Better Regulation? Think Small First!

Pieter Veldhuizen • 1 February 2019
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With the European elections coming up in May, European citizens have the opportunity to choose their new MEP’s. The Spitzenkandidat of either the christian-democrats, social-democrats or liberals will thereafter take on the position of President of the new European Commission. Then it’s up to the member states to put forward their candidate for the Commission. After the summer, a new Commission will be installed and will lead the way for the next five years.

One of these Spitzenkandidaten is Frans Timmermans. At the moment one of the most influential actors in Brussels. As First Vice-President he is responsible for the important topic of ‘Better Regulation’. One of the key principles of the current Juncker-Commission: if the EU ought to work for its citizens, it should focus on the things that are pivotal for our economy, rather than EU programmes for school milk. In short: it is Timmermans his task to make sure that every regulatory proposal abides to the concepts of subsidiarity and proportionality.

Over the last years, the EU has set a clear goal in further strengthening the Digital Single Market. As a regulator for technology, the EU can set the standard when it comes to ensuring a level playing field and fair market access. One of these regulations is the current proposal for a Platform-to-Business regulation (P2B). The initiative “focuses on the fairness of platform-to-business trading practices in the online platform economy.”

We all have ordered a meal via Deliveroo, booked a hotel via Booking.com or bought shoes via Zalando. These companies shape the economy of tomorrow and play a large role in our (digital) lives. With new developments come new challenges. It it good to rethink what the social impact is of these companies, or how they deal with their business users (e.g. how is Deliveroo treating restaurants?). The P2B-proposal seeks to regulate the latter.

However, in the EU's desire for a better regulatory framework concerning platforms, it it worrying that they seem to neglect what the impact is on startups and scale-ups. For example: when it comes to dispute settlements between platforms and business users, platforms should pay at least half the costs for mediation. Even if the business user turns out to be wrong. They are exempted in the Council version, but still in the Commission and Parliament text. Furthermore, regarding search results platforms are obliged to inform their business users on the perimeters of its search results in their terms and conditions. Quite challenging, since some startups or scale-ups change their algorithm daily.

Startups and scale-ups are always facing challenges when implementing and complying with new rules and regulations. Without a strong legal department, it could take them ages to be P2B-ready with excessive backlog costs. What happens? The innovative companies that seek to challenge the established ones will lose speed and possibility to scale.

Recently, also operating systems have been included in the P2B-proposal, without any assessment of the potential impact. Making the scope of the proposal even more far-reaching. Startups and scale-ups will be deeply affected by this new inclusion. Not only do they make use of current systems, but they also are the companies that will create the future ones.

It’s time for EU policy-makers to “Think Small First”. Following the Lisbon Strategy for jobs and growth, the need for EU’s SME’s should come first. We tend to forget that a lot of small innovative companies are platforms and (users of) operating systems themselves. Why not give them the chance to grow? Instead of focusing on tightening the Digital Single Market, let’s try to broaden it.

Time for MP's, the Commission and the Council to step up their game. Because startups and scale-ups deserve better regulation.