Will the DSA favour startup innovation in the Single Market?

October 5, 2021
Single Market

The Digital Services Act can provide the harmonisation that startups need to operate across EU markets by updating and clarifying the rules governing platforms. Following the recent discussions in the co-legislative bodies of the EU, namely the European Parliament and the Council of the EU, it’s unclear that all parties are considering startups’ growth perspectives in the Digital Single Market. 

One of the objectives of the DSA was to design horizontal rules for all services providers to follow. Startups want to be able to comply with the DSA from day one but seeing some of the latest provisions discussed, this could be a challenge.

What does not work for startups? 

The DSA includes provisions that establish thresholds for online platforms. A threshold will create an entry barrier effect for an early-stage startup and a glass ceiling effect for one at a later stage of growth. Imagine a startup called RViewy, an early-stage startup that allows consumers to review any company or service, from fashion to gaming industry. Knowing that even before launching its business, REView will have to implement an internal complaint mechanism or a trusted flaggers system will discentivise it from even launching its services in the EU market. Let’s imagine RViewy scales and reaches 10million euros turnover a year or 50 employees it will have to set up an out-of-court dispute settlement body or any new provisions that are not adapted to its services. On top of this, our startup would have to remove illegal content in 24h and randomly check its products or services.  RViewy’s management team might not offer their services to EU consumers as the burden of these provisions become increasingly heavy and at times impossible for it to carry. 

The due diligence requirements should leave enough space for startups to innovate and implement their own tailor-made solutions to ensure their services are safe for their users. A one size fits all approach in the DSA will not favour startup innovation in the EU Digital Single Market. The European platform economy is wide and colourful. Not all due diligence provisions suggested in the DSA, as drafted in the latest version of the European Parliament’s Internal Market Committee, will be adapted to all the digital services offered in the EU. 

What’s the solution? 

Designing a DSA through the lens of the already existing big platforms will be detrimental to the competitiveness of innovative companies, the diversity of the Digital Single Market, and de facto, to EU consumers. A successful DSA is one that will lay down horizontal and straightforward rules for all services providers alike, taking into account the resources of the smallest ones. The best possible DSA will be one that startups want to comply with because it gives them legal certainty. When it comes to their services and products, startups are the most consumer-driven companies. All startups have a vested interest in implementing the right guarantees and safeguards for their users when launching their businesses. Building on that will ensure a colorful, diverse, and competitive Digital Single Market!