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Love to hate: more balance required in Digital Markets Act and Digital Services Act

Over the last year it has been clear all over Europe how much we profited from our online connectivity and the presence of a vibrant startup ecosystem. In the Netherlands alone e-commerce based startups and scale-ups have reached more people than ever and success has been homegrown with Dutch companies such as PICNIC, Coolblue and soaring. In some ways these platforms provide a crucial lifeline for small businesses that could not count on over-counter clientele, thus saving jobs and companies in one go. Looking forward to a - hopefully - swift recovery, we need online businesses and innovative companies to set the path for sustainable economic growth. We will need Europe’s brightest startup minds for that, if we are to achieve long term equitable, green and responsible digital growth. 

You would think with this in mind that ‘Brussels’ is careful in its regulatory approach. However, the deck appears to be stacked differently. Although drafted with the noble ambition of “ensuring fair and open digital markets”, the European Union’s Digital Market Act (DMA) and Digital Services Act (DSA)  proposals risk neglecting the needs of small businesses and startups.

Rather than really thinking through the implications of the proposals for the market participants it is ultimately supposed to serve. A healthy DMA for example is not just about protecting the competitors of so-called ‘gatekeeper’ platforms, but also about supporting their users where need be- in this case - meaning businesses needing these platforms to reach their own customers.

Europe’s SMEs and startups rely on digital platforms like Google, Facebook and Amazon for everything from market research to advertising to sales and distribution. And while many startups and scale-ups understand and support the need for a proactive European approach on competition, policymakers need to be keenly aware this is a love/hate relationship.

For every wish to build an European digital market with its own set of rules on for example online ads, which has been suggested around the DSA, we need to realize what the upside for Dutch and European businesses existing platforms offer. Their cloud platforms more often than not form the basis for safe and cheap  ‘rack space’. Personalized advertising may deserve all the scrutiny it gets, but it is also a vital marketing tool for small businesses which rely on being able to reach niche audiences effectively across the world. Besides has anyone considered the chilling effects the legislative package can have on investment and the dreams of scaling for new European startups? To mention but one of these: how is the regulatory dialogue geared up to ensure a strong, reliable and predictable process of designating gatekeepers? Legal uncertainty or regulatory unclarity will hinder the growth of new European platforms in the long term.

In short: a top priority of the DMA and also DSA must be to enable startups and SMEs to grow their online presence and to create a healthy competitive environment. With this lens applied we can scrutinise each provision and ask ourselves: does this lead to fairer and more open markets for European entrepreneurs but also to a sustainable path of growth we need post-COVID?

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