Assessing The Data Act: How Startup-Friendly Is It?

July 6, 2023
Data Act

On the 27th of June, after three months of trilogue negotiations, EU policymakers came to an agreement on the Data Act, which mandates requirements to facilitate the sharing of non-personal data. Before the beginning of the trilogues, Allied for Startups and its Members approached policymakers with an open letter in which we suggested three key improvements to ensure the Data Act fulfills its promise to boost Europe competitiveness and innovation capacity. In this blog post, we assess EU policymakers’ efforts to address startups’ needs. 

  1. Scope: clarity and proportionality

Our open letter stressed that a more comprehensible and proportionate text was particularly beneficial for startups as it reduces ambiguities and uncertainties that might discourage them from innovating and launching new solutions to the market. Despite efforts to define the scope of data, meaning the products and services that would be covered in the text, as well as to clarify its interplay with existing legislation, we remain concerned that startups will still have many difficulties navigating the current and upcoming patchwork of regulations.

  1. Cloud switching: data portability & interoperability provisions for startups

In the context of switching between providers of data processing services, such as cloud and edge, it is valuable for startups to enjoy fairer contractual agreements and fewer barriers, as it would further level the playing field in the emerging ecosystem for sharing industrial data. Nonetheless, startups that are service providers continue to be overburdened with strict functional equivalence obligations and mandatory transition periods. 

  1. International data transfers: rules that encourage taking advantage of the global data economy

With regards to international data transfers, the Commission proposal left several unresolved questions about how startups should decide to approve or decline data access requests from foreign governments. Startups needed greater guarantees that they would be assisted if foreign governments demanded their data, especially when trade secrets or other sensitive data are involved. Although the inclusion of guidelines and assistance on how to assess the lawfulness of a transfer is highly appreciated, the bigger picture suggests that such strict safeguards are laying the groundwork for setting sovereignty requirements that will require startups to store data within the EU, thus limiting their options when choosing between providers.

In conclusion, the recent agreement reached by EU policymakers on the Data Act marks a significant milestone in a journey that began almost a year and a half ago. While the Data Act holds the potential to shape the future of industrial data sharing and become an instrument to support smaller industry players, it also presents challenges for startups in their struggle to leverage data effectively.