Innovation in the digital economy architecture: Ensuring regulatory simplification drives innovation and growth

Over the last decade, the EU has pioneered a world-leading framework for digital governance, but the result has been an increasingly complex regulatory landscape and a digital governance system that undermines the workings of economic markets. This column argues that while the European Commission’s Digital Omnibus package responds to this complexity, it treats the symptoms rather than the structural cause of market failure. The authors propose an ‘Innovation in the Digital Economy Architecture’ (IDEA) framework that meets the simplification aims of the Digital Omnibus proposal, while giving digital consumers more control over their personal data, strengthening digital rights, creating transparent data markets that reward trust, and promoting competition and innovation.

The Innovation in the Digital Economy Architecture (IDEA) framework unleashes the expected wave of innovation and renewed competition of the European Commission’s Digital Omnibus proposal. However, it does not weaken the protection of fundamental rights or overhaul existing digital law. It introduces market-based mechanisms to make enforcement and compliance more efficient and simpler.

Through enhanced control over verified personal data, expert fiduciary representation, fiduciary duties to act in the best interest of data subjects, and collective negotiation, the IDEA framework reduces the need for regulatory overhaul, supports the single digital market, and strengthens Europe’s competitiveness in a global economy increasingly shaped by digital governance and geopolitical tension.

The problem: Complexity and fragmentation in EU digital regulation

The present EU digital governance system undermines the workings of economic markets. Data subjects receive many free (or heavily underpriced) digital services in return for vast amounts of free information about themselves, usually extracted without meaningful consent and knowledge. Digital policies are doomed to remain inadequate as long as data subjects are not empowered to become active participants in decisions about how data about them is processed, both individually and collectively.

Over the last decade, the EU has pioneered a world-leading framework for digital governance, anchored in the General Data Protection Regulation (GDPR), Digital Services Act (DSA), Digital Markets Act (DMA), Data Governance Act (DGA), and the Artificial Intelligence Act (AI Act). However, despite their ambition, they form an increasingly complex regulatory landscape.

Firms, particularly European SMEs and start-ups, can face overlapping compliance obligations and related operational costs. Citizens possess extensive digital rights on paper, but the mechanisms to exercise them in practice are not always efficient. Regulators must manage an expanding set of provisions, often requiring intensive oversight with limited capacity.

The growing body of digital rules has also led to regulatory divergence, inconsistent enforcement across member states, and high transaction costs that deter innovation. Digital firms face uncertainty over how to comply simultaneously with multiple legislative regimes, while consumers remain disempowered in an opaque digital environment.

The result is that trust, compliance, and innovation, which should reinforce each other, are instead in tension. The Digital Omnibus package responds to this complexity, but it treats symptoms rather than the structural cause of market failure.

The Digital Omnibus package aims to simplify the EU digital governance framework, but its approach creates new structural risks. It amends core digital laws in one sweep to streamline obligations. This move weakens key protections in GDPR, the ePrivacy directive, and the AI Act with no increase in compliance certainty or gains in innovation and economic growth. Enforcement remains fragmented and dependent on resource-constrained authorities, and market power stays concentrated. The central failure at the core of the digital economy remains unaddressed.

Rather than just expecting the EU to continue shouldering an onerous burden of trying to regularly update digital regulation to keep up with technological and commercial changes, the IDEA framework moves forcefully to gain the benefits of a properly functioning market by ensuring that data subjects are active economic participants.

The IDEA framework: A simplified institutional architecture

The Digital Omnibus proposal seeks to simplify the EU digital framework by amending core laws to streamline obligations. In contrast, the IDEA framework drives human-centred innovation, fosters competition, and supports economic growth without weakening the protection of fundamental rights or overhauling existing digital laws. It introduces a new market, driven by new companies and businesses that deliver personal digital advisory services. It also introduces new models for the use of personal data in the single market. These models ensure that user needs drive digital services.

Importantly, the IDEA framework achieves this without weakening digital rights or adding another major layer of rules. It introduces market-based incentives and institutional mechanisms that restore meaningful consumer control over data processing practices. The IDEA framework is designed to make digital governance human-centred by aligning economic incentives with consumer interests and democratic oversight. It does so through four mutually reinforcing market-based mechanisms that convert fundamental rights and obligations into enforceable market outcomes:

1. Effective control over key personal data (KPD): legally recognised, consumer-controlled data repositories that serve as the authoritative, auditable source of verified personal data.
2. Collective representation through expert fiduciaries: accredited professionals who represent consumers in negotiations with companies whose business models rely on collecting, combining, monetising, or otherwise processing personal data, including digital service providers (data aggregators).
3. Fiduciary duties: binding legal obligations of loyalty, care, and transparency, aligning the activities of fiduciaries and (in defined cases) data aggregators with the interests of consumers.
4. Collective negotiation: structured bargaining between expert fiduciaries and data aggregators to define the lawful terms of data processing, turning compliance into a negotiated, market-based process.

Together, these pillars simplify the enforcement of digital rules by internalising control, accountability, and equity within market transactions. They shift ex-post enforcement into ex-ante empowerment, reducing reliance on repeated legislative adjustment.

Strong data control by consumers creates incentives for data aggregators to place resources on clear consumer needs. Similarly, promoting such control gives individuals the ability to express social and political views and choices free from a non-transparent environment of implicit manipulation.

How IDEA simplifies EU digital legislation

1. Converting fragmented compliance into a unified market mechanism

Current EU law imposes overlapping compliance obligations. Data aggregators, particularly those that intend to leverage AI systems, must navigate at least four distinct enforcement tracks.

The IDEA framework consolidates these functions into one market process. For instance:

• KPD repositories reduce compliance risks, enhance accuracy, auditability, and control rights over personal data by data subjects.
• Collective negotiation transforms data-processing practices and legal obligations into negotiated contractual standards, reducing the need for repetitive disclosures.
• Negotiated terms embed fairness and accountability principles aligned with the Digital Market Act’s competition objectives, ensuring market power is balanced by fiduciary responsibility.
• Advice from expert fiduciaries ensures that GDPR obligations on lawful grounds are upheld, digital rights are better understood, and enforcement becomes more effective. Overall, the need for public body litigation or judicial intervention is reduced.

In effect, compliance becomes a byproduct of market participation. Agreements made between data aggregators and expert fiduciaries are presumed compliant with EU law. Those who decline carry full fiduciary liability. This clarity sharply reduces regulatory uncertainty and administrative duplication.

2. Streamlining enforcement and reducing bureaucracy

Under existing regimes, enforcement mostly depends on self-assessment, self-regulation and, particularly, on resource-intensive investigations by enforcement agencies. The IDEA framework decentralises oversight by using expert fiduciaries to monitor data aggregators on behalf of consumers.

Fiduciaries act as licensed compliance advisors, continuously verifying that data aggregators adhere to negotiated standards. This approach lightens the administrative load on public authorities while enhancing effectiveness.

By turning enforcement into a continuous market process, the IDEA framework makes digital regulation more dynamic, proportionate, and adaptive, and reduces ex-post litigation.

3. Enhancing legal coherence across member states

Divergent national interpretations and uneven implementation of digital legislation continue to fragment the EU’s digital single market. The IDEA framework’s reliance on verified personal data registries and expert fiduciary advice creates a pan-European infrastructure of trust.

• KPD repositories, operating under EU-wide interoperability standards, ensure consistent recognition of verified data across jurisdictions.
• Accredited expert fiduciaries, licensed under a unified EU regime, standardise consumer representation and negotiation procedures.
• Collective negotiation agreements serve as presumptive evidence of compliance under EU law, enabling mutual recognition between Member States.

This architecture strengthens the digital single market while aligning with the Commission’s Better Regulation agenda.

4. Promoting innovation and economic growth

Far from constraining innovation, the IDEA framework’s market-based design unleashes it by realigning incentives toward trust, quality, and efficiency.

Lowering barriers for SMEs and start-ups

Compliance costs currently scale with firm size, discouraging small entrants. Collective negotiation and access to verified, high-quality and secure personal data create a shared compliance infrastructure that SMEs can join at minimal cost.

Standardised contracts and KPD access reduce unnecessary personal data accumulation and storage. The result is a level playing field that fosters competition and creativity across the EU’s digital ecosystem.

Creating new data markets and business models

The IDEA framework turns personal data into a negotiated asset with clear and revocable terms. It establishes the foundations for transparent data markets. Consumers can negotiate receiving compensation or benefits in kind.

Collective negotiation shifts expertise to the demand side. This supports models that serve data subjects, not only data aggregators.

Such arrangements generate price signals for privacy, improving resource allocation and supporting new business models in finance, health, mobility, and AI. Verified data also reduces fraud, enhances interoperability, and improves the quality of AI training data, essential for Europe’s technological competitiveness.

Building trust as an economic asset

Trust is the cornerstone of digital growth. According to the OECD (2023), high levels of consumer confidence correlate with higher digital adoption and cross-border data flows. By embedding fiduciary accountability and transparent data governance, the IDEA framework transforms trust from a compliance cost into a competitive advantage.

Data aggregators that meet fiduciary standards, either by agreed terms or compliance with fiduciary duties, can display certification marks signalling trustworthy data practices. This creates market incentives for ethically driven business conduct and allows new entrants to demonstrate ethical innovation. Over time, this fosters a ‘race to the top’ dynamic, driving both social legitimacy and economic value.

The European dimension: Strengthening digital sovereignty

The IDEA framework aligns directly with the EU’s strategic goals for digital sovereignty and human-centred AI. It operationalises the EU’s normative leadership, often described as the ‘Brussels effect’ (Bradford 2023), by providing an exportable model of incentive-based digital governance.

• Internally, it consolidates fragmented rules into a single architecture centred on citizen empowerment and market-based accountability mechanisms.
• Externally, it offers a scalable framework that partner countries can adopt without replicating the full complexity of EU regulation.

Because the IDEA framework relies on market incentives rather than uniform legal transposition, any large jurisdiction adopting it, such as the EU, attracts digital activity that seeks a trusted and compliant environment. This dynamic strengthens Europe’s role as the global standard-setter in responsible innovation.

Policy recommendations

1. Integrate IDEA within the EU’s digital legislative framework. The Commission should explore incorporating the IDEA framework as an enabling mechanism under the next review cycles of the GDPR, DSA, DMA and Digital Governance Act (DGA). This simplifies compliance without rewriting legislative texts.
2. Set up an EU-wide accreditation and oversight body for fiduciaries. A body modelled on existing professional regulators (e.g., for auditors or financial advisors) should certify fiduciaries, ensure independence, and maintain transparency registers. Under the current EU digital law, accreditation and oversight already exist across multiple EU and national bodies.
3. Pilot KPD repositories in strategic sectors. Priority should be given to health, finance, and mobility, areas where verified data control can rapidly improve trust, interoperability, and innovation.
4. Recognise collective negotiation agreements as evidence of compliance. Data aggregators adhering to fiduciary-negotiated standards should enjoy a presumption of compliance across the EU, reducing administrative duplication and litigation risk.
5. Support research and standardisation. The Commission should fund studies on fiduciary economics, interoperable data formats, and AI auditing frameworks to underpin IDEA’s rollout.

Expected outcomes

By implementing the IDEA framework, EU policymakers can achieve multiple policy goals simultaneously:

• Simplification: streamlined enforcement and reduced regulatory overlap through fiduciary co-regulation.
• Innovation: lower entry barriers and the creation of transparent data markets that reward trust.
• Accountability: continuous, professional oversight replacing fragmented, reactive enforcement.
• Economic growth: more efficient allocation of resources, improved quality of innovation, and strengthened consumer participation.
• Democratic legitimacy: Rebalancing informational power between citizens, data aggregators, and the state.

These outcomes correspond to the policy objectives set out in the Digital Omnibus package and the Commission’s broader Simpler and Faster Europe Initiative.

Conclusion

The IDEA framework meets the simplification aims of the Digital Omnibus proposal without lowering protections or rewriting digital legislation. Market mechanisms drive and promote innovation. It embeds control, accountability, and clear negotiation inside digital interactions. Compliance becomes simpler and more reliable for companies, and enforcement becomes more coherent and proportionate for regulators.

The EU has built the world’s most comprehensive digital framework. The IDEA framework moves that framework from reactive regulation to proactive empowerment.

Source : VOXeu