Time to introduce fairness requirements for big platforms

EU negotiations on copyright have undoubtedly caught broad attention around Europe. Yet another important piece of legislation in digital may have even a bigger impact on Europe’s digital economy. A proposed Platform to Business regulation comes as an attempt to improve transparency and fairness in the relationship of platforms with businesses that use them as marketplaces to meet their customers.

The digital eco-system provides enormous opportunities for small businesses. Companies that display their products on digital platforms, have immediate access to billions of customers worldwide.

Nevertheless, following ten years of incredible growth, a handful of digital platforms is nowadays dominating the markets. The five most valuable companies in the world, Apple, Alphabet, Amazon, Microsoft and Facebook, are platforms themselves or operate platforms. While platforms have offered big opportunities to consumers and businesses alike, they have also erected barriers to competitors. With scale advantages in terms of market share, financial resources and data, it seems unlikely that their dominance could be challenged by newcomers.

At the same time, the dominance of platforms has started threatening also the businesses downstream. While certain markets are close to saturation, think about Amazon or Android, dominant platforms become increasingly vertically integrated and start targeting their own suppliers. While they own the marketplace and they know what customers buy, it is quite obvious that platforms seize an opportunity to grow at the expense of business suppliers.

The European DIGITAL SME Alliance, as a non-partisan representative of more than 20,000 digital SMEs in Europe, welcomes the approach taken by the European Commission and Council of the EU to tackle this imbalance by increasing transparency in these relationships. At the same time, DIGITAL SME supports and reiterates the prepositions put forward by the European Parliament. In addition to increasing transparency, this regulation could go beyond and put fairness as a cornerstone of the platform to business relationship. The introduction of an enforceable and clear blacklist of unfair practices was a good step in this direction, complemented by fair terms & conditions. We believe that it is important to clearly spell out unfair practices and to prohibit them in this regulation, thus ensuring their enforceability. Any ambiguities in the text could be easily exploited by larger players and challenged in court cases leaving little chances to SMEs. The enforcement mandate given to competent authorities and the monitoring obligations are another important piece in this puzzle.

At the same time, the EU must not create barriers for European digital SMEs and start-ups to set up their own innovative platforms and succeed in the digital economy. Therefore, smaller platforms should be excluded from the obligations formulated under this legislative proposal. A threshold based on revenues and users could be a smart way to make sure that European digital champions and start-ups are not negatively affected and that the positive effects that this proposal aims for will be achieved. A threshold would provide new entrants with a regulatory sandbox, where they can experiment and innovate – thus giving them the same chances as the big players of today had when starting up.

Furthermore, platforms of nowadays are moving to new technologies, which encompass voice assistance systems, but also extend to integrated eco-systems that cover everything from the operating system to the search engine and app store available on phones or other devices. It is thus necessary for legislators to make sure that the formulations of the regulation are forward-looking and applicable to all future forms of platforms.