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The Digital Services Act has the potential to empower start-ups and the wider EU economy

Oxera’s new study of 1,000 businesses from across four member states reveals that a well-designed Digital Services Act has the potential to return positive outcomes for Europe’s businesses, consumers and platform start-ups.

In June 2020, the European Commission proposed a new Digital Services Act (DSA) to provide updated rules and regulations for digital services. Allied for Startups, a worldwide network of industry organisations focused on improving the policy environment for start-ups, asked Oxera to examine what different DSA policy options could mean for Europe’s businesses and consumers.

Oxera interviewed a number of European platforms to assess the opportunities and challenges different DSA options that are being considered by the Commission and European Parliament present for them. Using the insights from these interviews, a range of potential scenarios emerged for how platforms could react. These were used as a basis on which to survey 1,000 businesses from across four member states. The survey asked businesses how they will be affected if the platforms they rely on change their functionalities, processes or access charges.

The research showed that businesses and platform operators alike would benefit from more safety and trust in a well-designed regulatory environment. 44% of the business users surveyed said their customers would trust them more if platforms had more safety features. However, excessive regulation could have the opposite effect, leading to lost business opportunities if platforms (to avoid increased liability) remove or restrict valued services—such as options for content sharing, leaving written comments, and uploading user-generated content. Under more stringent liability rules, 38% of businesses interviewed expected to reduce their revenue with this amounting to up to €23bn of lost revenue for small businesses alone.

Informed by this research, Oxera has recommended seven principles that would help create a well-balanced policy environment that allows for innovation, legal certainty and online safety. The study finds that the DSA could achieve positive outcomes if it: (i) continues to limit platform’s liability, (ii) enables proactive measures, (iii) designs procedural obligations with known penalties and (iv) increases the consistency of rules applied across the EU. At the same time, it should (v) avoid creating information burdens, (vi) avoid prescriptive regulation, and (vii) avoid rules based on platform size that would limit growth opportunities.

Gareth Shier, Senior Consultant, who led the study said:

“The European Commission has a unique opportunity to create a regulatory environment that is fit for platform start-ups, businesses and consumers. The study shows us how a DSA designed to promote safety and trust while avoiding the pitfalls that reduce access to digital services would empower Europe’s platform startups to boost the wider economy.”

Benedikt Blomeyer, Director of EU Policy at Allied for Startups said:

“Over 10,000 EU platforms serve markets and societies. Getting liability rules that work for these start-ups is in our broader economic interest and should be the central objective of the Digital Services Act.”

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