Startups are born out of consumers’ needs. In order to grow their businesses, consumer trust is imperative and hence it is in their interest to provide the information and tailored services that their users need. The Digital Services Act (DSA) represents an opportunity to strike the right balance between designing a clear pathway for startups and clarifying the rules for them as well as, protecting consumers online. 

While the European Parliament is drafting its position on this key file for startups, we are concerned about some of the measures introduced by the Internal Market Committee (IMCO). These measures may have the undesired effect of hindering innovation by placing a disproportionate burden on startups and undermine the balance that the European Commission originally achieved in its proposal. 

Here are some of our concerns and why and how they affect startups. 

Ensuring proportionality for all providers 

The draft report does not take into account the fact that all the providers do not have the same resources. It’s technically very demanding for startups to implement the 24h illegal content removal deadline or conduct random checks, in comparison to larger, more established players. For C2C second-hand retail platforms it might not even be possible (digitally or physically) to do random checks on their products because they do not have their own warehouses. Asking platforms to prevent illegal content from reappearing is akin to removing the ban on general monitoring for small providers which can end up in the removal of legal content.

A one-size-fits-all approach is not the solution to the challenges raised by the dissemination of illegal content online as the online platform economy is colourful and varied. The cost of complying with all DSA provisions should not turn into a barrier for market entry for startups. 

The preservation of the Intermediary Liability Exemption

The intermediary liability exemption, inherited from the E-Commerce Directive, is a key principle that has enabled platforms to flourish in Europe. The draft report challenges this key principle for marketplaces and all service providers. This will discourage entrepreneurs from starting their business in Europe. The intermediary liability regime exemption is important in order to preserve the ability of new startups to reach out to customers in the EU. Without it, countless success stories – ranging from TrustPilot to TooGoodToGo – would not have enriched our societies and economies. The liability exemption for service providers should not be tied to any due diligence requirement obligations as it will only ring-fence established players who will be able to deal with the risk of being liable.

Protecting the integrity of the Single Market with the Country of Origin principle

Some provisions of the report go against the Country of Origin principle, which ensures the legal certainty that startups need to scale. Startups should comply with the rules and regulations of their main place of establishment like they currently do. If the enforcement of the DSA is based on a country of destination principle, like the IMCO draft report suggests, it will be far more expensive for startups to scale up across Europe, as they effectively will have to do so 27 times. 

A flourishing platform economy is one that enables startups to offer new choices to consumers. The objective of the DSA should be that all service providers, from large internationals to new startups, want to comply with it from day one.

As the European Parliament continues drafting its position on the DSA, we would encourage them to think startup-first. The DSA has the potential to catapult Europe to the future by allowing innovation to thrive while protecting and empowering consumers. 

You can find our position on the Digital Services Act here.