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Let’s be realistic about new digital regulations

Today, the European Commission will present a regulatory framework that will determine the future of the European digital economy for the years to come.

Both the Digital Services Act (DSA) and Digital Markets Act aim to prevent and punish anti-competitive behaviours across digital platforms, in particular, those with at least 45 million users. Although that is indeed a historic moment for EU digital policy, it is expected that the very nature of these new regulations will be punitive and its unintended consequences might curb innovation instead of enhancing it.

The European Commission’s goal to keep big tech giants at bay has become obvious long ago when antitrust investigations into Facebook and Amazon started to build up. The witchhunt after anti-competitive actions has been the result of the European Union’s lack of knowledge about these new platforms and how their supply chains operate.

Digital Markets Act will attempt to solve this problem through a series of ex-ante restrictions that will tell big platforms how to behave and by introducing a new competition tool.

Several factors need to be considered in order for these developments to be fair and less damaging than it seems at first glance. First, ex ante regulations should be limited to large online platforms that qualify as gatekeepers and shouldn’t discriminate between them. However, keeping in mind, that the world of technology is constantly evolving and the economy as such is going to change, it is crucial that ex-ante regulations are concise and straightforward, and flexible.

A smart approach would be to strike a balance between the need to safeguard competition and remaining liberal enough to not block innovation. A code of conduct that would lay out specific blacklisted practices without making the costs of compliance excessively high for gatekeepers and preserving consumer choice might be as close as we can ever get to a compromise.

The European Union’s digital lag is well-known, and if we put even more brakes on our digital economy, we might find ourselves in the back of the queue for economic wellbeing. The key narrative of the EU digital reform shouldn’t be “let’s punish the big tech for its success” but rather “let’s create the favourable conditions for smaller enterprises”. Granting the Commission large-scale investigation powers would be an extremely dangerous move that will likely only increase the number of costly antitrust proceedings without boosting innovation.

Contrary to widely spread belief, lock-ins are all too often a conscious choice made by consumers in the absence of a viable alternative. Therefore, we should make it easier for small business to enter and for the existing ones to operate on equal terms with the more successful ones. We need a digital single market that can meet the needs of
European consumers without any external interference.

Although transparency is equally important, its pursuits shouldn’t lead us beyond the pale and turn the Commission into an honesty tribunal. The very fact that digital platforms bring value to Europeans is a clear indication that they do something right,and that should be enough for the Commission to form its judgment. Unmatched demand for digital services, including those provided by the big tech, speaks for itself.

The best way to approach today’s presentation of the new digital framework is to be realistic about its unintended consequences. Our goal should be innovation, not punishment.

Originally published here.

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