking to do so.

2.2.1.1. Additional costs and compliance burden for economic actors (Problem 1.1)

Driven by rules which are not always clear, transparent or publicly available: Reliable information about applicable requirements (including the procedures to be followed) can be challenging for service providers to obtain outside their specific jurisdiction, especially as they are not always clear and easily accessible. For instance, in some Member States, they are provided by standard-setting bodies or national authorities, rather than in law 43 .

Driven by fragmented rules, definitions and requirements:

Operators affected by these rules must invest in separate compliance steps and adapt to the various requirements of the different EU jurisdictions 44 to provide services in the internal market. Fragmentation is exacerbated by the scope of national rules differing, with different actors being covered, and by varying obligations depending on the period, sponsor, medium, content and objective of the ad 45 . As an example of the potential effect of differing definitions, online audio-visual ads prepared in the Netherlands with a political aim but without affiliation to a specific political party would not be subject to the rules applying to political campaigns if disseminated into Denmark, but would be subject to such rules if they were disseminated into Ireland or Cyprus 46 . Publishers and campaign agencies need to ensure that ads are adapted to each jurisdiction’s transparency requirements, such as on logos, affiliation and funding, but also to related obligations e.g. connected to access to the media. In this respect, political ads offered across borders in the internal market differ from commercial ads, where such rules are (largely) harmonised 47 .

The relevant national rules on transparency of political advertising thus differ depending on what counts as ‘political advertising’, as per national definitions. This means that what can count as a political advertisement in one state (and thus also potentially engage other rules), might not in another, or vice versa, which complicates cross-border campaigns.

They further differ depending on whether they apply to a specific medium: some Member States have distinct rules for print, radio, television and online media, whereas for others the rules apply to multiple media at once, or regardless of the medium, or explicitly to traditional media and implicitly to other media. 48 Only four Member States have (or will soon have) rules specifically for online media. This kind of fragmentation obliges service providers interested in providing political advertising services to carefully assess the whole legal framework applicable to each media for each Member State where they want to provide their services.

Further, even when two Member States have rules in place for the transparency of political advertising on a given medium, the elements of transparency required to be disclosed may still differ strongly, for instance in terms of the amounts paid for the advertisement 49 or of the actors to be identified in the ad 50 . Having to disclose different elements across Member States requires having different versions of the same advertisement ready (or different transparency notices), and when they are disseminated online it requires controlling carefully the audience to which each version of the advertisement is shown.

Similarly, the few Member States which recently passed or intend to pass rules concerning the transparency of targeting techniques also require different elements to be disclosed, some going much further in terms of the explanation of the process behind the targeting technique 51 .

Beyond transparency disclosures in the advertisement itself, some Member States also require some form of transparency through reporting obligations (either only from political actors, or also from service providers) concerning the political advertising services contracted and political advertisements circulated on their behalf 52 .

Inconsistent rules not only drive fragmentation in the internal market directly, they also have an indirect effect through private sector policies and service availability. Economic actors, including Code of Practice on disinformation signatories, therefore respond to the increased compliance risk and the uncertainty by applying different commercial strategies in their terms of service regarding political ads, to adapt to the fragmented regulatory context and to limit their liability in terms of compliance with different requirements 53 . Such existing policies can include opting not to provide services to actors established in other Member States (including in the context of EU elections), or not providing services in more than one Member State, for commercial reasons.  

It was in this context that Facebook 54 , as of the 2019 European parliamentary elections, took the decision to require that political ads may only be disseminated in a Member State if the can advertiser provides identification documentation or a proof of residence issued by the state in question. This rule meant that for EUPPs to campaign online across the EU through one of the main social media platforms, they would have had, on the basis of the contractual terms of a company, to be established in each Member State 55 and administrate their campaigns locally. This increased the cost of campaigning and limited the options available to EUPPs 56 and any other actor wishing to campaign on European issues or in more than one EU Member State.

By taking such actions, private actors – in particular if they are gateway intermediaries – act as de facto enablers and/or quasi-regulators of political ads 57 . Their decisions can have the effect of further partitioning the internal market or otherwise affecting its functioning 58 . This limits the choice of service providers available to actors wishing to sponsor political ads such as political parties and candidates 59 , including EUPPs.

Consequences: service providers can decide to limit the services they offer in some Member States, or across borders altogether, because the costs of adapting their services to the different regulatory requirements makes service provision unattractive. 60  

2.2.1.2 Regulatory arbitrage and circumvention of relevant rules by providers offering political ads services (regulatory failure) (Problem 1.2)

In the consultation, Member States’ competent authorities indicated that a concern in their oversight of political ads during national electoral campaigns was the circumvention of national rules. This happened through the delivery of political ads services, particularly online, across borders within the internal market 63 .

This problem is driven by differences in the:

I.cost of complying with the transparency obligations in certain Member States, for instance as regards specific disclosures, information retention or other steps 64 .

II.monitoring and enforcement of relevant rules. In certain Member States, the relevant rules are not applicable or are not enforced, either online or outside of electoral periods. Cooperation mechanisms to support enforcement are limited.

Uncertainty about which rules apply and a lack of information about online activity can also drive differences in regulatory outcomes and hence the commercial decisions taken by service providers (including those established outside the internal market) about their political ad services.

Consequences: This tends to direct cross-border services away from more regulated Member States 65  towards less regulated ones, or where enforcement is limited.

The difficulty for Member State competent authorities to monitor ads in their jurisdiction and enforce their rules for political ads originating from abroad is felt to be disadvantaging domestic service providers in some Member States. Restrictions in Member States are being considered to prevent the circulation of political ads from other Member States or from non-EU countries 66 .

The legal analysis confirms that such circumvention cannot be addressed by Member States acting individually. While the introduction of the DSA will improve the overall transparency of advertising and support cross-border oversight of the obligations it imposes, issues specific to political ads will remain unresolved, including the need to cover the transparency of programmatic ads, and to provide transparency of political ad spend and financing.

2.2.1.3 Additional regulatory burden for offline operators in political ads (Problem 1.3)

Member States regulate more those political ads which are disseminated through offline media (radio, TV, print etc.) than those distributed online 67 .

Offline operators therefore face a heavier regulatory burden than those working with online political ads 68 . This burden is increased if the services are delivered across borders because the relative advantage of the lighter requirements of providing ad services online is multiplied by the fragmentation costs. This also places EU-based service providers at a disadvantage to online service providers established outside the EU, who can avoid certain compliance costs altogether 69 .

Consequences: While not the only factor driving political ads online 70 , these issues contribute to the trend for political parties, candidates and groups to use online ads rather than more strictly regulated offline media. This further distorts competition and favours a limited number of large online operators.

2.2.2. Problems for democratic processes linked to internal market issues (Problem 2)

There is a substantial body of national regulation applicable to political ads, including electoral and political party rules, political funding and transparency rules and regarding relevant audiovisual media and other media services. There are also relevant EU rules. As described in Section 2.2.1, in the Member States where political ads are permitted, specific provisions condition the availability of political ads (regarding medium, period, actors etc.) and their content (transparency and other rules) 71 . These rules are specific to each Member State and reflect their respective democratic traditions 72 , which have in common principles such as addressed by the Council of Europe’s Venice Commission 73 . They seek to promote free and fair elections and accountability in the democratic debate, including by ensuring that:

·a plurality of political actors have access to the means to communicate their message to voters;

·political actors campaign in the open and can be challenged on the claims they make;

·resources are used transparently 74 ;

·citizens are provided with the information they need to evaluate the political messages they receive and make their minds up freely; and

·foreign actors and powerful commercial interests are not able to control the political debate.

Citizens, civil society and national authorities have indicated concerns that the monitoring and enforcement of such rules in political ads is being eroded, especially online and across borders, threatening the integrity of democratic processes. 75  Practical examples of this situation, such as those mentioned in the problem definition chapter, occur on an increasingly regular basis. Beyond the EU instruments relevant to the regulation of political ads 76 , the European Commission has issued soft-law measures to help respond 77 , but concerns remain. These concerns are closely linked to the internal market issues related to the regulation of transparency of political ads. Addressing them in this initiative will improve fundamental rights (see section 6). They are also relevant for problem 2.3. They are summarised below and presented in more detail in Annex 5, section 2.

2.2.2.1. Negative impacts of current framework on regulatory outcomes across borders (Problem 2.1)

The differences and gaps in national regulation and self-regulation (detailed in Annex 7) result in poor regulatory outcomes for cross-border campaigns, in particular regarding non-recognisability of political ads by individuals, lack of accountability in the debate and risk of electorate illicit manipulation.

This problem has the following drivers:

·Societal and political actors lack information to hold political actors and parties accountable on their online political ads activities and thereby play their role in the democratic process.

·Political actors are unable to exercise mutual scrutiny and Member States have difficulties to monitor and enforce relevant rules which they have adopted to protect the public interest.

·Limited legislation providing insufficient information, especially online.

·Insufficient information provided by the various actors, and ineffective collaboration between national authorities and economic actors 78 .

Consequences: All stakeholder groups underlined the negative impact of the poor regulatory outcomes on democratic processes and on public trust in political ads. It has prompted some Member States to unilaterally prepare relevant legislation. These Member States and others have also indicated that neither national regulation nor self-regulation are likely to be effective in addressing the cross-border aspect of this problem without a sufficient EU framework to support them.

2.2.2.2 Targeting techniques in online political ads create problems for citizens and for the democratic process (Problem 2.2)

Online political advertising are different from traditional political campaigning due to the actors involved (including foreign-based actors from inside or outside the EU), the type of media being used (by nature not confined to national border) and the possibility to use techniques tailoring the information provided to different audiences without the possibility to consult what other audiences have been exposed to. This allows a political actor to highlight a different issue for each voter, leading to a different perception of the actor’s priorities 79 . These techniques altering or tailoring the visibility of ads can be very elaborated, and can be based on extensive knowledge about individuals, including their vulnerabilities, with the aim to impact voters’ behaviour. Further, the same tools that allow people to be targeted can also be used to exclude people from messages that, in a democracy, they have a right to hear.

Targeting online greatly differs from targeting offline. While advertisers will aim to promote their information in specific journals, TV channels, locations etc. based on the categories of the groups that gather there (which amounts to a certain form of targeting), online advertising allows for a selection of audience that is both much narrower (to the level of micro-groups, or even individuals) and less evident to those exposed to it – also because the targeted groups will be ad hoc 80 . Beside the level of granularity that can be achieved and the level of knowledge about each individual targeted, online ads can also be targeted to appear at specific moments in specific places designed to exploit the moments where they will be most sensitive to certain kind of information, hence manipulation.

Online advertising and advanced data processing and analysis thus enable a number of techniques to target and amplify the impact of political ads 81 . The personal data can come from a number of sources, such as online activity, surveys, the electoral roll etc., and is used for a number of purposes, including to plan campaigns and shape messages, as well as to establish the criteria for the targeting of programmatic ads, etc.

Recent elections in the EU have shown that the impact and the use of targeting is increasing 82 , and targeted ads account for an increasing proportion of overall political campaign spending 83 . Despite the existence of comprehensive common EU data protection rules and guidance, transparency on the use of such targeting techniques remains insufficient. This includes for instance the amounts being spent in such techniques and publically available information on the techniques used 84 . Political ads can avoid scrutiny by being narrowly targeted to (and hence only visible by) certain audiences or profiles, allowing political actors to make irreconcilable promises to different segments of the electorate and manipulate the public 85 . The absence of due transparency about the targeting behind a political ad exposes individuals to a greater risk of being manipulated. More details of such abusive and sometimes unlawful practices related to these techniques are documented in the literature 86  and public concerns have been expressed 87 – with targeting of political ads being argued to be problematic per se 88 , even in the absence of psychographic profiling techniques such as used by Cambridge Analytica. The use of sensitive categories of personal data is also considered problematic and liable to misuse; the public in particular is opposed to microtargeting that is about certain content, including political advertising, or based on certain sensitive attributes including political affiliation 89 . Watchdog organisations and national authorities appear unable to oversee this activity effectively, and are calling for action to revise rules on political ads to address the implications of targeting 90 . These practices create particular horizontal problems for citizens and the democratic process.

National rules on political ads can also be engaged by targeting activity, and new national measures are being considered, but they will not address the cross-border nature of this issue and are unlikely to be effective. Annexes 7 and 8 present the relevant national and EU provisions, and point to the gaps and challenges.

Consequences: The way targeting (and amplification) techniques are used with political advertising, and the limited transparency and control applied to them undermines trust in the use of such services among citizens and government authorities, and has a knock-on effect on perceptions of the integrity of elections and the democratic process. Member State and private sector actions in response have been driven by the association of targeting of political ads with foreign interference and disinformation. While these actions have limited the availability of services, they have not provided effective solutions to the problems associated with using targeted political ads. Proposals in the European Parliament 91 , the EDPS 92 and at national level have included banning targeting.

2.2.2.3. Member States are unable to monitor and enforce transparency of political ads, and other relevant rules (Problem 2.3)

National competent authorities encounter challenges with monitoring and enforcing relevant rules connected to political ads, particularly online and across borders driven by:

Lack of resources, capacity, competence regarding political ads: The lack of appropriate powers and resources is raised by both civil society and international organisations 93 . The legal mapping in Annexes 8 and in the underlying study shows that only few national authorities and bodies are empowered to supervise online political ads.

Extraterritorial nature of the enforcement of online political ads: National authorities and bodies reported insufficient capabilities for oversight of political advertising across borders, while the market for political ads is becoming increasingly cross-border. National rules cannot easily be enforced across borders. With the exception of the voluntary exchanges of information and practices in the European cooperation network on elections (ECNE), Member States reported little cooperation among authorities on these specific topic. EU law provides for oversight mechanisms related to specific aspects of activity relevant to political ads (see Annex 8).

Insufficient coordination on political ads among national authorities: Outside of EU-coordinated governance, including under the GDPR or as envisaged for the DSA, the legal mapping describes the diversity of existing authorities and bodies in the different Member States, all playing a role based on different legal acts. The OSCE reports on EU Member States’ elections provide various examples of insufficient coordination in this area.

First impact: Fragmented enforcement of rules and fragmentation of sanctions applicable at national level: The lack of capacity and knowhow by national competent authorities to properly enforce legislation, as well as the insufficient coordination between these bodies, affect enforcement at national level.

Second impact: Use of undeclared sources and interference by foreign actors: Difficulties exist with the lack of transparency including the financing used to conduct political advertising across borders. This enables foreign state and non-state actors to manipulate and interfere in the democratic debate and elections in the European Union.

2.2.3. Political parties in the EU: insufficient and inconsistent transparency (Problem 3)

Political parties in the EU do not provide enough information about their advertising for citizens to recognise them as political advertising, to know how much money was spent on them, what techniques were used to target and amplify them, or to identify which parties and campaigns they are affiliated with. Insofar as this problem relates to the activities of national political parties, it is already discussed in problem 2 (especially on targeting and on the enforcement of national rules), and the rest of problem 3 will therefore focus on EUPPs.

This issue is relevant for EUPPs as their campaigning activity grows 94  and they increasingly campaign cross borders on ‘European political issues’ 95 . The main driver for this is that EU rules applicable to EUPPs do not provide for specific transparency for political ads, when disclosed to citizens. Further national rules are heterogeneous and generally not enforced for political advertising sponsored by EUPPs. This may be related to a focus placed by national oversight bodies on national campaigns. EUPPs and European political foundations are regulated by Regulation 1141/2014, with national law otherwise being applicable 96 . The Regulation regulates the statutes and funding of EUPPs 97 and does not directly address the transparency of political ads. It obliges European political foundations to use their funding activities only for a closed list of tasks, which does not include political advertising as such 98 . The Regulation also prohibits EUPPs from (i) directly or indirectly funding other political parties, and in particular national parties or candidates, and (ii) financing referendum campaigns 99 . The Regulation provides for verification of compliance with certain registration conditions and requirements 100 , and on infringements of rules on the protection of personal data 101 .

Regulation 1141/2014 includes transparency obligations in relation to financing and expenditure for electoral campaigns, published in annual financial statements 102 . It also requires the Authority competent for EUPPs to provide on its website information about contributions and donations collected from EUPPs 103 . The Authority does provide some non-binding recommendations 104 , however without follow-up monitoring of compliance. Further, the Recommendation accompanying the Commission’s 2018 Electoral package recommended that EUPPs take steps to provide a range of information about their advertising, including about targeting 105 . 

Consequences: In the 2019 European Parliamentary elections, the EUPPs did not effectively deliver the level of transparency recommended in the 2018 elections package 106 . While most political advertisements sponsored by the EUPPs merely aimed to raise awareness of the European elections and promoted electoral participation, the EUPPs did make increased use of targeted political advertising to cover substance issues like climate change 107 . 

For the future, the European Parliament has indicated its intention to further strengthen the European dimension of the European elections. On this basis, it is to be expected that the proportion of political ads sponsored by EUPPs that address European political themes will increase. In this context, the need for transparency of political ads to ensure accountability in the democratic process would increase, which may prompt Member States to seek to enforce national rules in connection with political ads at European level.

A parallel revision of Regulation 1141/2014 proposes substantive rules to strengthen the European dimension and protection of rights and values in the European political process, including issues identified in the overall governance. That initiative and the one considered for EUPPs in the present impact assessment reinforce each other, with the former clarifying among other rules on how EUPPS can receive funding, and the latter increasing transparency and accountability on the origin of the funds and spending in the context of political advertising.

2.3. How will the problems evolve?

An increasing number of internal market issues are expected to be identified in the provision of cross-border political ads services. Offline political ads will continue to be seen as more burdensome and less attractive. The proportion of political ads which will be published online and which could a priori be provided by cross-border operators is likely to increase. Cross-border services will continue to be affected by the costs of fragmentation, and this will continue to further concentrating advertising business towards the limited number of very large providers able to absorb the compliance costs and/or position themselves to benefit from the lighter regulation in certain Member States. This, together with the fact that increased fragmentation and costs will affect the possibilities for SMEs to enter in this market, was reported by stakeholders as problematic.

The cross-border dimension of political ads should further increase, as the number of mobile EU citizens exercising their electoral rights across borders is on the rise. Political parties will increasingly conduct cross-border campaigns, for instance on European themes like climate change. These trends will make more acute the problematic regulation of political ads services as well as inconsistencies and gaps in the regulation of ads, especially political parties. Additional enforcement of national political campaigning rules on political ads sponsored by political parties, would further increase fragmentation and deter European political campaigns. In light of the Parliament’s explicit request to strengthen respect for democratic principles including transparency 108 , political parties may act voluntarily to implement the 2018 transparency recommendations for their political ads. Efforts could be made to apply national (in most cases Belgian law 109 ) provisions to European parties in this respect, though national provisions would only apply within their national scope.

As political ads move increasingly online, regulatory outcomes from national legislation will continue to be poor. The disparity of the national requirements in the internal market is likely to increase 110  together with inconsistent across national jurisdictions or ineffective enforcement. This will add legal uncertainty and costs for service providers. 

As indicated in Section 2.1 above, while its scope is different, the DSA will already significantly enhance the transparency of ads on online platforms 111 . The DSA will not, however, regulate political ads displayed on other services or provided and produced by other services, nor on offline political ads. The information that it requires to be published with all ads will not include spending information and other elements identified as relevant to political ads.

Signatories of the existing Code of Practice on Disinformation provide information on ad spend in their political ad repositories 112 . While it will continue to evolve under the Guidance of the Commission, the Code needs to be complemented with relevant binding obligations related to the specific area of political ads to ensure a level playing field in the internal market, consistent regulation and the protection of rights 113 . 

While the DSA represents a significant step forward in the governance of many relevant online activities 114 , including the collection of information from online intermediaries 115 , the oversight it establishes is linked to the substantive obligations in the DSA itself and its addressees, and will thus not cover all the service providers and activities involved in political ads 116 . 

Unauthorised actors will continue to interfere in the EU’s democratic debate and manipulate the information environment, threatening its democratic processes. This is especially harmful during electoral periods. With rapidly evolving technologies and tools that facilitate the manipulation of the debate online, in particular artificial amplification and engagement, increased transparency of political ads is crucial to safeguard the integrity of EU elections.

Finally, competent authorities will have increasing difficulty in exercising oversight due to the lack of accessible data from service providers, to support their interventions in case of unlawful behaviours affecting electoral campaigns in their country. Problematic activities will continue in areas where gaps exist, and the risk of interference in elections through the misuse of political ads will persist. The existing cooperation structures among competent authorities at European level on their side will be unable to sufficiently address the problems identified 117 .

What are the consequences of the problem? The above-described issues are crosscutting and would continue to affect negatively the Internal Market for political ads and fair democratic processes in Europe.

3.Why should the EU act?

3.1.Legal basis

Any legislative intervention at the EU level must relate the competences of the Union legislator.

Article 114 of the Treaty on the Functioning of the European Union (TFEU) enables measures for the approximation of the provisions laid down by law, regulation or administrative action in the Member States which have as their object the establishment and functioning of the internal market. It is the appropriate legal basis for an intervention covering service providers in the internal market and address differences between Member States’ provisions which obstruct the fundamental freedoms and have a direct effect on the functioning of the internal market 118 . Differences in national laws exist and the national laws develop, given that some Member States have legislated or intend to legislate on political ads. By harmonising requirements applicable to transparency and the targeting of political ads on the basis of Article 114 TFEU (approximation of laws for the improvement of the internal market), the initiative will remove certain existing obstacles and genuinely enhance the functioning of the internal market.

Article 114 TFEU does not presuppose the existence of a link with the free movement of services in every situation covered by the measures founded on that basis 119 . It permits additional objectives to be pursued 120 . It is logic that measures based on Article 114 TFEU touch upon many different areas, because the economic and the non-economic aspects are many times closely intertwined. As confirmed by the Court, the EU legislature cannot be prevented from relying on that legal basis on the ground that the protection of other policy objectives is a decisive factor in the choices to be made 121 . What is relevant is that the measures adopted on that basis be actually intended to improve the conditions for establishment and functioning of the internal market 122 . In its settled case law on the use of Article 114 TFEU 123 , the Court does not engage in weighing the importance of the internal market and the other objectives pursued. What the Court focuses its analysis on is on the fulfilment of the conditions for the use of Article 114 TFEU, i.e., that the measure in question effectively pursues the internal market objective. Some examples in the EU acquis in which Article 114 TFEU has been used as a legal basis for measures that pursue other objectives apart from the improvement of the internal market include, for instance, Regulation 1007/2009 on trade in seal products 124 , Directive 98/44 on the legal protection of biotechnological inventions 125 , and the Consumer Credit Directive 2008/48/EC 126 .

Article 114 TFEU is also relevant to provide obligations on service providers established outside the EU where their service provision affects the internal market, when this is necessary for the desired internal market goal pursued.

Article 16 TFEU permits the Union legislator to enact rules relating to the protection of individuals as regards processing personal data by Union institutions, bodies, offices and agencies, and by the Member States when carrying out activities falling within the scope of Union law, and rules related to the free movement of such data. As the current initiative seeks to address problems specific to the use of personal data in political ads (in particular regarding their targeting), intervention will also be based on this provision.

Article 224 TFEU is also relevant to provide for transparency standards applicable to EUPPs. On this basis, regulations governing EUPPs at EU level can be laid down

3.2.Subsidiarity: Necessity of EU action

According to the principle of subsidiarity laid down in Article 5(3) of the Treaty on European Union (TEU), action at EU level should be taken only when the aims envisaged cannot be achieved sufficiently by Member States alone and can therefore, by reason of the scale or effects of the proposed action, be better achieved by the EU. Several Member States have legislated or are about to legislate in the field of transparency of political ads to protect their electoral processes 127 . As these rules diverge in their scope, content and effect, a patchy framework of national rules is appearing and risks to increase. This jeopardises an effective exercise of the freedom of establishment and the freedom to provide services in the EU. Only intervention at European level can solve this problem, as regulation at national level is aimed at ensuring transparency and protecting the electoral process, with therefore little concern for the barriers erected to cross-border political advertising services in this exercise of otherwise national competence. Furthermore, the cross-border nature of activities, including in the online environment, creates significant challenges which purely national regulation in this domain would not be able to address. It is unlikely that Member States acting independently would be able to effectively address the identified problems, except eventually if they (like Ireland does) decide to prohibit cross-border political advertising – something which further fragments the internal market. The Commission already highlighted the need for EU action in this area ahead of, and following the 2019 European Parliamentary elections, in the framework of the 2018 elections package. 128  This need for EU action was also demonstrated by the action of certain economic actors providing political ads and related services and of the political actors making use of them. During the European elections, some large online platforms took steps to address the challenge presented by legal uncertainty and fragmentation of the internal market, by only servicing discrete Member State markets, essentially partitioning it. This proved a significant issue for political parties seeking to publish political ads EU-wide 129 .

The competence to lay down regulations governing EUPPs resides with the EU.

Further, the envisaged policy options do not go beyond what is necessary to achieve the identified objectives not affecting the competence of Member States to organise elections. Subsidiarity is not only respected, but proportionality as well.

3.3.Subsidiarity: Added value of EU action

The initiative will only address activities where EU action is necessary for the functioning of the internal market, for a high standard of data protection in targeting practices, and to specify the transparency requirements for EUPPs. EU common standards for political ads and related services would bring enhanced legal certainty especially for service providers. The incremental compliance costs of delivering a service across borders would be removed, and the non-compliance risk reduced. This in turn would remove the incentive for economic actors to partition the internal market, provide a fresh incentive for the provision of cross-border services and for the development of new ones. EU rights, including fundamental rights would also be protected more effectively.

In contrast, the effects of any action taken under national law would be limited to a single Member State and would risk being circumvented or difficult to oversee in relation to service providers from other Member States, and could conflict with the internal market. This does not address the EU-wide problems identified, and can also exacerbate the effects of fragmentation. An EU system would also help competent authorities in their oversight functions, other stakeholders to exercise their role in the democratic process and increase the overall resilience of the European Union to information manipulation and interference in electoral processes, including disinformation 130 . 

4.Objectives: What is to be achieved?

4.1.General objectives

There are two general objectives:

1.Facilitate the provision of political advertising and related services in the internal market while supporting fair democratic processes based on high and harmonised transparency standards and lawful use of targeting techniques 131 .

2.Provide for high transparency standards for political parties in the EU supporting free and fair elections.

4.2. Specific objectives 

The Intervention Logic (relations between drivers, problems, consequences, general and specific EU objectives, options and expected impacts) is depicted graphically in Annex 6.

5.What are the available policy options

5.1.What is the baseline from which options are assessed? 134

Under the baseline scenario, the EU regulatory framework will evolve, particularly as regards information society services, though specific legislation to fully address the issues identified would not be introduced. Once the DSA enters into application, it will clarify responsibilities and accountability for providers of intermediary services, and in particular online platforms, such as social media and marketplaces. Certain intermediary services 135 would be subject to additional due diligence requirements, including notice-and-action procedures for illegal content – including illegal ads. Online marketplaces would be obliged to collect, store and partially verify and publish information on traders using their services to ensure a safer and more transparent online environment for consumers 136 . Further, ads published on online platforms will be clearly distinguished from other content, would directly disclose the advertiser as well as ‘meaningful information about the main parameters used to determine the recipient to whom the advertisement is displayed’. VLOPs will also publish ad repositories, including ‘whether the ad was intended to be displayed specifically to one or more particular groups of recipients of the service and if so, the main parameters used for that purpose’, making this information available for e.g. vetted researchers or authorities. Further access to data by vetted researchers would also be possible. No information will be provided about the the political affiliation of ads, the money spent on them and its source. The chain of actors involved in the preparation, placement and dissemination of the ads will remain obscure, preventing the effective oversight by public interest actors and authorities into the spending of political actors and other national rules relevant to electoral processes. Transparency about the more detailed elements on targeting will remain merely implicit (in the GDPR) or indicated as desirable (in EDPB Guidance). There will not be public scrutiny of the use of political ads online, except to a limited extent for actors in the DSA’s scope. The Commission will continue its monitoring of the implementation of the Commission’s Electoral package recommendation on transparency and combatting disinformation and the coordination within the framework of ECNE 137 . In line with the Guidance on strengthening the Code of Practice of Disinformation the Commission expects the signatories of the Code to step-up the Code’s measures on the transparency of political and issues ads. The Code will evolve from a self-regulatory approach to a co-regulatory framework with the adoption of the DSA 138 . While the Code of Practice aims to deliver industry-led solution regarding specific issues related to the transparency of political ads, it would not address all the specific areas related to political ads. Monitoring and enforcement of EU data protection rules would continue, as well as guidance on the consistent application of the GDPR 139 .

The baseline would also benefit from measures set out in EDAP. Further, research would continue to analyse the impact of these voluntary measures and unilateral legislative measures being adopted by Member States.

The problems identified in this impact assessment would continue to evolve as described in section 2.3. Political activity will move increasingly online, making cross-border service provision a developing market, including in the context of European elections. The costs and obstacles affecting service providers (ad agencies and publishers) when providing their services across borders or in multiple states will persist. Issues identified for the democratic process related to the circulation of political ads in the internal market, will remain. Despite expected improvements, the lighter online regulation 140 will continue to contribute to driving political ads services online. This move online will cause national rules to become increasingly difficult to monitor and enforce. Member States will continue to respond with diverging national solutions aiming to increase transparency and the possibility for oversight, without the coordinated enforcement. Large platforms with a presence across the internal market will continue to control compliance risks through actions which partition the internal market. Obstacles will continue to prevent smaller companies from scaling up. The problems outlined above resulting from the non-transparency in political ads and regulatory failure will continue to evolve, including as regards the lack of power for citizens to inform themselves on political ads and hold political actors to account.

In the context of European elections, EUPPs intend to increase their campaign activity, for instance on transnational issues such as climate change. 141  Member States might seek to enforce national rules in connection with political ads targeting their citizens. This, and related obstacles to cross-border campaigning may significantly reduce the possibility for transnational parties and movements to conduct their campaigns. Similar obstacles could affect the right to campaign in multiple Member States for some national elections in Europe with diaspora constituencies. The existing, largely ex ante oversight framework will address EUPPs’ transnational campaigning activities, and the proposal to reform the regulatory framework may expand their scope.

5.2.Description of the policy options

The objectives are addressed by two packages of options, which differ in terms of level of intervention proposed. The packages differ in their approach to intervention, but share common elements, especially those soft measures when not replaced in option 2 by binding measures. They address the problems identified regarding the internal market for political ads as they concern transparency rules, the use of targeting and manipulative amplification techniques, oversight, and the problems identified concerning EUPPs and political parties more generally. They build on the 2018 elections package and the experience gathered from it, other related EU policymaking, input received in the consultation and the guidelines and reports published by relevant standard setting bodies. The legislative elements build on the findings of the mapping of the relevant Member State frameworks (see Annex 7) and are consistent with the acquis.

Each internal market option aims to complement and not amend existing EU legislation applicable to offline and online political ads and services, including the DSA, EU consumer and data protection rules, audiovisual media rules and the digital single market.

In turn, the options concerning EUPPs are prepared in close alignment with the initiative to reform the regulation on the statute and funding of EUPPs and foundations.

The options addressed to economic actors in the internal market are as follows:

1.Limited binding measures to align certain definitions and provide for information retention, and soft measures and standards to promote transparency in the use of political ads online and offline and support further interventions, including self-regulation. The soft measures also cover the use of targeting techniques.

2.Binding measures to harmonise transparency requirements for political ads accompanied by soft measures and standards. The binding measures also address the use of targeting techniques in political ads.

The options addressed to political parties are as follows

1.Limited binding measures to adapt the existing framework on EUPPs to introduce an obligation for parties to support transparent use of political ads; and

2.Extending the existing framework to introduce complementary obligations on EUPPs to provide meaningful and transparency obligations for the use of political ads.

Further non-legislative measures are envisaged to incentivise and promote equivalent standards nationally in European elections.

Table 1 – Summary of measures addressed to economic actors in the internal market

Table 2 – summary of measures addressing political parties

Providing identical transparency requirements at EU level is the element available for harmonisation that would most obviously make the biggest difference for service providers in the internal market. However, providing identical standards on the use of targeting in the political ad context is closely linked to this harmonisation objective. Indeed, while the policy options could be bundled differently, a package combining hard standards on transparency with soft measures on targeting would not address appropriately the objective of the Article 114 TFEU legal basis that is the primary motive for the proposal aimed at economic actors. Indeed, efforts to harmonise the market for political advertising by focusing on high standards of transparency without also harmonising on high standards regarding the use of targeting would soon be met by new fragmentation from Member States determined to protect themselves from the risks emerging from the targeting techniques afforded by online media 144 . Further, even in the consultation, no genuine alternatives to a ban capable of addressing the issues were suggested 145 .

Policy option 1 – Limited harmonisation

Transparency: The first option provides for limited mandatory common transparency requirements for political ads (both online and offline) including on targeting. It relies on national definitions of political ads, 146  which for the most part a priori do not cover issues ads. This would provide a common reference point for service providers in their contractual terms, and for competent authorities to exercise their oversight functions as well as for other stakeholders to play their role. A specific obligation on all economic actors involved in these political ads to retain relevant information about political ads (and provide it upon request) is provided to facilitate the oversight of relevant rules and democratic accountability 147 .

Targeting: Under this option, Member States would be specifically invited to provide for standards on the use of targeting techniques. This would support voluntary commitments fostering democratic accountability among economic and political actors, including those within the Code of Practice. This would be without prejudice to existing legal information obligations under the GDPR.

Oversight: Option 1 foresees limited measures to support oversight and audit including soft measures to support cross-border cooperation on these matters and enforcement. It promotes common standards (e.g. Application Programming Interfaces (‘APIs’), data retention protocols) for interoperable ad repositories, the ‘know you client’ data for the disclosures to support interoperable information systems and processes, and allows for the effective oversight of, and research into, the circulated ads 148 .

Political parties: Option 1 introduces mandatory transparency standards for political ads in Regulation 1141/2014, building on the recommendations in the Electoral package. EUPPs would have to provide ex ante to the Authority reassurances that they will take the necessary measures including through their own websites and via explicit commitments.

Soft measures would be addressed to Member States and political parties to promote high transparency for national political parties equivalent to those to be introduced for EUPPs. Political actors would be invited to join, and Member States to support, a fair campaigning pledge, building on national models, to promote high standards of transparency and accountability in political ads, in particular on the use of targeting.

5.2.2. Policy option 2 – More extensive harmonisation

Transparency: Under policy option 2, a common approach to the concept of political ads would be defined. It would cover ads connected to a political actor, campaign or aim as defined nationally, and self-declared political ads 153 . This would include issues ads 154 .

Option 2 includes harmonised transparency requirements. Beyond the transparency obligations vis-à-vis those directly exposed to the political ad, further requirements (proactive for VLOPs, upon request for others in the value chain) would apply vis-à-vis interested actors 155 and authorities.

The publishers of online and offline political ads would have to make available information (provided in a transparency notice within or easily retrievable from each political advertisement) about the amounts spent in an advertising campaign and their source, any relevant (nationally defined) campaign/party registration information as well as (where relevant) a link to official information sources about the elections, the sponsor’s identity, whether and how the advertisement was targeted or amplified, the scope 156 and period of circulation of the advertisement, the data sources, and the criteria used for targeting 157 . VLOPs would also have to proactively provide this information in their publicly accessible ad repository, in addition to the information they already provide about ads under the DSA 158 .

Ad publishers 159 would have to issue standardised periodic reports 160 on the amounts received for the services they have provided connected to political advertisements and their targeting, aggregated to campaign or candidate.

Other economic actors involved in the political advertising value chain would have to retain (keep record of) information on transactions, including amounts, parties, services provided and (where applicable) on the use of targeting, the relevant mechanisms, techniques and parameters used and the source(s) of personal data used. They would also have to provide this information down the chain toward the eventual ad publishers to support the latter’s respective proactive obligations, or to provide the information themselves upon request to interested actors.

Additional measures on transparency could be provided through soft measures.

Targeting: Two sub-options are envisaged in policy option 2 for targeting. Elements of these two sub-options could be combined. Under sub-option 1, common standards would prohibit during reference periods 161  the use of defined targeting that is based on sensitive data 162 .

Under sub-option 2, common standards would similarly limit the use of some targeting techniques such as micro-targeting and targeting based on certain categories of personal data 163 , but also beyond electoral periods. However, the limitation to targeting techniques would not apply under certain conditions and when ads are clearly labelled as political ads (thus complying with the other specific transparency requirements above) and when the service provider implements and publishes a policy for political ads, with specific reporting in the annual report.

Monitoring and enforcement: Option 2 would build on established European governance frameworks including those foreseen for the DSA 164 and for the GDPR 165 . It would provide for the identification of a specific national contact point on the obligations envisaged by the initiative 166 . It would impose specific cooperation obligations to economic actors involved in the political ads value chain.

With regard to the objective of achieving a ‘clear line of sight’ 167 and automated reporting in the monitoring of the political ads value chain, policy option 2 would specify headline requirements for interoperable information systems based on the required outcome (established on the basis of the transparency needs). This would enable the transparency obligations to be delivered efficiently for both their beneficiaries and for the addressees of the obligations.

Additional measures would support the coordination of oversight of the envisaged measures at EU level, as well as strengthen national coordination and oversight capability among competent authorities, and foster pooled resources, joint action and the exchanges of good practices (including in the framework of the ECNE).

Political parties: Policy option 2 would provide transparency obligations on political ads and limitations to their use of targeting techniques. EUPPs would be obliged to label their ads and to publish or otherwise make available additional information 168 , including to actively provide timely disclosures during the electoral campaign period 169 . Further obligations would ensure that parties retain sufficient information to support reporting and oversight functions.

This option would include an independent, platform and party-neutral repository of information about political ads activity in elections to the European Parliament, accessible in real time by all individuals and with corresponding obligations on EUPPs to upload their political ads and provide relevant disclosures 170 .

Soft measures would be addressed to Member States and national political parties recommending introducing equivalent standards for all political actors and to support the establishment of a fair campaigning pledge.

5.3. Options discarded at an early stage

Some options were discarded at an early stage, especially based on competence (subsidiarity) and proportionality criteria.

1.Any ban on cross-border political advertising. This was discarded as being likely to disproportionately restrict legitimate activity and impact on fundamental rights while being unlikely to effectively address most problems identified.

2.A general ban on the use of targeting was discarded as likely disproportionate 171 . It would increase the cost of political advertising and may unduly affect lawful communications outside of electoral periods and during which the main parties affected would be CSOs. Such a ban would advantage well-resourced parties able to afford untargeted online campaigns.

Options based on opt-in and opt-out have been discarded on targeting as this is already largely addressed by the GDPR, does not address the fact that use is made of people’s vulnerabilities, and that manipulation can be at stake when targeting and amplification techniques are being used to disseminate political advertising.

3.Extensive harmonisation of essential terms in the electoral process, such as political party or political actor, or campaign periods versus silence periods. These concepts are essential parts of the organisation of elections, which remains largely a national competence 172 , raising issues in terms of subsidiarity and proportionality (necessity and EU added value). 

4.Extensive harmonisation of substantial requirements for the electoral process other than transparency. It would not be possible with this initiative to harmonize all the requirements applicable to political advertising across EU (e.g. who may sponsor an ad or how much they may spend), because the organization of elections and of political activity is a competence of Member States. There are specificities, traditional and historic characteristics accompanying the advertising in political context that have to be taken into account and, in contrast, horizontal transparency and measures applicable to economic operators was indicated as something Member States would be willing to support.

5.Amending the ‘country of origin’ principle for political ads, whereby providers of online services are subject to the law of the Member State in which they are established, by creating an horizontal elections-related carve-out to enable the direct application of national relevant rules on services in the internal market affecting national elections. This was rejected as being likely to undermine the internal market and its development, including for services unrelated to political ads, and reducing legal certainty for economic actors. 

6.What are the impacts of the policy options?

6.1. The baseline scenario

The impact of the baseline scenario is assessed under the problem definition.

6.2. Assessment of the options 

The policy options were evaluated for the following economic, social, fundamental rights and other impacts. No environmental impacts are expected and are not considered further.

6.2.1.Economic impacts

6.2.1.1.Functioning of the internal market

Both options would have a positive effect on the functioning of the internal market.

Option 1 would partially reduce the costs resulting from legal fragmentation and uncertainty for economic actors, thereby facilitating the offering of political ad services across borders. By supporting coordination among competent authorities, it would contribute to improving regulatory outcomes and reduce the possibility of economic actors obtaining an unfair advantage by offering services from specific Member States.

Option 2 would further remove costs resulting from the legal fragmentation and uncertainty 173 , also facilitating the offering of services across borders. By clarifying and harmonising the rules on the retention and provision of information for the purposes of oversight and accountability, it would remove a key driver of compliance costs in multi-Member State and cross-border campaigns. In addition, it would add legal predictability for intermediary services active in several Member States, contributing to the good functioning of the internal market 174 . This option would also improve regulatory outcomes as competent authorities increasingly struggle to enforce the current legal framework. Competent authorities from Member States other than the one where the provider is established will be in an improved position to monitor ads affecting their electoral and democratic process – a currently complex and costly practice 175 . This should in turn improve trust and transparency in political ads services, removing the justification for national market segmentation, thereby increasing opportunities for cross-border services to develop. 

The measures on targeting would address the most problematic targeting techniques 176 while also providing for the use of targeting in a manner which incentivises good practice. Tailored restrictions would limit the availability of certain elements of such services. This would be outweighed by opportunities for economic actors resulting from increased trust among citizens and regulators in the technique and from greater legal certainty of compliance in its use in the political context.

In addition, this option would reduce the advantage derived from regulatory fragmentation by providers of services for online ads compared to offline media 177 . It would limit unfair advantage being derived from offering political ads services from outside the internal market, and help ensure that all such services comply with norms established to protect the integrity of democratic processes.

6.2.1.2.Competitiveness, innovation and investment

Both options are expected to have a positive impact on the competitiveness, innovation and investment in cross-border political ads services. Both are proportionate and neither would impose dissuasive requirements on service providers. The removal of the obstacles resulting from legal uncertainty and fragmentation will foster the development of a European industry of rights-compliant services, and will enable existing national enterprises to scale up.

Option 2 would have a greater positive impact on competitiveness, innovation and investment. It would reduce legal fragmentation and help create a stable market to support investment, enable national SMEs to scale up their operations and stimulate the development of new services offered at EU level. Both sub-option of option 2 could slightly limit the choice in such services. Both sub-options incentives the development of an accountable and fair market for political ads targeting services.

Costs and administrative burden on economic and political actors

Both options would add compliance costs for economic actors providing services which are in scope and not currently regulated (or to be regulated by the DSA) – mainly online adtech and related service providers, though some smaller online intermediaries could be affected despite the specific mitigation foreseen for SMEs. These are also expected to be compensated by the efficiencies realised from the removal of legal fragmentation that facilitate the cross-border provision of services. The net expected result is a cost reduction against the baseline. The measures in common to both options on establishing a common framing and passive transparency for political ads would not involve more than one-off adaptation costs, especially as the retention of the information can be automated.

Option 2 introduces some additional specific obligations over option 1 and the baseline which require business process adaptation and technical design costs. However, the provision of information can for the most part be automated. The costs can be offset against the benefits of streamlining oversight and compliance and the removal of costs associated with regulatory fragmentation.

Estimates of costs for obligations addressed to economic actors

SME test 186

It is not possible to fully exempt SMEs from the transparency requirements as they are important actors in political ads. However, some support measures are foreseen 187 , as well as an exemption. SMEs would have the possibility to appoint an external person as contact point. On the basis of a de mimimis threshold, enterprises would not have to conduct annual public reporting.

Legal fragmentation in the internal market for political ads services is a significant barrier for SMEs, amounting to prohibitive legal and costs obstacles to such enterprises 188 . SMEs are also more affected by policies established by private sector actors and some Member States which limit the possibility to run campaigns to entities which are established in the Member State where the political ads would be published. 

Both options foresee changes that would impose one-off costs. The obligation to provide information to the authorities and specific actors (including other enterprises in the value chain) involve an ongoing compliance cost. Support to compliance to transparency requirements should be offered by Member States, professional associations and external consultancies. While the ongoing costs depend on the volume of requests, the one-off costs described affect SMEs proportionately more than other actors.

Option 2 offers more opportunities for such costs to be offset by savings resulting from simplification of the rules and the elimination of the need for multiple adaptations when offering services across borders. This would increase cross-border activity in particular for SMEs, which could offer their services to clients outside their Member State of establishment and would have the opportunity to scale up to operate at EU level.

The ban on targeting based on sensitive data or specific techniques during reference periods under suboption 1 of option 2 would affect SMEs which process data for political ads purposes just like other economic actors. Suboption 2 is designed to rebalance the impact of limiting targeting for political ads by incentivising high standards of transparency and accountability, also demonstrable to the wider public. Providing a common framework for the legitimate use of targeting in political ads could increase opportunities for SMEs to introduce new services and enter the market.

Estimates of costs for obligations addressed to political actors

6.2.1.3.Costs for public authorities of measures addressed to economic actors

Both options would aim to streamline oversight, providing better access to needed information, more opportunities for coordinated action and resource-sharing and clarity about the responsible authority. This would result in more effective regulatory outcomes, especially between online and offline political ads.

Option 2 would harmonise transparency requirements for all political ads and establish certain limits to how online political ads may be targeted. It also provides support to Member State authorities to request information to support their tasks, 190 to facilitate cross-border oversight. It could result in some costs for national authorities: one-off costs for training administrative staff and ongoing costs of monitoring compliance transparency and targeting obligations. These costs are expected to be offset against the efficiency savings expected from the harmonised obligations and streamlined and strengthened oversight process, but given the low levels of current enforcement, particularly online, they may not yield a net saving in this respect.

Costs for public authorities of measures addressed to political actors: Given the low level of oversight currently reported, impacts would be modest. Option 1 is not expected to require significant investment by the Authority, except for one-off training costs following a change in the scope of conditions considered.

Option 2 would require the Authority to ensure the technical design, operation and maintenance of a suitable platform for the submission of these disclosures and the publication of relevant information for individuals. 191  Considering that the Authority was reinforced in 2019, the mentioned tasks could be integrated into current workflows and this option does not propose a drastic change to the Authority’s tasks.

Costs similar to those in option 1 or 2 (depending on which is adopted) would be incurred by national parties and national authorities in the Member States that align national political parties’ transparency obligations to those introduced for EUPPs. These costs would be similar in kind, but proportionate to the parties’ size 192 .

6.2.2.Social impacts

6.2.2.1.Stronger transparency for economic actors

Both options enhance transparency in the use of political advertising and hence their recognisability, with a likely reduction of disinformation and other manipulations. This would make it harder for unauthorised actors to use tactics such as the inauthentic amplification of certain advertisements (or other tactics uncovered in the Cambridge Analytica scandal). Such activities, conducted with or without the knowledge of the sponsor of the ad, have the potential to unduly influence democratic debates and elections within the EU.

Transparency of political ads would improve under both options above the expected levels compared to the baseline scenario. Increased transparency and accountability of involved actors should foster a culture of open and honest political campaigning. There would be equally a small positive reputational impact for economic actors resulting from facilitating transparency. Providing identical transparency requirements at EU level on the basis of harmonised standards would make the biggest difference for service providers in the internal market.

Option 2 increases the scope of the measures and includes further harmonisation of the transparency requirements which should make it easier for citizens to recognise more political advertisements, and support oversight by competent authorities as well as scrutiny from interested actors (including CSOs, political actors, researchers, elections observers and journalists) to monitor online political ads in the EU and hold their sponsors to account. The strengthening of the quality of information available to interested actors can help enrich the political debate too, 193 and the possibility for NGOs to sponsor informational ads is being preserved. 

By fostering a culture of open and fair political campaigning, these measures should enhance trust in the use of political ads, and more generally in the political debate and the integrity of the electoral process. It would contribute to a higher resilience of the EU electoral system to information manipulation and interference.

6.2.2.2.Stronger transparency for political parties

Both options would complement the impact of the measures addressed to economic actors, and increase the transparency provided by political actors as sponsors of political ads. This would be achieved at EU level by introducing concrete elements that EUPPs should ensure that are included in their political ads, replacing the existing and rarely applied patchwork of national rules with a common standard. At national level, political actors would be encouraged to comply through peer and political pressure, as well as through potential future national legislation to make best use of the strengthened EU-level framework.

Under option 2 the likely impact of information standards in EUPPs’ political ads will be reinforced by the strengthening of the governance framework to provide ongoing, active supervision, as well as through the provision of an independent platform and party-neutral repository of information about political ads activity in European elections, accessible in real time by all individuals.

6.2.2.3.Enforcement and supervision by authorities

Both options entail improvements over the baseline, in strengthening regulatory coordination among competent authorities especially via the designation of contact points as well as via more operational coordination in this area making best use of existing frameworks. This would ensure that oversight building on a common set of transparency requirements is better coordinated among national authorities.

Option 2 introduces specific powers for competent authorities to request the rapid transmission of additional information from economic actors and provides for monitoring and enforcement structures, building on existing oversight frameworks. This should improve the effectiveness and consistency of the oversight among Member States. Enabling the exchange of information among market actors to ensure that transparency is meaningful and conducive to compliance with relevant electoral rules also supports effective oversight.

6.2.2.4. Address abusive use of targeting

Both options would lead to improvement in the use of targeting in online political advertising, which would be more transparent and accountable. Improved transparency measures in coordination with existing self-regulation would be expected to increase awareness, and potentially trust. More transparency around currently opaque targeting techniques is likely to indirectly limit targeting or make it more accountable.

Option 2 on targeting and its suboptions introduces restrictions and conditions on the use of targeting (at all times or during specific critical periods).

While a certain level of transparency on targeting practices is already provided under EU law, the increased mandatory level of transparency and accountability toward individuals and toward society at large is likely to produce greater awareness among citizens of different techniques used to target and amplify the effectiveness of political messaging they see. It will allow for greater public scrutiny of differentiated political campaign messaging and will empower citizens to hold political actors more accountable for their different messages and promises.

The proposed regulation could also reduce the perceived and actual legal and reputational risk for political actors of cross-border campaigning, increasing opportunities for campaigns to reach diaspora communities and mobile citizens, as well as for transnational campaigns in the European elections. By clarifying the obligations of EUPPs, this option strengthens the EU dimension of the European Parliamentary elections.

6.2.3.Fundamental rights impacts

All options have a positive impact on fundamental rights, and are not expected to have significant negative impact on fundamental rights.

6.2.3.1.Freedom of expression and information 194

Both options enhance transparency and hence accountability 195  and a priori do not negatively affect freedom of expression 196 . The issuance and disclosure of political ads as such, and their content, remain regulated on the basis of relevant national and EU law. The initiative does not interfere with the content of political messages. Option 2 could cover issues ads disclosed by CSOs or individuals. This could impact such actors which could become more reluctant to intervene in the political debate if their anonymity is affected. However, this should be balanced with the importance for citizens to get a fair access to information, understand where information comes from and not be subject of manipulative anonymous content. Both options positively impact such access to information with a more beneficial impact for option 2. Such transparent and accountable disclosure of political ads also has spill-overs on users’ freedom of assembly and association, as well as on the protection of vulnerable groups from manipulation. 

A limitation of targeting techniques under sub-option 1 could impact on freedom of expression. This impact would be proportionate if limited in scope and balanced with impact to other fundamental rights. This option would significantly address the risk of manipulation of the democratic debate while respecting the freedom and pluralism of the media.

6.2.3.2.Private life, secrecy of communications and data protection 197

Both options are expected to impact the rights to the secrecy of communications and to private life set in EU legislation. This is balanced by an overall positive effect on democracy and electoral rights. Measures which would identify the sponsor of a political ad and the amount of money spent on an ad impact the protection of personal data and have to be proportionate to the policy aim sought: to ensure that individuals engaged in the political debate use political ads in a transparent manner 198 . The enhanced transparency, conditions and restrictions on targeting should also benefit the right to data protection.

Where option 2 requires from large online platforms facilitating data access for audits and investigations by interested actors (furthering the freedom of the arts and sciences) 199 , such measures would not provide for any derogations from the EU data protection acquis. Only the relevant data should be made accessible to stakeholders including to conduct research on practices affecting the democratic debate and elections. Access would be designed in a non-invasive way (e.g. through the use of anonymized data when feasible, and secure or protected access) 200 . 

Similarly, where option 2 requires further reporting to national authorities, this can entail communication of personal data of users of platforms placing the ads (and of users flagging the ads). This is a necessary measure for protecting the public interest at stake 201 and would respect proportionality requirements by limiting it to data already collected by the platform. It would imply in any way requirements for citizens using online services to identify themselves.

6.2.3.3.Right to property and freedom to conduct a business

Option 1 does not affect these rights.

In providing for obligatory limitations to the possibility to provide targeting of political ads on the basis of certain data or techniques, option 2 could limit the freedom to conduct a business. This impact is mitigated using two approaches detailed in the suboptions, which narrow the effect of the proposed limits to the most problematic targeting.

6.2.3.4.EU electoral rights

Both options will support the exercise of electoral rights 202 , They will also support free and fair elections and a fair democratic debate, by facilitating transparent cross-border political ads achieving a high level of rights protection, including as regards the protection of personal data and ensuring that citizens are able to make informed political choices without manipulation or coercion. The options addressed to political actors are expected to have a positive impact on fundamental rights including electoral rights, access to information and data protection. Furthermore, the limitations to targeting practices of policy option 2 are coherent with, and have a positive impact on electoral rights as protected under international standards 203 . 

Table 1: Summary of Internal Market impacts for each option considered (compared to the baseline)

Table 2: Summary of Political parties’ impacts for each option considered (compared to the baseline)

The tables above should be read in vertical: ‘~’ means 0 for the baseline. ‘+’ pointing to a better performance of the option than the baseline, and ‘++’ to the best performance among the options; the ‘>’ symbol is used to indicate higher costs than the baseline, and ‘>>’ the highest cost among the options. See Annex 4 for a detailed description.

7.How do the options compare? 

The options were compared on the basis of the following four criteria:

·Effectiveness, including to:

1.Reduce legal fragmentation, limit circumvention of regulation and regulatory arbitrage and remove obstacles and reduce costs for the provision of cross-border political ads services in the internal market;

2.Increase transparency in political ads;

3.Regulate the use of targeting and other manipulative techniques;

4.Ensure the effective oversight of the implementation of envisaged obligations and strengthen regulatory outcomes; and

5.Promote stronger transparency and free and fair elections through compliance with relevant rules among political parties in the EU.

·Efficiency: relating the anticipated costs of the measures against the expected benefits of increased effectiveness.

·Coherence with existing and planned initiatives.

·Proportionality: relating effectiveness against efficiency and any negative impacts. 

Table 3: Comparison of options against baseline

7.1. Effectiveness 

1.Reduce legal fragmentation, limit circumvention of regulation and regulatory arbitrage and remove obstacles and reduce costs for the provision of cross-border political ads services in the internal market;

Both options would increase legal certainty over the baseline. Option 1 would be a partial step towards reducing fragmentation, but it would leave the majority of the substantive changes needed to convergent Member State regulation and self-regulation. Option 2 would increase legal certainty and reduce the scope for divergent regulation. It would provide a clear basis for effective oversight, increasing incentives for legitimate market entry and reducing the incentives for circumventing relevant rules.

With the soft measures proposed by some stakeholders and taken into account in option 1, no tools sufficient for effective oversight are provided, and further fragmentation will a priori not be preventable. Large platforms typically call for self-regulation and soft measures, and participate in self- and co-regulation such as the Code of Practice on Disinformation; however, as discussed in the annex, their efforts (e.g. to label political ads) are done inconsistently. In particular, in the case of providing researchers with access to their data, their measures are indicated to be insufficient, inconsistent and non-transparent.

2.Increase transparency in political ads

Both options increase transparency over the baseline. Option 1 is less likely to be effective: experience with the Electoral package recommendation and current national legislative plans do not suggest that convergent regulation is likely. Option 2 would ensure that relevant advertisers provide with all political ads the information necessary for them to be recognised as such, for their sponsors to be held to account in the political process, and for competent national authorities to carry out their oversight functions to ensure that rights are protected and the democratic processes are not undermined.

3.Regulate the use of targeting and other manipulative techniques

Both options will support self-regulation aiming to ensure more transparent targeting and the existing transparency and personal data protection framework. Option 2 aims to introduce restrictions to how and when targeting can be used. Suboption 1 would prioritise legal certainty and the effectiveness of protection during nationally established reference periods. Suboption 2 would promote transparency and accountability toward society at large and would address further the (e.g. sensitive) data types and limit the scope of misuse. Both suboptions of option 2 would include common rules on transparency around targeting practices regardless of the targeting limitations.

4.Ensure the effective oversight of the implementation of envisaged obligations and strengthen regulatory outcomes

Both options aim to support capacity building, cooperation and the strengthening of the existing and planned governance frameworks at EU and national levels. Option 1 focuses on supporting with soft measures the best use of these frameworks where they provide for cross-border enforcement. Option 2 would also aim to ensure that the gaps in these governance frameworks 204 are closed by providing powers for national authorities to request the information necessary for their oversight activities for political ads, and to be enabled to cooperate in investigation and enforcement action. Economic actors would be supported to enable oversight by ensuring interoperability of information system in the political ads value chain through the development of common APIs and automation in the provision of the data needed by publishers to comply with transparency obligations.

5.Promote stronger transparency and free and fair elections through compliance with relevant rules among political parties in the EU

Both options aim to ensure that EUPPs use political ads transparently and to support all political actors in achieving high standards of compliance in political campaigning. Option 1 relies on the existing Regulation 1141/2014: supervision would be passive after the moment of registration and application for funding, and review would be conducted significantly after campaigning ends. Option 2 would provide obligations for active and timely disclosures for EUPPs.

In parallel to both options is the soft measures to Member States to align transparency standards for their national parties to those introduced for EUPPs, which would have a similar impact on free and fair European elections nationally.

7.2. Efficiency

The efficiency of the options weighs the qualitative cost-benefit analysis described in Annex 3, as well as in the description of the impacts in section 6 above.

For both options, online service providers would face non-negligible but variable compliance costs for the obligations related to the retention of information and its supply to competent authorities, with the highest likely exposure being for ad publishers.

Option 1 would impose fewer direct costs on economic actors and national authorities. Economic actors would continue to be exposed to many of the indirect costs of fragmentation described in the baseline scenario.

Option 2 brings with it additional compliance costs for economic actors to implement the specific transparency and oversight related obligations, with both one-off adaptation costs and ongoing compliance administrative costs. Overall costs on service providers are expected to be lower, however, as reduced fragmentation yields efficiency gains.

7.3. Coherence with other initiatives 205

Both options are complementary to the objectives of the horizontal instruments establishing the single market for digital services, and align with the objective of empowering users and improving the opportunities for innovation and the supervision over digital services. Option 2 would in particular strengthen opportunities for the development of an EU political services market, especially for online services.

Option 2 also supports EU and Member State policies to combat interference and strengthen the resilience of democratic processes. Both options apply to the offline context in addition to online political ads. Member States already regulate offline political ads strictly on the basis of the UCPD and on the basis of their respective electoral and media regulation. Online advertising is addressed to an extent by the ECD, and more so by the DSA proposal. The measures considered in this proposal will therefore close gaps of substance and scope and ensure coherence in the approach between media to addressing the specific issues raised by political ads.

Similarly, targeting activities 206 are already regulated by data protection rules (the GDPR and the ePrivacy Directive 207 ), both online and offline. 208 The measures assessed would frame the use of targeting for political advertising purposes, by mandating specific additional transparency obligations around its use and by banning certain forms of political ad targeting.  Another initiative coherent with, and relevant for the present initiative is the DMA (Digital Markets Act), which would apply to Core Platform Services designated by the Commission as gatekeepers, including their ad services.

Proportionality: Both options apply the principle of proportionality and necessity. This is based on the assessment that the fragmentation of the relevant regulatory framework cannot be addressed by independent action and requires intervention at EU level. All proposed measures are proportionate to the objectives set, though the first suboption of option 2 regarding targeting goes further in restricting economic activity to protect rights. A fragmented approach across Member States is unable to ensure an appropriate level of protection to citizens across the Union, and the supervision of services would remain inconsistent. However, the effectiveness and proportionality of the second option in reaching the objectives is superior, not least in preventing future re-fragmentation of rules (something which no other option is able to do).

8.Preferred Option

Against this assessment, the preferred option is a package comprising option 2 for the internal market with suboption 2 on targeting, and option 2 for political parties (see table under point 5.2 above.). This preferred set of options would best meet the general objectives of the intervention and would mutually establish a coherent and proportionate framework for political ads in the EU. Further, the preferred option limits the impact on the electoral systems as established by Member States in line with their respective traditions, focusing on the cross-border dimension of the transparency of political ads. The limitations on the targeting of political advertising are proportionate because they are strictly limited in scope to the specific targeting activities in the political context that have been identified as posing a significant risk to individual’s fundamental rights.

The choice of legal basis is justified by the need for a uniform application of the new rules, such as the definition of political advertising and the transparency obligations that economic operator must fulfil when preparing or disseminating political advertisement. It will reduce legal fragmentation and provide greater legal certainty by introducing a harmonised set of key elements for the provision high transparency standards for political advertising, which will provide legal certainty for economic operators and prevent divergences hampering the free provision of the relevant services within the internal market.

9.How will actual impacts be monitored and evaluated?

The table below summarises tentative indicators proposed to monitor the achievement of the operational objectives 209 . An evaluation of the new legislative proposal should be conducted within two years after the coming elections to the European Parliament, based on the proposed indicators, and every five years thereafter. Dedicated reports and surveys launched by the Commission including Eurostat and other entities will be used to monitor the situation.

Data on the following items will be collected through Eurobarometer and other surveys directed to citizens. The existing oversight coordination mechanisms under the GDPR, the AVSMD, and as foreseen for the DSA will be used to collect data. This will also be addressed specifically in the work programme for the ECNE. The implementation of the elements of the initiative will be assessed following each European Parliamentary election on the basis of specific data collection conducted with the support of external contractors.

Annexes

Glossary and acronyms

Annex 1: Procedural information

1.Lead DG, Decide Planning/CWP references

The Staff Working Paper was prepared by the Directorate-General for Justice and Consumers.

The Decide reference of this initiative is PLAN/2020/8647.

2.Organisation and timing

The Impact Assessment was prepared by DG JUST as the lead Directorate-General.

The Inter-Service Steering Group established for this initiative was associated and consulted several times in the process with meetings on 30 April, 7 June, 30 June and finally on 25 August 2021, under the coordination of the Secretariat-General. It included the following services: DG COMP (DG Competition), DG COMM (DG Communication), DG CNECT (DG Communications Networks, Content and Technology), DG EAC (DG Education and culture), DG FISMA (DG Financial Stability, Financial Services and Capital Markets Union), DG GROW (DG Internal Market, Industry, Entrepreneurship and SME), DG JUST (DG Justice and Consumers), JRC (Joint Research Centre), DG RTD (DG Research and Innovation), SJ (Legal Service), SG (Secretariat-General), EEAS (European External Action Service).

The last meeting of the ISSG, chaired by the Secretariat-General of the European Commission was held on 25 August 2021 (minutes attached).

3.Consultation of the RSB

An upstream meeting took place on 11 February 2021 and the recommendations of the Regulatory Scrutiny Board were duly taken into account. The Regulatory Scrutiny Board discussed the draft impact assessment in the hearing that took place on 29 September 2021.

4.Evidence, sources and quality

The evidence base is drawn in particular from the following:

·The implementation of the Commission’s September 2018 electoral package 224 , as described in the Commission’s report on the 2019 elections 225 ;

·The experience combatting disinformation and other forms of information manipulation and interference in democracy guided by the Action Plan against disinformation 226 , most recently reported on in the Commission and High Representative’s joint Communication, “tackling COVID disinformation” 227 ;

·The Commission’s assessment of the first year of operation of the self-regulatory Code of Practice on Disinformation 228 ;

·The preparatory studies and open consultation for the European Democracy Action Plan 229 , the 2020 EU Citizenship Report 230 and the Digital Services Act 231 , as well as an ongoing study on the use of digital tools in elections;

·Standard Eurobarometer 94.1 (the fieldwork for which was conducted in December 2020), which included five specific questions on elections relevant to this initiative, and other relevant Eurobarometers 232 ;

·Other material as necessary, including the substantial research performed by the Joint Research Centre within the Enlightenment 2.0 research programme 233 ;

·The work of the European Cooperation Network on Elections, including its mapping of relevant national laws and procedures;

·An open public consultation on the present initiative and bilateral meetings with stakeholders (see Annex 2); and

·A dedicated study from VVA with a backward-looking baseline description of the status quo and analysis, including a comprehensive legal and policy mapping of relevant national provisions determining political advertising in general, advertising in political campaigns, as well as the conduct and financing of political campaigning (“the underlying study”) 234 .

5.Implementation plan

An implementation plan will be prepared, tailored to the policy option pursued. Evaluation of implementation of measures before, during and following the elections will be conducted as a part of the usual reporting process (would be included in the legislative proposal).

Annex 2: Stakeholder consultation

1.THE STAKEHOLDER ENGAGEMENT STRATEGY

The Commission conducted wide consultations on issues related to political advertising, digital services and online platforms between January and May 2021. The consultation process built upon other consultation, which helped identify the key issues at stake as well as options and their assessment. An open public consultation (“OPC”) from 22 January to 2 April 2021 and a consultation on the inception impact assessment published on 26 January 2021 provided information to develop the problem definition and policy options. The OPC was promoted through the Commission’s website, as well as through specific networks. Broad outreach to the wider stakeholder community was organised by Communication services of the European Commission (notably via social media).

The Commission organised meetings with key stakeholders to gather additional evidence and data on the specific problems addressed by the initiative, as well as on the policy approach and its impacts. It also conducted targeted bilateral consultations and analysed numerous position and analytical papers received especially in the context of the preparation of the initiative. The preparation of this impact assessment was also supported by an external study. The contractor also conducted a series of individual consultations with key stakeholders (see section 4 below).

Relevant work in the Council (including in the relevant working parties) and in the European Parliament (including in the Committees in charge of Constitutional Affairs, Legal Affairs; Civil Liberties, Internal Market and Consumer Protection, Justice and Home Affairs and the Special Committee on Foreign Interference) has provided significant input to this process 235 .

The stakeholder engagement strategy aimed at gathering the input of the following actors:

1.Private sector. The Commission collected the input of businesses involved in the value chain of political advertising:

a.Online intermediaries, including internet service providers;

b.Advertisers, which constitute the link between political actors and service providers;

c.Telecommunication services;

d.Publishers Trade and business associations representing the different interests of the businesses of the above categories, as well as SMEs.

2.National authorities including through the European Cooperation Network on Elections;

3.Political parties at EU level;

4.Civil society organisations advocating for fundamental and democratic rights (such as digital rights) and representing the interests of vulnerable groups;

5.Journalists and media organisations;

6.Academia and information technology communities;

7.International organisations working on democratic issues such as IDEA International 236 and the Council of Europe 237 ;

8.General public including citizens themselves through the OPC of which a thorough data analysis has been conducted.

The different consultation tools and an overview of the results are described below.

2.OPEN PUBLIC CONSULTATION (OPC) – 22 January to 2 April 2021

In total 137 responses were received in the context of the OPC. Most feedback was received from citizens (EU citizens 48%, and non-EU citizens 1.4%), NGOs (20.4%), and business associations (9.5%). There were followed by ‘Other’ (6.5%), private companies (5.8%), public authorities (4.3%), academia (2.1%), consumer organisations (0.7%), and trade unions (0.7%).

The majority of respondents were from the EU. Their six main countries of origin were Belgium (21.1%), Germany (10.9%), Italy (9.4%), France (8.7%), Czech Republic (6.5%) and Spain (6.5%). In addition, 12 position papers were submitted (see point 3.6 below).

2.1 Definition of political advertising

On defining political advertising, the only item that respondents did not consider part of the definition of political advertising was essential information about an election. Respondents were split as to “get out to vote” campaigns should be also covered. A small majority considered issue based ads as political advertising (61.3%).

58.3% of respondents considered that the definition of political ads should be set in law, while 27% deem that it should be dynamically adaptable. The former state that a legal definition is required to (a) provide legal certainty, (b) prevent grey areas and loopholes, (c) have a strong framework to prevent electoral manipulation and (d) to clearly frame restriction on freedom of expression. The arguments for a dynamic definition are to (a) allow quick modifications due to rapid evolutions in technology, (b) ensure fair competition and (c) that many political contents would not clearly be included in a fixed definition. Some advocated for a legal definition, which should be dynamically adaptable.

2.2 Prior experience with political advertising

Most respondents had encountered political advertising before, mostly in the form of posters (32.2%), online (26.3%), and on TV (10.9%). 77.4% have seen online political advertising.

Respondents were asked if they consider they can easily retrieve pieces of information in current online political advertisements. The responses clearly indicate a lack of, or unequal transparency in many different categories. The most striking missing items are

-a) information about who is sponsoring the ad;

- b) information about the amount paid;

- c) information regarding the use of targeting.

The majority of business associations and companies did not provide answers to these questions.

Respondents largely indicated being unable to identify information about the sponsor of political advertising they had encountered. A large majority of them would favour the disclosure of this information in the ad itself.

EC public consultation on political advertising – improving transparency: respondents’ views on the need to disclose the sponsor of political advertising in the ad itself

2.3 Potential legislation on online political advertising at EU level

The majority of respondents (62%) were in favour of a legislative action at EU level on the funding of political advertising. It is worth noting that there is a significant number of respondents (29%) who did not position themselves on this issue (11.7% maybe, 5.8% don’t know, 11.7% blank), mainly among business associations and companies.

In their comments, several underlined the diversity of legislation across Member States as an issue. Some respondents wrote that harmonised EU legislation would prevent national authorities to circumvent their own rules. For the ones favouring legislation action at EU level, they suggested focusing on transparency of funding of political parties and foreign donations.

For the ones against an EU legislative intervention, the most commonly used argument was that electoral matters is a national prerogative. However, they would support the exchange of best practices and the adoption of guiding principles.

On the sources of funding, the table below clearly shows a trend towards a citizen and participatory approach with preferences for political advertising being funded through crowdfunding and by EU citizens. Most respondents voted against anonymous donations and funding from foreign sources, underlining a will to keep political campaigns outside the reach of external actors. This is confirmed by the fact that 70.1% of respondents are concerned with the influence of foreign actors. In general, business associations, companies, and public authorities did not position themselves on this issue.

  Specific questions required the respondents to give their opinion on certain limitations at EU level. 43.8% of respondents (mostly citizens) indicated that the EU should limit the amount of money allocated to political advertising per campaign. All business associations, companies, and public authorities disagreed or did not answer.

46% agreed with the statement that the EU should limit the amount of money that a party, candidate, or campaign can receive from a single source. Again, this is supported mostly by EU citizens, while business associations, companies, and public authorities disagreed or did not reply.     

Subsequent questions required respondents to state the desirability of several disclosure requirements. 80.3% agreed that there should be EU rules requiring all political advertising to be clearly and specifically labelled. 72.3% indicated that all sponsors of political ads should be disclosed within the ad itself and 64.2% that there should be rules requiring political ads to be truthful and not misleading. While positive replies were equally spread across stakeholders for the two first questions, business associations and companies showed more reluctance regarding truthfulness requirements.

There was more uncertainty with regard to the need to regulate the allocation of online advertising space during election times (47.4% yes, 13.9% no, 19% maybe, 9.5% don’t know, 10.2% blank). Positive replies came from EU citizens, public authorities, academia, and NGOs.

2.4 European Elections & online political advertising

Several questions specifically zoomed in on the aspect of European elections. A majority of respondents (68%) voiced their support for common political advertising rules for European elections. Some of them argued that as Members of the European Parliament are all elected to the same body, they should run under the same conditions. Others reiterated the importance of transparency requirements to ensure the quality of European elections. A majority of respondents, across all stakeholders support specific measures to increase oversight of competent authorities (73.7%).

On the identity of ad placers, a small majority (57%) of respondents favoured residence in a Member State, although disagreeing as to whether it should be limited physical persons or not. A fair share (25%) would prefer to set the Member State where the ad will circulate as the criterion. Most business associations and companies did not reply.

The table below shows that there is a high demand for transparency when it comes to online political advertising sponsored by European political parties (EUPPs) as well as a certain distrust towards certain amplification and data-driven techniques such as targeting. However, political advertising should not be restricted for EUPPs. While again the ‘yes’ responses come primarily from EU citizens, NGOs have joined the former while major platforms and some business associations have refrained to vote.

2.5 Transparency requirements and advertisement repositories

On ads repositories, 71% of respondents would like that publishers of political ads retain at least basic information from those placing the ads. 67% responded that service providers involved in political ads should also have obligations to retain and provide information. 68% of the respondents stated that beyond competent authorities, all political ads should also be available to citizens. The specific content that should be retained can be found in figure 5. The majority of respondents has shown its support for retaining extensive information. Around 35% left a blank answer for each option, most notably companies, including online platforms and business associations.

2.6 Targeting and amplification methods

57.7% of respondents, mostly EU citizens, NGOs, and public authorities, favoured additional limits on targeting and amplification methods, besides compliance with data protection rules. Few respondents submitted additional comments, proposing limits ranging from stricter data protection rules, stricter transparency requirements, to rules diminish the misleading potential of such techniques. Among these 57.7%, respondents favoured either a ban of targeting and amplification, or an opt-in by the user. While most business associations and companies did not reply, EU citizens, NGOs, academia, and public authorities further considered that the EU should regulate the following amplification methods: paid for likes, bot software and paid for influencers. 41.6% of respondents, spread across stakeholders, replied that the targeting of political ads could be allowed for certain criteria if relevant data protection rules are complied with.

2.7 Positions of European political parties (EUPPs) and national parties

EUPPs were invited by letter to provide their input on the initiative. Five EUPPs submitted a contribution, the European People’s Party (EPP), the Alliance for Liberals and Democrats for Europe (ALDE), the European Green Party (EGP), the Party of European Socialists (PES) and the European Free Alliance (EFA).

All five parties support common rules at EU level. EFA highlighted that if the EU wants to create a stronger European-level democracy, EUPPs must be allowed to operate on a European level. The four other parties mentioned that this is particularly needed because they are concerned by the practice of very large platforms to limit the placement of online ads to the country in which they have a registered office, limiting their ability to reach out to citizens across the whole EU. Consequently, these four parties were in favour of allowing any person or legal person residing in any Member State to place an ad. Specifically, ALDE proposed to establish ‘election labels’ for political advertising of EUPP in the context of European elections. Regarding definition, PES and EPP supported an extensive definition, which includes ‘get out to vote’ campaigns, while the EGP preferred to exclude them. Both PES and EGP would set such definition in law. The same two parties agreed that civil society actors should be subject to the same rules as political parties when placing political ads.

PES, EPP, EFA and EGP agreed that there should be rules at EU level regarding how political ads are funded, with the PES only accepting crowdfunding as a valid source. Not all parties agreed that disclosing all sponsors of an ad was necessary - PES and EGP and EFA did. EPP and PES consider that European parties should disclose their ad expenditures in real time. EFA supported the creation of a common database of political advertisements to be kept, with relevant information on who is paying for the ad, the amount spent, target audience, etc. PES, EFA and EGP agreed that such ad repositories should be made available to citizens, while EPP suggested that only competent authorities should have this access. They had different views regarding transparency disclosure. EFA indicated that levels and limits of spending for national elections should be set at national level, and that an EU approach as to how these ads can be funded would be beneficial.

On targeting and amplification techniques, four parties (the fifth one did not take a stance) considered that EU data protection rules would be sufficient to protect EU citizens. EGP was open to a limit the processing of personal data for targeting and amplification, namely via an opt-out for users. EUPPs had different views regarding transparency disclosure on targeting: ALDE and EGP agreed that European parties should maintain examples of ads; ALDE and EPP were in favour of disclosing the targeting services used. .

Furthermore, national political parties were consulted too, albeit indirectly: Member States were requested to transmit the consultation letter to their national parties and consult them, in order that Member States’ position in the consultation reflect the national views on the initiative. Very few replies were received from national political parties and could not be considered as representative.

2.8 Position of other stakeholders

Below are the results of the consultation, broken down by category of respondents

Civil society organizations support high transparency around political ads including which adds are shown to whom, why, and who has paid for them 238 . They referred to the fact that the EU Code of Practice against Disinformation (soft measures) was not sufficient in this perspective as information for instance on targeting criteria was missing and many false positive and negatives occurred. They also requested the issue of targeting to be addressed beyond transparency 239 . Some have asked for a ban of targeting techniques for political ads (foreseen, during reference periods, under sub-option 2 of policy option 2) 240 . Some CSOs advocated for an obligation to set up ad repositories (interoperable at EU level) 241 , and also underlined that ads that are removed should remain visible in ads repositories 242 , as envisaged in policy option 2 for very large online platforms.

Member States welcomed the initiative and agreed with the need to regulate at EU level (online) political advertising 243 . Member States also repetitively supported measures that will enhance the cooperation from platforms (foreseen in both policy options) including access by researchers to more information on political ads (addressed in policy option 2). Certain have highlighted the limits of non-binding measures, the importance of transparency (binding) requirements on funding 244 and support establishing a common definition of political advertising 245 - which is envisaged in policy option 2.

Industry stakeholders have asked for a common EU definition that allow them to determine which ads are political ads 246 and a common approach to provide for proportionate requirements to label sponsored political ads 247 , including as regards the identity of the sponsor of the ad. Both the establishment of an EU definition of political ads and the introduction of labeling requirements are measures included in policy option 2. Industry “offline” stakeholders strongly requested a level playing field with online stakeholders 248 . Broadcasters asked for binding minimum standards for political ads on online platforms and supported a ban on online targeting for political purposes –envisaged under suboption 2 of policy option 2 249 . At a stakeholder meeting on 11 May 2021, small tech providers requested a clear set of rules clarifying what is political ads, who can sponsor them and applicable transparency requirements.

EUPPs have pointed out that labelling measures that help citizens to identify when they are being exposed to a political ad will contribute to strengthen European democracy 250 . They were particularly concerned about how the policy implemented by Facebook negatively affected their activities at EU/cross border level 251 .

For citizens, the OPC shows that when it comes to targeting a majority supports a ban of targeting and or amplification or an opt-in. A minority could accept targeting if framed by criteria and data protection compliance. Besides, most citizens believe that publishers of political ads should retain certain basic information from those placing such ads, something addressed by both policy options.

Other stakeholders: The supporting study by the contractor integrates a literature review in section 2.1. There is an emerging academic consensus on the need for specific transparency for political ads and controls on the use of personal data in connection with political ads online. Guidance from international standard setting bodies such as the Council of Europe also call for specific transparency of political advertising, including in particular on sponsor and funding, and where online, on the mechanism for delivery (algorithms, data).

3.DEDICATED STAKEHOLDER MEETINGS

Stakeholders meetings were conducted with preparatory work ahead of each meeting, including providing stakeholders with guiding questions structured to cover key aspects of the IA, namely: scope and definition, the use of targeting and data-driven technologies, the legal and regulatory framework, and solutions and options. Each group of stakeholders received tailored questions aimed at taking into account their specificities. Meetings were moderated in a way, which allowed each stakeholder, to voice his and her position beyond the questions being transmitted and make comments on the envisaged initiative.

Meetings with private sector actors and civil society organisations were composed 15 stakeholders.

3.1 Dedicated meeting of the Rapid Alert System (RAS)

On 18 March 2021, the Commission presented the state of play of the initiative and called for contributions during a dedicated meeting of the Rapid Alert System. Representatives of Member States were present as well as the European Regulators Group for Audiovisual Media Services. This meeting provided the opportunity to Member States to share their views and raise relevant points for discussion.

3.2 Ninth meeting of the European Cooperation Network on Elections (ECNE)

On 25 March 2021, Member States’ experts were consulted in the framework of the European Cooperation Network on Elections. The Commission outlined envisaged options for measures as set out in the inception impact assessment. 252 The Commission has shared the legal mapping to the membership of the network beforehand. Each Member State then had the opportunity to complete the mapping as well as present its legal context at the meeting.

Most Member States’ experts indicated that political advertising is regulated at national level through legislation on political party financing, broadcasting and print media, and electoral and campaign rules. The discussion showed that there is no uniform approach as to how to define political advertising, which authority is competent, and how to further regulate. Some Member States provide for extensive regulation while others regulate less and emphasise monitoring and oversight. Some noted insufficient cooperation from platforms with national authorities as well as limitations of existing ad repositories. Other underlined the insufficient enforcement of the Code of Practice on disinformation. Experts suggested to limit microtargeting. Online advertising brings some benefits as it is increasingly shifting to the online environment, partly due to the pandemic of Covid-19. Experts underlined the need for complementarity between legislative instruments such as the DSA, the GDPR, the Code of Practice on disinformation, and the envisaged initiative.

3.3 Dedicated meeting with signatories of the Code of practice on disinformation and private sector industry associations

On 26 March 2021, the Commission has organised a dedicated meeting to collect the input of the key stakeholders, signatories of the Code of Practice on disinformation and representatives of industry associations, mainly from the advertising and telecommunications fields. Overall, participants largely welcomed the initiative. There was a general call for clear and long-lasting definitions. Participants underlined that national legislations widely vary across the EU and platforms have different policies for political advertising. Participants supported harmonised legislation across the EU, with platforms emphasising the need to adopt rules, which fit each platform’s specificities. Twitter and TikTok indicated that they do not allow political advertising on their platforms. The issue of influencers has been raised as a tricky evolution, which makes proper monitoring of political advertising difficult. Snapchat insisted on the importance of human review of ads as well as the need to provide for regular updates of ad repositories, of which the access should be granted both to researchers and citizens.

On targeting, Google indicated having introduced limitations regarding allowed criteria, being limited to age, gender, location, and general interest. Mozilla and the Association of Commercial Televisions (ACT) called for a limitation of targeting, notably drawing on data protection rules.

ACT suggested that the priority of regulation should be to increase safeguards for citizens rather than facilitating business activities of platforms. ACT also called for standards, which apply offline, to apply to the online environment. Google and ACT had different view as to whether ads that were taken down for policy violation should be disclosed in ad repositories.

3.4 Dedicated meeting with civil society organisations

On 31 March 2021, the Commission held a dedicated discussion with civil society organisations involved in the defence of digital rights and the representation of vulnerable groups’ interests. The following international organisations -IDEA International and the Council of Europe- also took part. Overall, the Commission’s initiative was largely welcomed by the participants.

As other stakeholders, participants underlined the importance of articulating the initiative with other legislative instruments. Some participants stressed that it might be efficient to address on ad buyers and political parties when it comes to facilitating the enforcement of obligations. Common points with the ECNE meeting were shared such as the need for a stronger cooperation between Member States as well as increased communication between national regulators and online platforms. Participants pointed at weaknesses in the regulatory framework of Member States. Only 5 of them have monitoring mechanisms for online expenditures of political parties during online campaigns.

On targeting and other techniques, several issues were highlighted by participants. Firstly, political parties are increasingly dependent on targeting to compete, and it favours more the affluent parties. Secondly, targeting lacks a clear definition. Thirdly, it is very difficult to know how algorithms work. Lastly, major platforms do not respect data protection rules. Participants largely agreed that users should explicitly allow their data to be used. Ad quotas can help increase accountability of political parties.

Regarding policy options, addressing political party financing was mentioned as a way to increase transparency that would allow to tackle the issue of influencer marketing, which is not covered by the DSA. Most participants agreed with the fact that ads that are removed should remain visible in ads repositories to allow researchers to work, and authorities to make parties accountable. Increasing national authorities’ capacities and resources was deemed to be crucial to enforce regulations.

3.5 Private sector

On 12 May, the Commission met with the representatives of the broadcasting sector and SMEs (ACT, AER, EGTA, Schibsted, FEDMA, AIB Europe, News Media Europe, European Newspaper Publishers Association, EASA, EACA, DOT Europe, DDMA, EDAA) where the envisaged initiative was presented with its context, issues addressed and possible options. Most participants mentioned the need to make sure that what is forbidden offline is also forbidden online and that a common “political advertisement” definition is needed. Some concerns on microtargeting and the use of political data were expressed.

3.6 Written contributions and papers 253

The following stakeholders have submitted, through or outside the OPC, a position or policy paper, shared significant material, or held bilateral meetings with the Commission:

1.ALDE - Alliance of Liberals and Democrats for Europe

2. EGP - European Green Party

3. EPP - European People's Party

4. PES - Party of European Socialists

5. EFA - European Free Alliance

6. AMO - Association for International Affairs

7. ACT - Association of Commercial Televisions

8. Avaaz Foundation

9. Belgian Association for Human Rights and Development

10.CCIA - Computer and Communications Industry Associations

11.DLM - The Directors’ Conference of the State Media Authorities (Die Medienanstalten - German Media Authority)

12.EACA - European Association of Communication Agencies

13.EDRi - European Digital Rights

14.Election.Watch.eu

15.EPC - European Publishers Council

16.EPD - European Partnership for Democracy

17.EU Disinfo Lab

18.Facebook

19.GISAD - Global Institute for Structure Relevance, Anonymity and Decentralisation

20.Google

21.IAB - Interactive Advertising Bureau

22.IDEA International

23.Institute for Information Law University of Amsterdam

24.Ireland’s Department of Housing, Local Government and Heritage

25.Lithuania’s Electoral Commission

26.National Electronic Mass Media Council (Latvia)

27.ALIA - Autorité Luxembourgeoise Indépendante de l'Audiovisuel

28.Oana Goga Univ. Grenoble Alpes, CNRS

29.Panoptykon Foundation

30.Newsguard

31.CDT - Centre for Democracy & Technology

32.ERGA - European Regulators Group for Audiovisual Media Services

33.PROVIDUS

34.RESET.tech

35.Snapchat

36.TikTok

37.Twitter

38.Who Targets Me

4.SPECIFIC CONSULTATION CONDUCTED BY VVA

The contractor VVA has been commissioned to provide a study to support the preparation of the initiative. Supported by targeted questionnaires, VVA has conducted an extensive range of individual interviews with a total of 67 stakeholders coming from all relevant categories, indicated in the table below. These interviews and the insights shared therein gave access to VVA to data otherwise inaccessible publicly, and allowed VVA to draw pertinent conclusions or simply to confirm arguments made in the literature.