Last week we published our position on the DSA, following a consultation with our Members. In a subsequent blog post, we highlighted what elements of the DSA  have the potential to ignite startup growth. This week, we want to cover the elements of the DSA with the potential to undermine startup growth and the economic recovery in Europe. 

Here are three elements of the DSA that will disincentivise startup growth and economic recovery.

Thresholds limit and discourage growth: We always say that thresholds create a ceiling for startups and incentivise staying small. The threshold for very large online platforms is not fully taking into account the dynamics of the online world as it is possible for many platforms – be it a startup or an established company – to have 45 million active recipients monthly. Threshold criteria based solely on size could discourage startups from becoming the scale-ups we need for our post-COVID recovery. 

Costly administrative requirements: Almost by definition startups have less resources than more established players. The cost of complying with the DSA should be proportionate to resources which will encourage adoption and implementation. While no single provision in the DSA is in theory impossible to comply with, the total cost of complying with all of them could turn into a barrier for market entry, putting startups at a competitive disadvantage in respect to other bigger more established players. Ultimately, the DSA should be an instrument that startups want to sign up because it provides them legal certainty and an effective pathway to compliance. 

Undermining the country of origin principle:  The Internal Market clause is a cornerstone principle of a functioning, Digital Single Market. It is adamant for startups to have the legal certainty that they need to scale-up. Otherwise startups have to scale-up 27 times in Europe. Undermining the country of origin principle means that startups may have to respond to the authorities in every Member State rather than the one where they have their main legal establishment. In practice this means that startups, who inherently have less resources, would have to have a legal establishment in every corner they want to scale-up which disincentivises growth. 

According to the European Commission “one million EU businesses are already selling goods and services via online platforms, and more than 50% of small and medium enterprises are selling through online marketplaces”. In addition, it is estimated that just 5 key sectors in the platform economy will grow from $15 billion in 2015 (€14 billion) to $335 billion by 2025 (€313 billion), the possibilities for growth in Europe are endless if regulation is done right. 

COVID-19 has demonstrated the value of online platforms for consumers, which are central to the EU’s green and digital transition. For that reason, the DSA should be made with them and not just for them. Our DSA4startups campaign brings the voice of startups to such important debates on the future of innovation and the economy.